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Time Warner Cable’s Broadband Pricing Game: Special Wall-Street-At-Home Edition

Phillip Dampier December 12, 2011 Competition, Data Caps, Editorial & Site News 3 Comments

Time Warner Cable’s ruminations about charging usage-based pricing in 2012 has Wall Street all excited about the fatter profits made possible by nickle-and-diming broadband customers for their Internet use.  Forbes magazine tells investors the easy money earned from Internet Overcharging could boost the company’s profits and stock price:

We estimate that Time Warner Cable’s broadband business is single-most important business for the company, constituting about 42% to its value. The company’s management’s words essentially echo our estimates.

The company sees itself primarily as a broadband provider, bundling some extra services such as pay-TV for customer convenience. That said, any change to the pricing is likely to have notable impact on the company’s value, and therefore to its stock. Assuming that a tiered pricing is implemented and brings in more revenue per broadband subscriber, the company’s results could improve.

We believe that our fee per broadband subscriber forecast incorporate increasing penetration of high speed packages, but it could change if the company was to charge higher or implement a tiered pricing for high usage.

These kinds of earning estimates are what makes raising prices for Internet service so popular among the Wall Street crowd.  It fattens their portfolios, even if it increases cable bills which already routinely rise well beyond the national inflation rate.  The only caveat?  Customers could leave for other providers or eventually find the service too expensive to make it worthwhile.  Trefis, a business analysis firm, created an analysis tool (seen above) that allows readers to raise and lower the current estimates for Time Warner’s broadband pricing, add and remove competitors, and check out the impact on the company’s predicted stock price.  The results couldn’t be clearer.  The more you gouge consumers for expensive broadband, the bigger the Money Party, particularly if you live in an area with anemic DSL competition.

Currently there are 3 comments on this Article:

  1. Mike W says:

    Just got notice of an 11% rate hike here in Austin, TX on my Roadrunner Standard bill.

    $45 to $50 next month.

    What recession?

  2. Milan says:

    Mike,

    I live in Austin,TX as well. I haven’t received notice of a Road Runner rate increase. I have the “All the Best” Phone/TV/Roadrunner package. Every year I am able to receive a good discount by threatening to disconnect. I currently shell out $136 per month (including taxes and fees) for all three services including DVR.

    Threaten to jump ship and Time Warner will be willing to offer you a discounted rate.
    It works every time.

  3. Mike W says:

    Yeah, I haven’t done that in a while — last time I got $5 reduction that lasted all of two months 🙂

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