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Wall Street’s Latest Great Idea: Providers Should Charge More for 5G, But Only After You Are Hooked

“You’re giving it away… you are giving it all away!” — An unknown Wall Street analyst tossing and turning in the night.

America is simply not paying enough for wireless service. Thanks to dastardly competition introduced by T-Mobile and Sprint (potentially to be snuffed out in due course if their merger gets approved), wireless pricing is no longer a license to print money. Forced to offer one-size-fits-all affordable $40-50 unlimited plans, the prospects to grow Average Revenue Per User (ARPU) have never been worse because you can’t charge people for more service on an “unlimited plan” without admitting that plan is not exactly “unlimited.”

Wall Street analysts, already upset at the thought of carriers spending more than $100 billion on 5G network upgrades, are in a real tizzy about how companies are going to quickly recoup that investment. No matter that some wireless companies have profit margins in the 50% range and customers have paid providers for a service they were assured would keep up with the times and network demand. If there is to be a 5G revolution in the United States, some insist it must not come at the cost of reliable profits — so the industry must find a way to stick consumers with the bill.

It is not common for industry analysts to go public brainstorming higher prices and more customer gouging. After all, North Americans already pay some of the highest cell phone bills in the world, only mitigated (for now) by scrappy T-Mobile and Sprint. Mark Lowenstein, a leading industry analyst, consultant, and commentator, was willing to go public in the pages of Fierce Wireless, arguing “operators should be considering charging a premium price for what will hopefully be a premium service.” That is likely music to the ears of AT&T and Verizon, both frustrated their pricing power in the market has been reduced by credible competition from a significantly improved T-Mobile.

Lowenstein fears the prospects of a “race-to-the-bottom 5G price war” which could arrive if America’s wireless companies offer a credible home internet replacement that lets consumers tell the local phone or cable company to ‘take a hike.’ Since wireless operators will bundle significant discounts for those who subscribe to both home and mobile plans, telecommunications services may actually cost less than what Wall Street was banking on.

Something must be done. Lowenstein:

In mobile, there’s been premium pricing for premium phones. And Verizon Wireless, for a few years when it had a clear network lead, was sort of able to charge a higher price for its service (but not a premium price). But today, there isn’t really premium pricing for premium services. That should change when 5G really kicks into gear.

So how do you extract more cash from consumers’ wallets? Create artificial tiers that have no relationship to the actual cost of the network, but could potentially get people to willingly pay a lot more for something they will initially get for a simple, flat price:

One simple way would be a flat premium price, similar to the “tiers” of Netflix for a higher number of devices or 4K/Ultra HD.  So, perhaps $10 per line for 5G, or $25 for a family plan. Another approach would be more akin to broadband, where there are pricing tiers for different levels of service performance. So if the base 4G LTE plan is $50 per month today, for an average 100 Mbps service, 5G packages could be sold in gradations of $10 for higher speeds (i.e. $60 for 300 Mbps, $70 for 500, $80 for 1 Gbps, and so on). An interesting angle on this is that some of the higher-end 4G LTE services such as Gigabit LTE (and beyond) could get incorporated into this, so it becomes less of a 4G vs. 5G discussion and more of a tier of service discussion.

I would also like to see some flexibility with regard to how one can purchase 5G capabilities. For example, a user might only need those premium 5G features occasionally, and might only be prepared to pay that higher price when the service is being used. Here, we can borrow from the Wi-Fi model, where operators offer a “day pack” for 5G, or for a certain city, location, or 5G-centic app or experience. 5G is going to be hot-spotty for awhile anyway, so why not use a Wi-Fi type model for pricing?

Even better, now with net neutrality in the ash heap of history, courtesy of the Republican-dominated FCC, providers can extract even more of your money by artificially messing with wireless traffic!

Lowenstein sees a brand new world of “app-centric pricing” where wireless carriers can charge even more to assure a fast lane for those entertainment, gaming, and virtual reality apps of the future, designed to take full advantage of 5G. Early tests have shown millimeter wave 5G networks can deliver extremely low latency traffic to customers from day one. That kills the market for selling premium, low-latency add-ons for demanding apps before companies can even start counting the money. So assuming providers are willing to purposely impede network performance, there just could be a market selling sub-100ms assured latency for an extra fee.

The potential of a Money Party only 5G can deliver is coming, but time is short to get the foundation laid for surprise toll lanes and “premium traffic” enhancements made possible without net neutrality. But first, the wireless industry has to get consumers hooked on 5G at a tantalizingly reasonable price. Charge too much, too soon and consumers may decide 4G LTE is good enough for them. That is why Lowenstein recommends operators not get carried away when 5G first launches.

“We don’t want to be setting ourselves up for a WiMAX-like disappointment,” Lowenstein writes. “The next 12-18 months are largely going to be ‘5G Experimentation’ mode, with limited markets, coverage, and devices. Heck, it’s likely to be two years before there’s a 5G iPhone in the United States, where iOS still commands nearly half the market.”

The disappointment will eventually be all yours, dear readers, if Lowenstein’s recommendations are adopted — when “certain milestones” trigger “rate adjustment” letters some day in the future.

Lowenstein sees four signs to start the pillaging, and we’ve paraphrased them:

  • Coverage: Wait until 30-40% of a city is covered with 5G, then jack up the price. As long as customers get something akin to 5G one-third of the time, they’ll moan about why their 5G footprint is so limited, but they will keep paying more for the scraps of coverage they get.
  • Markets: Price the service differently in each market depending on how stingy customers are likely to be at different price points. Then hike those prices to a new “nationwide” standard plan when 5G is available in the top 20-30 cities in the country. Since there may not be much competition, customers can take it or leave it.
  • Performance: AT&T and Verizon’s gotta gouge, but it’s hard to do it with a straight face if your 5G service is barely faster than 4G LTE. Lowenstein recommends waiting until speeds are reliably north of 100 Mbps, then you can let rip with those diamond-priced plans.
  • Devices: It’s hard to extract another $50-100 a month from family plan accounts if there are an inadequate number of devices that support 5G. While your kids “languish” with 4G LTE smartphones and dad enjoys his 5G experience, mom may shut it all down when the bill comes. Wait until everyone in the family can get a 5G phone before delivering some good old-fashioned bill shock, just like companies did in the golden days of uncompetitive wireless.

These ideas can only be adopted if a lack of competition assures all players nobody is going to call them out for pickpocketing customers. Ajit Pai’s FCC won’t interfere, and is even subsidizing some of the operators’ costs with taxpayer dollars and slanted deregulation to let companies construct next generation 5G networks as cheaply as possible (claiming it is important to beat China, where 5G service will cost much less). Should actual competition remain in the wireless market, all the dreams of rate-hikes-because-we-can will never come true, as long as one carrier decides they can grow their business by charging reasonable prices at their competitors’ expense.

Comcast Invades Europe With Sky Satellite Takeover; Analysts Predict Big Rate Hikes are Coming

Comcast kicks the door open to the European television market.

Europe is about to get a taste of Comcast, the cable company most Americans abhor, after the Philadelphia-based cable giant won control of Sky, Europe’s largest satellite TV provider.

Comcast, criticized in some circles for overbidding, easily eclipsed 21st Century Fox’s bid to win control of the television provider that is a household name in the United Kingdom.

Sky customers are being groomed to think highly of the deal by Comcast’s PR department, promised a healthy increase in original programming, expansion into more European markets beyond the UK and Ireland, Germany, Austria, Switzerland, and Italy, and a richer selection of American and European programming owned or controlled by Comcast, which also owns NBCUniversal.

Analysts expect European customers will soon get the bitter taste of what their American counterparts have endured for decades — frequent and steep rate hikes widely expected from Sky’s new owner.

Comzilla

Comcast sees the American television market as saturated, but Europe is wide open for more television services. Comcast believes Sky is not meeting its value potential, giving the company plenty of room for hike rates as new programming and channels are introduced, especially on the European continent. British viewers already benefit from the consolidation of English language global media brands, bringing most American network fare to British and Irish audiences. But there is plenty of room to grow in Italy and Germany, where state public broadcasters are hardly meeting their audience potential and pay television networks are still lacking.

Sky currently has 27 million subscribers across Europe. Just 5.2 million of those subscribers are in Germany, a country with nearly 83 million people. Most are attracted to Sky’s ad-free movie service and sports networks. Sky has traditionally lacked the deep pockets necessary to compete effectively with global streaming providers like Netflix, which have scooped up a considerable amount of foreign language content.

These days, Sky is typically a co-partner in original programming ventures, but it rarely comes away with key ownership rights. Comcast’s ownership of NBCUniversal is expected to dramatically change that, with NBC and Universal Studios capable of aggressively entering the original programming business on behalf of Sky, keeping rights in-house.

European regulators will be watching how the Comcast-owned venture develops. Many countries already have concerns about the American “invasion” of entertainment programming, often a mainstay on the lineups of European networks. Comcast’s involvement will only escalate the amount of American content seen on European televisions, either in its original English, subtitled, or dubbed.

Currently, UK customers subscribing to the full Sky HD package, including the Sky Q set-top box, pay up to $119 a month. In Germany, the smaller “full package” costs $82 a month after promotional pricing expires. Comcast is likely to raise prices significantly over the next few years, possibly reaching $150 a month in the UK and $100 in Germany. In contrast, Netflix is building a giant market share in Europe keeping pricing low. A 4-screen subscription to Netflix currently costs $13 a month in the UK, with Netflix’s new Ultra subscription priced at $19.96 in Germany.

Despite potential price increases, few believe Sky will lose many subscribers, at least as long as it continues to hold the rights to must-have sports programming, notably the English Premier League soccer matches in the UK and Bundesliga matches in Germany, which Sky Deutschland shares with public broadcaster ZDF and Eurosport.

 

Investigation: Spectrum’s Best Discounts Go Only to Areas With Robust Competition

Spectrum customers living in areas wired for fiber optics get substantially better discounts for longer periods of time than those living in areas where anemic phone company DSL service is the only competition.

Charter Communications, like many cable operators, asks all prospective customers to enter their complete mailing address, claiming prices “vary per location.” What the company does not say is that it maintains a database of addresses where fiber-fast competition is currently available and only offers the best deals to those locations.

In Rochester, N.Y., Spectrum competitor Greenlight Networks has made headway installing fiber to the home service in select neighborhoods in the city and suburbs. As fiber service becomes available, some Spectrum customers start switching to Greenlight, which markets 100/20 Mbps service for $50/mo, 500/50 Mbps for $75/mo, or 1,000/100 Mbps for $100/mo. In response, to keep customers, Spectrum offers 24 months of reduced pricing on its internet package. But your address must match Spectrum’s database as being within a competitive service area. Otherwise, the deals will not be so good.

Stop the Cap! found dramatic differences in prices between addresses nearly across a street from one another – one wired for Greenlight Fiber, the other not.

Competitive Area (Spectrum, Frontier DSL, Greenlight fiber-to-the-home service)

Spectrum Ultra (400 Mbps): $44.99/month for 24 months (free upgrade from Standard 100 Mbps package)

All promotions last 24 months

Free Wi-Fi Service

No installation or set up fee*

Non-Competitive Area (Spectrum, Frontier DSL)

Spectrum Standard (100 Mbps): $44.99/month for 12 months (for Ultra 400 Mbps, add $25/mo)

All promotions last 12 months

Wi-Fi Service is $5/month

$49.99 professional installation fee required for Ultra 400 Mbps service*

In Greenlight service areas, Spectrum now undercuts Greenlight’s pricing by offering Spectrum Ultra 400 Mbps service for $5 less than what Greenlight charges for 100 Mbps.

“Racerbob,” a DSL Reports reader in Webster, N.Y., discovered the same “enhanced offers” as an ex-Spectrum customer. He switched to Greenlight three months ago. He discovered if he added a Spectrum cable TV package, the price for 400 Mbps Ultra internet service dropped even lower, to $39.99 a month for two years.

In all, a sample package he assembled delivered dramatic savings, but only if a robust competitor like Greenlight was also offering service to his address:

Addresses used for comparison were in zip code 14618, with verified access to Greenlight at a street address to represent the “competitive” service area and verification Greenlight was not available at the address used for “non-competitive” service area. *-Although a setup fee was found on the final checkout page in both competitive and non-competitive service areas, it was only actually charged in non-competitive service areas during our investigation.

AT&T Upgrades Home Internet Plans – 5, 100, 300, and 1,000 Mbps Now Available

AT&T quietly changed their home internet plans this week, dramatically boosting speeds for some of their lower-priced offerings in areas served by fiber, while boosting gigabit pricing by $10 a month in some instances.

Last week, AT&T was selling 5, 50, 100, and 1000 Mbps plans in AT&T Fiber areas. This week, customers can choose 5, 100, 300, or 1000 Mbps. Existing customers will likely have to switch plans to get the speed upgrades.

Prices shown reflect a bundled discount in the Chicago area. Prices vary in different service areas and are higher for broadband-only service. Basic 5 Mbps pricing can range from $30-60 a month depending on area and available discounts.

If you are a new AT&T customer, the company is offering a $50 Reward Card rebate (expires 7/31/2018) and a free Smart Wi-Fi Extender (new or existing customers switching to gigabit service only) (expires 6/28/2018). Here are some other important terms and conditions to be aware of:

  • There is a 1 TB data cap on all plans except Gigabit Internet 1,000, which is unlimited. But you can avoid the cap for $30 extra a month (not worth it) or by maintaining a bundle of TV and internet service on a combined bill.
  • All internet offers require a 12 month agreement ($180 pro-rated early termination fee applies).
  • Prices reflect bundled service combining internet with at least one other AT&T product (TV/AT&T Phone/Wireless).

Altice Raising Rates Across the Board for Optimum/Cablevision Customers

Altice, which operates Cablevision’s Optimum brand cable service in New York, New Jersey, and Connecticut, has informed regulators of a broad-based “rate event” that will take effect on June 1, 2018. Unless a customer is currently enrolled in a price-locked promotion, these new rates generally affect all customers, except as noted.

Altice told Connecticut regulators the rate changes “reflect the rising cost of programming and our significant investment in the customer experience. Optimum pricing is competitive when compared with other providers, and the Company continues to offer a wide array of products to meet all consumer needs and budgets.”

Altice has told Wall Street a different story, noting it is prioritizing a reduction of the company’s massive debts that came from aggressive acquisitions of other cable systems. Altice also told investors in February Altice USA will distribute a special cash dividend to shareholders of $1.5 billion to celebrate Altice USA’s split from its Netherlands-based parent company Altice NV. The company also told shareholders it was happy with its latest profitable results, showing Altice’s residential business growing to just over 80% of total revenue, up 2.9% in 2017 and 1.8% in the fourth quarter of 2017. Business services is growing in mid single digits.

Altice also plans to continue increasing marketing on its advanced all-in-one-box solution — Altice One, which costs $25 a month.

Changes effective June 1, 2018:

Set-Top Box: For customers who elect to receive a traditional set-top box from Optimum, the monthly rate will increase from $10.00 to $11.00. Does not apply to existing commercial customers.

CableCARD: For customers who request a CableCARD from Optimum, the monthly rate will increase from $2.00 to $2.50.

Sports Surcharge: To partially cover the continually increasing costs that programmers charge Altice to carry sports, the Sports Surcharge will increase from $6.97 to $7.97, for customers subscribing to the Optimum Core or higher tiers. (Broadcast Basic & Economy customers are not charged the Sports Surcharge.)

Broadcast TV Surcharge: New residential Broadcast Basic and above customers currently pay a $3.99 monthly “Broadcast TV Surcharge” to partially offset the high costs that broadcasters charge. This fee will increase to $4.99 a month and will also be applied to existing Broadcast Basic residential customers and new commercial customers.

Broadcast Basic Tier: New residential customers currently pay $19.99 per month for Broadcast Basic. To align basic tier rates, this same rate will apply to existing residential Broadcast Basic customers currently paying a monthly rate over $13.95. As an accommodation to existing Basic Tier customers currently paying $13.95/month, the new monthly Basic rate will be $14.95.

Sports and Entertainment Package: This a la carte subscription will increase from $8.95 to $10.00.

Residential Service Protection Plan: In addition to the free 24/7 technical support that Optimum offers all customers, the optional Service Protection plan covers any fees assessed for service visits. To align our rates, existing customers who currently pay $4.99/month will pay the same $6.99 fee currently applicable to new customers.

Restoration Fee: Optimum customers who do not pay their bill within 30 days of the due date, despite multiple reminder notices, are currently subject to a $4.99 per service fee to restore their service. Effective June 1, the minimum service restoration fee will be $10.00 for single and double product customers and $15.00 for triple product customers.

Installation Fee: Starting June 1, the prices paid by customers for standard and premium installations will increase from $69.00 to $99.00 and $99.00 to $129.00, respectively. Customers are being notified 30 days in advance for each of these changes through bill messages or inserts. In addition, rate information will be available on our website at www.optimum.net.

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