Xfinity Flex

Comcast today announced the launch of Xfinity Flex, a $5/month service targeting Comcast’s internet-only customers with a streaming set-top box capable of accessing Comcast-approved apps including Netflix, Amazon Prime Video, HBO, and other services.

Subscribers must have a Comcast-supplied internet connection, no video package, and an xFi Gateway (a cable modem/router combination that costs between $10-13 a month to lease). After the new service becomes available nationwide next week, those enrolling will receive a small set-top box comparable to a Roku capable of streaming 4K HDR video. Comcast also supplies its own voice remote, and bundles access to Comcast’s apps that manage in-home Wi-Fi, mobile, security, and automation services for easy access.

“Xfinity Flex will deepen our relationship with a certain segment of our Internet customers and provide them with real value,” said Matt Strauss, executive vice president of Xfinity Services for Comcast Cable. “For just five dollars a month, we can offer these customers an affordable, flexible, and differentiated platform that includes thousands of free movies and shows for online streaming, an integrated guide for accessing their favorite apps and connected home devices, and the ease of navigating and managing all of it with our voice remote.”

A closer look at the device and the fine print suggests customers may want to carefully evaluate whether Flex offers good value for money. Instead of buying a traditional streaming set-top box like Roku, customers can only lease the Flex box for $5 a month… indefinitely. Comcast is not including any programming with the box, just hardware to access streaming content already available, often for free, on other streaming or desktop platforms. Flex’s search function is supposed to make it easier to find programming across a wide number of services, but you will have to subscribe to each service independently.

Comcast also warns that using Flex will count against your monthly data cap.

The 4K capable Roku 3920R can be purchased from Best Buy for $39.99.

Comcast has also carefully designed the box to protect the cable company from any competitive threats. Competing streaming services like DirecTV Now, Sling TV, YouTube TV, Hulu Live, and other services are intentionally blocked, another example of life without net neutrality. The only available path to cable TV programming using Flex is to visit the ‘easy upgrade’ app that will sign you up for Comcast’s X1 cable TV service, presumably the one you cord-cut before you signed up for Flex.

The service is also designed to protect other cable companies from competition from Comcast. Only Comcast internet customers can purchase Flex service, so it is not available to customers of Charter Spectrum, Cox, Altice, or other cable operators.

The $5 subscription fee is also misleading, because you will also have to rent Comcast’s own xFi Gateway, which costs between $10-13 a month, instead of using your own cable modem. That suddenly makes Flex a $15 a month service that essentially just gives you access to a walled garden of the services Comcast approves of for around $180 a year (including the Gateway).

Comcast probably won’t attract a big audience for Flex because of all the restrictions it comes with.

Consider buying a streaming set-top box outright instead of living with Comcast’s restrictions and mandatory gateway fees. Shoppers can find basic Roku devices for purchase under $30, with more capable 4K-compatible devices starting at around $40.

Comcast and Charter Communications have no real interest in competing head-to-head in wireless with AT&T, Verizon, T-Mobile, or Sprint. Instead, the two cable companies hope to trap you in a bundled package of services too inconvenient to cancel.

Jeff Kagan, a longstanding telecommunications analyst specializing in the cable industry, believes Comcast, Charter, and other cable operators entering the wireless business have no intention of being a serious competitor to the country’s four largest mobile companies.

“The goal of XFINITY Mobile [from Comcast] is to offer their customers another service and to create a sticky bundle,” Kagan said. “It’s not to lead the wireless wars. It’s not to increase their market share for traditional reasons. It is simply to create a sticky bundle to stabilize and grow their customer base.”

Kagan

XFINITY Mobile and Spectrum Mobile (from Charter), both require customers to be signed up for their respective internet services. If a customer cancels internet service, they will lose their mobile service. That could prove to be a major hassle for wireless customers, because they will have to properly port out their existing phone number(s) to another provider before dropping broadband.

Kagan believes cable operators will use mobile service to further strengthen their bundle by tying discounts to the number of services each customer takes through the cable company.

“Customers who use one service find it easy to switch away to a competitor,” Kagan said. “However, when they use multiple services and get a discount for the bundle, they become sticky and generally stay put. And the more services a customer uses, the larger the discount, the stickier they get and the less likely they are to wander.”

That is also likely to be true with Altice, which operates Optimum (Cablevision) and SuddenLink and has partnered with Sprint to offer cell service.

Sprint and T-Mobile, which are planning to merge, have repeatedly argued cable operators will be aggressive new players in the mobile business, giving the potentially combined carrier fierce new competitors. But Kagan doubts that will prove true.

“The problem is, the sticky bundle is not a low-cost solution,” Kagan offered. “With that said, the higher cost to the cable television companies is less than that of losing their customer base. So, the cost makes sense as simply a cost of doing business.”

The challenge cable operators face is that none plan to own and operate their own traditional cellular network. Comcast and Charter have partnered with Verizon Wireless to resell access to its 4G LTE network and Altice will rely on Sprint. Leasing access on an ongoing basis is likely to be more expensive that relying on your own network, but beyond offering Wi-Fi calling and experimental access to future 5G-type services in the emerging CBRS band, cable operators will remain almost completely dependent on their wireless provider partners, limiting their effective ability to compete.

Kagan believes the goals of the two industries are different. Wireless operators are trying to monetize their networks through usage, while cable operators are trying to find new services that will keep customers loyal and are willing to ignore monetizing their wireless side businesses to achieve that goal.

Despite the growing impact of cord-cutting, Comcast is following companies like Charter Spectrum by cutting back customer retention discounts that savvy subscribers negotiate to keep their cable bill reasonable. Despite losing more than 344,000 cable television customers in 2018, almost twice as many as it lost in 2017, Comcast has lost interest in cutting prices to keep customers.

Traditionally, customers using the word “cancel” with a customer service representative would quickly be offered deeply discounted service if they agreed to stay. Customers willing to stand their ground in tough negotiations with the cable company could win promotional pricing indefinitely, often saving several hundred dollars a year without losing channels or services. In 2016, after Charter Communications completed its merger with Time Warner Cable and Bright House Networks, Charter CEO Thomas Rutledge vowed to impose “pricing discipline” on Time Warner Cable’s “Turkish bazaar of promotional deals” after Charter took control of the company.

Rutledge called out the ‘madness’ of offering customers fire sale prices on internet and television service at a MoffettNathanson Media & Communications Summit in May 2017.

“Time Warner wanted to make a video number, and there were data packages that cost less if you took video than if you didn’t,” Rutledge said. “And a lot of those were churning out. And a lot of them were basic-only. So on the margin, at the end – in the last year, I think they were selling 40% of their connects as basic-only. [TWC had] 90,000 different promotional offers, many of them deeply discounted and piled on top of each other.”

Rutledge said Time Warner Cable represented the worst of an industry practice that gave unprecedented power to customers to get what they wanted, at least for awhile.

“You’d call in, bargain … And so there’s a lot of that out there. And they’re also exploding packages. Meaning, at the end of the term, they go back to full price,” Rutledge complained.

Rutledge called an end to negotiations by offering customers the opportunity of keeping their current package, but gradually raising it to a price that was often higher than Spectrum’s own non-negotiable packages and pricing. Regardless of what package a customer chose, it was a win for Charter because regular pricing ensured the company was making money either way.

Comcast has apparently been won over by Rutledge’s message to the industry and is now gradually moving in a similar direction.

Strauss

Matt Strauss, executive vice president of XFINITY Services, told Business Insider Comcast will now attempt to keep and win back its cord-cutting customers not by discounting prices, but by creating much smaller cable TV packages with fewer channels — a practice known as slimming down packages into “skinny bundles.” Comcast also plans to stop pushing customers into its “best value” triple-play packages of television, phone, and internet services, understanding many customers have no interest in some of those services.

“Our strategy is very focused on segmentation and getting more sophisticated in putting together the right video offering for the right customer at the right time in their life,” Strauss said, not by offering deep discounts on bloated packages (including a landline or hundreds of unwanted TV channels) that would reduce profitability.

Charter is already offering an ultra-slim, a-la-carte local TV package combining Music Choice with the customer’s pick of 10 national cable channels for $21.99 a month. The package is targeted to those with internet-only service and is accessed through a Roku set-top box. DVR service is available, if a customer was willing to pay a steep DVR service and box rental fee.

Comcast’s new strategy will market internet packages that include the added-cost option of a super-slim TV package of local channels and a handful of cable networks.

Strauss disagrees with some industry pundits who have suggested cable companies are planning to abandon selling cable television altogether in favor of internet-only service.

“We continue to be very bullish on video, but you’re just going to see us be more focused on how we go to market with video,” Strauss said.

Comcast internet customers have a new add-on option – xFi Advanced Security, an “artificial intelligence” security package designed to identify and block Wi-Fi intrusions and hack attacks on Internet of Things (IoT) equipment like lights, thermostats, smart meter apps, Wi-Fi equipped home appliances, security cameras, doorbells, voice enabled personal assistants, and garage door openers.

Comcast will sell the package for $5.99 a month (except for xFi Advantage customers, who get Advanced Security included at no additional cost), based on claims that hacker attacks on IoT devices are up 600% from 2016-2017.

xFi Advanced Security provides an added layer of protection for your entire network by preventing you from inadvertently accessing malicious sites, blocking remote access to smart devices from unknown or dangerous sources and monitoring activity in real time to detect when devices are behaving in unusual ways that could indicate a network threat.

Whenever a threat is detected, it’s automatically blocked and you are notified in xFi and given tips on how to resolve.

“As the digital world gets more complex, we wanted to make it simple and easy for our customers to protect their home networks. That’s why we developed xFi Advanced Security,” said Fraser Stirling, senior vice president of digital home, devices and AI for Comcast. “We want to give customers digital peace of mind for the devices they already own and the confidence to expand and evolve their connected homes knowing that every new camera, voice-assisted speaker or smart thermostat they add will be protected.”

Comzilla

Comcast is increasingly invading the territories of neighboring small cable operators, a rare move that could eventually trigger price wars and threaten the informal “gentlemen’s agreement” that has kept cable companies from directly competing with each other for decades.

In New Hampshire, residents of Laconia and Rochester will have a choice between incumbent Atlantic Broadband or newcomer Comcast. 

Comcast is already the dominant cable operator in the state, providing service in 104 communities. The cable company recently filed its draft franchise proposal with Laconia city officials to extend Comcast service into areas already serviced by Atlantic Broadband, an independent cable operator owned by Montréal based Cogeco.

“We believe Laconia offers attractive opportunities for Xfinity and Comcast business products in an area close to Comcast’s existing footprint and part of the same designated market area we already serve,” said Comcast regional spokesman Marc Goodman. “We offer internet speeds of up to two gigabytes per second and 100 gigabytes for businesses. We have an award-winning video platform with voice remote.”

It is the second time Comcast announced it would directly compete with Atlantic in New Hampshire. Comcast is already overbuilding Atlantic’s service area in Rochester and is scheduled to finish sometime next year.

In response, Atlantic has introduced very competitive service and pricing plans to fend off Comcast.

Atlantic Broadband is trying to lock in their customers with two-year rate guarantees and lower introductory prices.

Consumers are thrilled.

“After years of MetroCast’s dark ages of bad service, Atlantic Broadband bought them up, raised some internet speeds, and raised our bill even more,” said Charlie Saunders. “It is real easy to pay a $200 cable bill around here, so I am glad Comcast is giving us a choice.”

Atlantic Broadband, at least in public, seems unfazed about Comcast’s entry. Ed Merrill, Atlantic Broadband’s regional general manager for New Hampshire and Maine stressed his company’s innovations, such as bringing gigabit internet speed to the region and using TiVo set top boxes. 

“Our plans are based not on what other providers are doing, but by anticipating customer needs and preferences, then developing and delivering the kinds of products and services that will make customer lives better, whether they’re residential customers or business clients with customers of their own,” Merrill said in a statement.

Comcast Invasion: Communities Where Consumers Can Also Choose Comcast as Their Cable Company

• Dec. 2017: Rochester, N.H. (Atlantic Broadband vs. Comcast)
• May 2018: Waterford and New London, Conn. (Atlantic Broadband vs. