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Cable One’s Costly Internet Service Helps Cable Company Achieve Record Profits

Phillip Dampier November 12, 2019 Cable One, Competition, Consumer News, Data Caps 1 Comment

Using a combination of lack of competition, high-priced service plans, and data caps, Cable One is once again the nation’s most profitable cable broadband provider, charging residential customers a record-breaking average of $72.09 a month.

Late last week, the country’s fifth largest cable company reported excellent results to its shareholders, as the company collected the proceeds from increasing rates on broadband service while shedding unprofitable cable television customers.

Cable One serves small and mid-sized cities, mostly in the mid-south, Rockies, New Mexico and Arizona. It has grown larger with the acquisition of NewWave and Fidelity Communications, and told investors on a quarterly results conference call the company would take some of its recent gains and move towards further acquisitions in the near future. NewWave customers will now face Cable One’s stiff data caps, rolling out across legacy NewWave service areas in November and December. NewWave customers have already found their cable television package pruned back to match the current Cable One package, which omits Viacom-owned networks. The same will hold true for Fidelity’s customers once the two companies merge systems.

 

Laulis

Revenues for the third quarter were $285 million compared to $268.3 million at the same time last year, representing a 6.2% increase. Even with the high cost of service, the number of Cable One internet customers is increasing, primarily because competing phone companies typically offer little beyond DSL. In the last quarter, Cable One added 7,400 new internet customers and boosted broadband revenue by 8.2%.

“Cable One still has one of the industry’s lowest broadband penetration of homes passed at just 32.2% and, with limited fiber-based competition, their ceiling is arguably one of the highest in the industry,” Moffett Nathanson analyst Craig Moffett told investors. “They are at last growing the broadband business at a rate fast enough to drive meaningfully higher penetration.”

Cable One makes no secret it now calls itself a broadband company and has been de-emphasizing cable television service over the last few years. In fact, customers who cut the cord are doing Cable One a favor because broadband-only customers boost their overall profit margins. Unlike cable television, where licensing expenses are growing, the cost to provide and support broadband service is dropping — even as Cable One raises internet pricing and constrains customer usage with industry-low data caps. That forces customers to upgrade to more costly, higher speed service plans to get a larger data allowance. Cable One also offers a $40/mo add-on that restores unlimited service, which is popular with their premium customers. Once a customer uses more than 5 TB, their speed is throttled.

“I think the interesting thing that I took note of is that the higher [the] speed that our consumer takes the higher the percentage of unlimited [plan] selling. So that is to say if you take our gig service the percentage of customers that take unlimited there is the highest of any consumer group,” noted Cable One CEO Julia M. Laulis.

Pricing is expected to rise further unless phone companies compete with fiber broadband, an unlikely scenario in the rural and exurban areas Cable One serves.

Comcast Completes Speed Upgrade in Northeast, But Data Cap For Many Stubbornly Remains

Despite a recognition that customers are using more data than ever as they cut traditional cable television in favor of streaming, Comcast’s data cap remains stubbornly fixed at 1 TB a month.

The nation’s largest cable operator last week completed a significant speed upgrade in 14 states in its Northeast and Mid-Atlantic service areas from Maine to Virginia. Some plans are getting as much as a 60% speed boost, but Comcast is not budging a megabyte on its fixed data cap that amounts to 1,000 GB of usage per month.

Comcast acknowledges the speed upgrades are designed to meet the exponential increase in demand for high-bandwidth video streaming in households that now average at least ten devices connected to the internet. Many of those devices are now streaming 4K video, which takes double the bandwidth of traditional HD video.

The speed upgrades:

  • Performance Starter: was 15 Mbps, now 25 Mbps
  • Performance: upgrades from 60 Mbps to 100 Mbps
  • Performance Pro: up from 150 Mbps to 200 Mbps
  • Blast: A slight upgrade from 250 Mbps to 300 Mbps
  • Extreme: This premium plan used to provide 400 Mbps, but it is now 600 Mbps.

Comcast faces significant competition in this part of the country from Verizon’s FiOS fiber to the home network. That may explain why it is also the only significant part of Comcast’s service area that remains exempted from the cable company’s data caps. Verizon has no data cap of consequence, although the company has shut down some customers that were likely using their residential internet connection as a server, running up many terabytes of usage a month.

For now, Comcast’s speed upgrades come with no price hike.

