Comcast may be undercutting its own fiber broadband aspirations by introducing a cheaper way for customers to get gigabit broadband service over their existing Comcast cable connection.

Customers in seven new areas, including most of Colorado, Oregon, southwest Washington State, and the cities of Houston, Kansas City, San Francisco and Seattle now have access to Comcast’s DOCSIS 3.1-powered gigabit downloads. (Upload speeds are limited to a much less impressive 35Mbps.)

Comcast announced the new communities as part of their gradual rollout of DOCSIS 3.1 — the standard that powers cable broadband — across their national footprint. These communities join Utah, Detroit, Tennessee, Chicago, Atlanta, and Miami where Comcast has already introduced the new speeds.

It is Comcast’s latest foray into gigabit speed broadband, and it is decidedly focused on the cities outside of the northeast (except Boston) where Comcast has not faced significant competition from Google Fiber or AT&T Fiber, both delivering gigabit speed internet access. Verizon FiOS, predominately in the northeast, only recently introduced gigabit speed options for its residential customers. Comcast continues to be among the most aggressive cable operators willing to boost broadband speeds for its customers, in direct contrast to Charter Communications, the second largest cable operator in the country that is predominately focused on selling 60-100Mbps internet packages to its customers.

Comcast sells multiple broadband speed tiers to its customers.

Comcast’s efforts may undercut its own fiber-on-demand project, which wires fiber to the home service for some Comcast customers seeking up to 2Gbps service. That plan comes with a steep installation fee and term commitment, making it a harder sell for customers. Comcast’s DOCSIS-powered gigabit will retail for $159.95 a month, but Comcast is offering pricing promotions ranging from $70-109.99 a month with a one-year term commitment in several cities. The more competition, the lower the price.

In Kansas City, where Google Fiber premiered and AT&T is wiring its own gigabit fiber, Comcast charges $70 a month, price-locked for two years with a one-year contract. Customers who don’t want a contract will pay dearly for that option — $160 a month, which is more than double the promotional price.

In Houston, where AT&T has not exactly blanketed the city with gigabit fiber service and Comcast has been the dominant cable operator for decades, gigabit speed will cost you $109.99 — almost $40 more a month because of the relative lack of competition. Customers who bundle other Comcast services will get a price break however. Upgrading to gigabit service will cost those customers an additional $50 to $70 a month, depending on their current package.

“Additional prices and promotions may be tested in the future,” the company said in a news release.

Comcast does not expect many customers will want to make the jump to gigabit speeds and a higher broadband bill. Rich Jennings, senior vice president of Comcast’s Western/Mountain region, told the Colorado Springs Gazette that gigabit service was a “niche product for people who want that kind of speed.”

Comcast does suspect a number of signups will be from broadband-only customers who don’t subscribe to cable television.

Mike Spaulding, Comcast’s vice president of engineering, thinks the service will appeal most to those who rely entirely on a broadband connection for entertainment and communications.

“There’s not a lot of need for gigabit service for one customer to do one thing,” Spaulding told the Denver Post. “But what it does is enable an even better experience as more devices in the home are streaming, whether it’s video or gaming or whatever they are doing in the home. Most of our customers subscribe to the 100Mbps package today. Less than 10 percent of our customers are in the 200-250Mbps. We’ll see where one gig takes us.”

One place a gig may take customers is perilously close to Comcast’s notorious 1TB usage cap, which is currently enforced in Alabama, Arizona, Arkansas, California, Colorado, Florida, Georgia, Idaho, Illinois, Indiana, Kansas, Kentucky, Louisiana, Michigan, Minnesota, Mississippi, Missouri, New Mexico, Western Ohio, Oregon, Tennessee, Texas, South Carolina, Utah, Southwest Virginia, Washington, and Wisconsin, even for this premium-priced internet tier. Customers exceeding it will automatically pay a $10 overlimit fee for each 50GB of excess usage, up to a maximum of $200 a month. An unlimited ‘insurance plan’ is also available for $50 a month, which removes the 1TB cap.

Customers will have to use a new modem if they upgrade to gigabit service, either renting one from Comcast for around $10 a month or buying a compatible DOCSIS 3.1 modem. Two of the most recommended: the Arris Surfboard SB8200 ($189) or the Netgear CM1000 ($171.99) (prices subject to change).