The speed increases are likely to be welcomed by most customers, but Comcast’s pervasive data cap for most of its nationwide footprint is not. In November, that data cap will be tested like never before as Google launches its Stadia cloud-based video game service. Up to six million broadband customers are expected to blow through their provider’s monthly data cap while using the service, which replaces traditional home game consoles. That is because Stadia will consume an enormous amount of bandwidth — as much as 15.75 GB an hour at 4K resolution.

An article published by Vice Media warned video game enthusiasts they could easily face steep overlimit usage penalties on a future bill:

According to data from The NPD Group, America’s estimated 34 million gamers play 22 hours per week on average. Were those gamers to all shift to Stadia as their primary game platform at 4K, they’d burn through 1,386 GB of data monthly. And that’s just the bandwidth consumed by gaming; it doesn’t include music and video streaming or other activities.

The result will be an even higher broadband bill for US consumers who already pay some of the highest prices in the developed world for bandwidth. For many this will be a surprise. Of the 943 gamers surveyed by the company, only 17 percent were certain they had a broadband cap. 21 percent say they weren’t sure one way or the other whether their broadband was metered.

Most providers set their overlimit penalty at $10 per 50 GB of excess usage. Some offer to waive data caps for a monthly additional charge of $50. That makes Google’s $10 video game service much less of a bargain than many initially thought.

When questioned about the impact data caps could have on Stadia, Google vice president Phil Harrison hoped the nation’s ISPs would do the right thing by their customers.

“ISPs have a strong history of staying ahead of consumer trends and if you look at the history of data caps in those small number of markets…the trend over time, when music streaming and download became popular, especially in the early days when it was not necessarily legitimate, data caps moved up,” he said. “Then with the evolution of TV and film streaming, data caps moved up, and we expect that will continue to be the case.”

Except Harrison’s utopian world view is not accurate. In fact, most broadband providers have set data caps and left them unchanged for years, even as those same companies promote frequent speed upgrades. In effect, more and more customers are running over their usage allowances and either paying steep penalties, reducing usage, or agreeing to pay another $50 a month to dispense with the cap altogether.

Vice author Karl Bode reminds readers “broadband caps are complete nonsense.”

“Experts say the real purpose of such limits is to covertly jack up your already expensive broadband bill—and punish customers looking to cut the cord on traditional cable TV services,” Bode added.

Correction: Data cap expressed at 1,000 MB changed to 1,000 GB to reflect the correct allowance.

What’s Eating Your Comcast Data Cap?

Comcast has put its proverbial finger to the wind to define an “appropriate” data cap it declares “generous,” regardless of how subjectively random that cap happens to be. Although 1,000 GB — a terabyte — usage allowance represents a lot of internet traffic, more and more customers are finding they are flirting with exceeding that cap, and Comcast has never been proactive about regularly adjusting it to reflect the reality of rapidly growing internet traffic. That means customers must protect themselves by checking their usage and take steps if they are nearing the 1 TB limit.

If you do exceed your allowance, Comcast will provide two “grace periods” that will protect you from overlimit fees, currently $10 for each extra 50 GB allotment of data you use. Another alternative Comcast will happily sell you is an insurance policy to prevent any risk of overlimit fees. For an extra $50 a month, they will take the cap off your internet plan allowing unlimited usage. But $50 a month is close to paying for your internet service twice and is indefensible considering how little Comcast pays for its customers’ internet traffic. It is just one more way Comcast can pick up extra revenue without doing much of anything.

Customers that do regularly break through the 1 TB data cap often have a guilt complex, believing they have no right to complain about data caps and should pay more because they must cost Comcast a lot more money to service. In fact, Time Warner Cable executives broadly considered internet traffic expenses as little more than a “rounding error” to their bottom line, according to internal emails obtained by the New York Attorney General’s office. Managing customers’ data usage is far less costly than network plant upkeep, the regularly increasing costs of video content, and expenses related to expanding service to new locations.

One VentureBeat reader investigated what chewed through Comcast’s data allowance the most, and it wasn’t easy:

Xfinity pretends to make this easier for you, but that’s a load of horsesh*t. Its X-Fi app claims to give you usage stats for your connected devices — only nothing appears up-to-date. The phone I was using to look at the X-Fi app doesn’t even appear on the connected-devices list. You also have to look at each device individually. I saw no way to sort a list of devices by data usage, which would obviously help a lot.

Some of the biggest data users are connected households, where multiple family members use a range of devices, often at the same time. Customers with multiple internet-connected computers, video game consoles, and streaming devices are most at risk of exceeding their cap.

Video Games Consoles/PCs

The biggest data consumption does not come from gameplay itself. It comes from frequent software updates, some exceeding 50 GB. If you play a number of games, updates can come frequently. In the case of the VentureBeat author, 17% of daily usage came from the home’s primary desktop PC. Another 12% was traced to the family’s Xbox One. An in-home media server that also runs Steam and auto-updates frequently was also suspect.

Streaming Devices

If you are not into video games and do not depend on cloud storage or large file transfers to move data back and forth, streaming set-top boxes and devices are almost certainly going to be the primary source of your biggest monthly data usage. Video resolution can make a difference in how much data is consumed. If you are regularly approaching or exceeding your monthly cap, consider locking down maximum video resolution for streaming on large televisions to 720p, and 480p for smartphones. Some streaming services offer customized resolution options in their settings menu.

Autoplay, also known as the ‘binge’ option can also consume a lot of video when a service automatically starts playback of the next episode in a series. Some people switch off their televisions without stopping video playback, which can mean you watched one episode but actually streamed six or more. Check the streaming software for an option to not autoplay videos.

Remember that cable TV replacements like DirecTV Now and YouTube TV will continue streaming live broadcasts until you stop them. Do not just switch off the television. Many live/linear TV apps will prompt you every few hours if you have not changed channels to make sure there is someone still watching. If you do not respond, streaming will stop automatically.

Cloud Storage Backups

When customers report staggering data usage during a month, cloud storage backup software is often the culprit. If you are new to cloud storage backup services like Dropbox or Carbonite, your PC may be uploading a significant part of your hard drive to create a full backup of your computer. This alone can consume terabytes of data. Fortunately, most backup services throttle uploads and do not automatically assume you need to backup your entire hard drive. Many offer options to limit upload speed, the total amount of data that can be uploaded each month, and options to selectively backup certain files and folders. 

Your Wi-Fi Network is Insecure

In areas where data caps are pervasive, those who want to use a lot more data and do not want to pay for it may quietly hop on your home Wi-Fi network and effectively bill that usage to you. This is most common in large multi-dwelling units where lots of neighbors are within range of your home Wi-Fi. The best way to reduce the risk of a Wi-Fi intrusion is to create a password that is exceptionally difficult to guess, using a mixture of special characters (!, ^, %, etc.) and mixed case random letters and numbers. Although this can be inconvenient for guests, it will probably keep intruders out and prevent them from running up your bill.

It is unfortunate customers have to jump through these kinds of hoops and compromise their online experience. But where cable and phone companies lack competition, they can charge a small fortune for internet access and still feel it is appropriate to cap usage and ask for even more money when customers “use too much.”

Starry Wins 24 GHz Spectrum to Launch 200/200 Mbps Unlimited Wireless in 25 States

Starry, Inc., a fixed wireless internet provider, this week announced it has won 104 licenses in the FCC’s recent spectrum auction, allowing the company to launch service to over 40 million people in 25 states, potentially covering more than 25% of all U.S. households.

“We are excited to take this important next step, augmenting our shared spectrum strategy with exclusively licensed spectrum,” said Starry CEO and co-founder Chet Kanojia. “This gives us the ability to provide access to unlimited, affordable, high quality internet access. We built our technology to be agile and operate across a range of frequencies, so that we could take advantage of opportunities like this to expand and grow our network.”

Starry’s internet service advertises 200/200 Mbps speed without data caps for a flat $50 a month, equipment included. The service will now also use licensed frequencies in the 24 GHz band and reach customers over a point-to-multipoint network that serves multi-dwelling residential units primarily in dense urban areas, but can affordably service other areas with a significant population density.

Starry claims to offer a simple, no bundles, no-long-term contract, no-data caps, no-hidden fees plan of $50 per month, and is up and running in parts of Boston, Los Angeles, Washington, D.C., New York City, and Denver. Customers give Starry a rating of 4.9 out of 5.0 stars in over 100 Google reviews.

Customers like Raphael Peña are fans.

“It’s awesome so far, 300 Mbps down and about the same up,” Pena writes. “The price is right and I can play Battlefield V or any other game with no lag. I just wish you could get this for homes but I’m loving it in my apartment.”

So far, Starry is focused on serving multi-dwelling units like apartments and condos in downtown areas that are increasingly attractive to younger residents. The technology can be extended to serve other customers at an average cost of around $20 per residence. Most of their customers are young cord-cutters or cable-nevers, and Starry only sells internet service, skipping video and phone service. Starry works closely with real estate developers and owners to deploy Starry internet service, sometimes as an amenity to attract new renters and keep current ones happy.

With the latest spectrum acquisition, Starry plans to expand service in phases, starting with Chicago, San Francisco, Houston, Dallas, Seattle, Detroit, Atlanta, Indianapolis, Philadelphia, Miami, Memphis, Phoenix, Minneapolis, Manchester, N.H., Portland, Ore., and Sioux Falls, S.D. But the company also plans to reach cities in the 25 states where it now holds licensed spectrum. How fast it reaches these cities will depend on available funding and subscriber interest:

Starry’s Spectrum Licenses Cover These Communities

State Cities
Alabama Birmingham, Huntsville, Mobile
Arizona Tucson
Arkansas Little Rock
Colorado Colorado Springs, Fort Collins
Florida Jacksonville, Tallahassee
Idaho Boise City
Illinois Decatur
Indiana South Bend, Fort Wayne, Bloomington
Kansas Wichita
Kentucky Louisville
Ohio Cleveland, Cleveland, Cincinnati, Toledo, Dayton, Columbus
Massachusetts Springfield
Mississippi Jackson
Nevada Las Vegas, Reno
New Mexico Albuquerque
New York Buffalo, Albany, Syracuse, Rochester
North Carolina Fayetteville, Greensboro, Charlotte, Raleigh
Louisiana Baton Rouge, New Orleans
Pennsylvania Harrisburg
South Carolina Charleston
Tennessee Nashville, Chattanooga, Memphis
Texas San Antonio, Brownsville, Lubbock, El Paso
Virginia Virginia Beach
Washington Spokane
Wisconsin Milwaukee, Madison
Courtesy of: Starry.com

Light Reading’s Mike Dano discussed how to build an affordable fixed 5G internet service with Alex Moulle-Berteaux, chief operating officer for Starry, at the Big 5G Event in Denver on May 8, 2019. (16:41)

Cable One: A Regime of High Prices and Data Caps

Cable One has the highest average revenue per customer of any publicly traded cable company in the United States, with the average customer paying Cable One $70.80 a month, mostly for internet access.

The company’s first quarter earnings growth of 5.5% reflect the company’s recent price increases and regime of low-allowance data caps, which have pushed 10 percent of its customers to pay an extra $40 a month to bring back unlimited access. Others are upgrading to costlier, faster tiers with more generous usage allowances.

“During the first quarter, we saw roughly 50% of our new customers choose our 200 Mbps or higher speed service and nearly 10% of our new customers opted to purchase our unlimited data plan,” said Julia Laulis, Cable One CEO.

Laulis

Cable One’s 200 Mbps plan (with a 600 GB data cap) costs $65 a month after promotions expire. A DOCSIS 3.0 modem lease fee of $10.50 applies. A $2.75 monthly internet service surcharge may apply. If a customer wants unlimited access to avoid overlimit fees, there is an additional charge of $40 a month (a 5 TB cap applies to the “unlimited plan”). Customers choosing a 200 Mbps broadband-only package with unlimited data will pay up to $118.25 a month.

Cable One’s broadband customers are concerned about staying within the data caps to avoid overlimit fees. While Comcast and Charter Spectrum customers consume over 300-400 GB of data per month (Comcast has a 1 TB cap, Spectrum only sells unlimited service), Cable One customers use an average of 290 GB, with usage growing at a 30-35% annual rate. Many Cable One customers have little choice either. Laulis noted that Cable One’s DSL competition is not very relevant when customers want to watch streaming video. Speeds are often so slow, customers do not have a good experience streaming HD video over DSL.

 

Cable One is also shedding its video customers in record numbers, with just 305,000 of its cable TV customers left. More than 29,000 departed year over year, and that number continues to rise as consumers rebel against the company’s high prices and unwillingness to negotiate.

MoffettNathanson warned that Cable One’s high pricing may eventually price itself out of broadband growth, as consumers elect to sign up with telephone companies instead. But many of its service areas are still served by low-speed DSL, and despite Cable One’s high cost, the company added 10,600 new internet customers in the last quarter.

In addition to raising prices, the company also plans to spend between $9-11 million to change its name from Cable One to Sparklight over the next two years.

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