Thought paying $65 a month for broadband service is too much? Just wait a few years when one Wall Street analyst predicts you will be paying twice that rate for internet access, all because the cable industry is gradually achieving a high-speed broadband monopoly.

Jonathan Chaplin, New Street Research analyst, predicts as a result of cord-cutting and the retreat of phone companies from offering high-speed internet service competition, the cable industry will win as much as 72.2% of the broadband market by the year 2020. With it, they also win the power to raise prices both fast and furiously.

In a note to investors, Chapin wrote the number of Americans left to sign up for broadband service for the first time has dwindled, and most of the rest of new customer additions will come at the expense of phone companies, especially those still selling nothing better than DSL.

“Our long-term penetration forecast is predicated on cable increasing its market share, given a strong network advantage in 70% of the country (this assumes that telco fiber deployment increases from 16% of the country today to close to 30% five years from now),” Chaplin wrote.

Cable companies already control 65% of the U.S. broadband market as of late last year. Chaplin points out large cable operators have largely given up on slapping usage caps and usage pricing on broadband service to replace revenue lost from TV cord-cutting, so now they are likely going to raise general broadband pricing on everyone.

“Comcast and Charter have given up on usage-based pricing for now; however, we expect them to continue annual price increases,” Chaplin said. “As the primary source of value to households shifts increasingly from pay-TV to broadband, we would expect the cable companies to reflect more of the annual rate increases they push through on their bundles to be reflected in broadband than in the past. Interestingly, Comcast is now pricing standalone broadband at $85 for their flagship product, which is a $20 premium to the rack rate bundled price.”

Chaplin himself regularly cheerleads cable operators to do exactly as he predicts: raise prices. Back in late 2015, Chaplin pestered then CEO Robert Marcus of Time Warner Cable about why TWC was avoiding data caps, and in June of that year, Chaplin sent a note to investors claiming broadband was too cheap.

“Our analysis suggests that broadband as a product is underpriced,” Chaplin wrote. “Our work suggests that cable companies have room to take up broadband pricing significantly and we believe regulators should not oppose the re-pricing (it is good for competition & investment).”

“The companies will undoubtedly have to take pay-TV pricing down to help ‘fund’ the price increase for broadband, but this is a good thing for the business,” Chaplin added. “Post re-pricing, [online video] competition would cease to be a threat and the companies would grow revenue and free cash flow at a far faster rate than they would otherwise.”

In an effort to keep up with Comcast, Cox Communications has quietly expanded its internet overcharging scheme to customers in Arkansas, Connecticut, Kansas, Omaha, Neb, and Sun Valley, Ida. (perhaps the only community that can afford Cox’s threatened overlimit fees). Cox’s customers have noticed and told DSL Reports about the forthcoming highway robbery.

These unlucky customers join those in Cleveland, Oh., Florida and Georgia who have already been enduring Cox’s usage cap and penalty fee system.

Cox hasn’t shown any interest in listening to customers who do not appreciate usage allowances and have repeatedly told the company they want unlimited access, especially considering how much they already pay Cox for service.

“It’s a total ripoff and customers have no option to keep unlimited, unless they move to the next city over where Charter/Spectrum offers internet access without any data caps,” notes Cleveland resident Shelly Adams.

Cox has followed Comcast by boosting most usage allowances given to customers to 1TB, an amount many believe was set high enough to avoid threatened regulatory scrutiny of stingy data caps by the FCC under the former Obama Administration.

As with every provider that has ever conjured up an internet overcharging scheme, no matter what the allowance is, the company always claims it is generous and impacts almost nobody. Cox claims 99% of their customers will never hit the cap, which always begs the question, if it affects so few customers why spend time, money and energy creating a data cap, usage measurement tools, and billing scheme for only a handful of customers? Is that Cox’s idea of innovation?

Usage caps for one and all.

In fact, Comcast has claimed the same thing, but their math came into question when more than 13,000 Comcast customers managed to stumble their way to the FCC’s complaints bureau in one year and write a formal protest about Comcast’s own overlimit fee scheme. We are certain there are many more customers with overlimit fees on their bills than that, and guess only a small fraction took the time to write a complaint and submit it.

As Stop the Cap! has said for almost a decade, beware of cable company “generosity” because it usually comes with fine print.

“Cox High Speed Internet packages include 1 TB (1,024 GB) of data to provide you with plenty of freedom to stream, surf, download, and share,” the company writes on its support website (its much rarer Gigablast gigabit plan includes 2TB). For now, if you use Cox Wi-Fi or CableWiFi hotspots, usage on those networks does not count toward your data plan.

Cox reserves itself some extra freedoms, such as automatically charging customers who exceed their allowance a $10 overlimit penalty for each 50GB of usage they incur until the next billing cycle begins. Cox’s generosity ends with the unused portion of your allowance, which Cox keeps for itself, not allowing customers to roll over unused data to the following month.

In an effort to get customers to accept the scheme, Cox calls it a “data plan,” similar to what wireless customers might pay, and says other companies have data caps too. But none of this justifies the practice.

You’re over our arbitrary usage limit!

In another “generous” move, Cox is offering a grace period for two consecutive bill cycles before it slaps overlimit penalties on customer bills for real in Arkansas, Connecticut, Kansas, Omaha, and Sun Valley. The grace period window begins with bills dated on or after Feb. 20, 2017. To make sure you get the message, the company will bill you the overlimit fee it claims almost nobody will ever pay along with a corresponding grace period credit for two months, just to put the scare in you. After May 22, it is time to pay up.

Cox will make sure you can’t claim you “didn’t know” you ran through your allowance by harassing you with data usage messages via Cox browser alert, email, text message, or an automated outbound call when you have used about 85% and 100% of your monthly data plan. You will receive additional alerts when you have reached 125% of your monthly data plan, at which point Cox will throw a party in your honor with thanks for allowing them to run up your bill.

Coincidentally, Cox isn’t testing their scheme in markets rife with competition from providers like Verizon FiOS, where usage is effectively unlimited. In many of Cox’s usage-capped markets, customers have AT&T as their alternative, and they have a 1TB usage allowance as well.

Incoming FCC chairman Ajit Pai is on record opposing any involvement in regulating usage-based pricing schemes, claiming it amounted to government meddling in business. But customers can complain directly to Cox and threaten to cancel service. It may be a good time to renegotiate your cable bill to win discounts that may help cover any overlimit fees that do make it to your bill.

There remains little, if any justification for a company like Cox to peddle data plans with usage allowances to their customers. The company is moving towards gigabit broadband speeds but apparently lacks the resources to manage customers that want a hassle-free unlimited experience? If Cox is being honest about how few customers will ever be affected by the cap, there is no reason the company cannot continue an unlimited plan at current prices.

Cox’s scheme does shine light on the uncompetitive broadband marketplace that continues to afflict this country. As one reader pointed out, customers are constrained by the offerings of whatever provider has set up shop in a city that typically has, at best, one other choice (usually a phone company selling DSL or up to 24Mbps U-verse). A truly competitive market would give customers a wide choice of “data plans” that include unlimited plans customers enjoyed for years and want to keep. But safe in their broadband duopoly, cable companies like Cox have no incentive to treat customers to a better or even fair deal.

The real reason for usage caps and data plans with penalty pricing was exposed by Wall Street analysts like Jonathan Chaplin, a research analyst for New Street Research LLP. Although he was speaking to a cable company executive at the time, his words traveled to our ears as well:

“Our analysis suggests that broadband as a product is underpriced,” Chaplin said. “Our work suggests that cable companies have room to take up broadband pricing significantly and we believe regulators should not oppose the re-pricing (it is good for competition & investment).”

“The companies will undoubtedly have to take pay-TV pricing down to help ‘fund’ the price increase for broadband, but this is a good thing for the business,” Chaplin added. “Post re-pricing, [online video] competition would cease to be a threat and the companies would grow revenue and free cash flow at a far faster rate than they would otherwise.”

Exactly.

AT&T’s rivals are likely to cry foul over the company’s practice of “zero rating,” in which it exempts its own video services from data-cap usage. The Wall Street Journal’s Shalini Ramachandran explains how this could impact the proposed AT&T-Time Warner merger. (2:44)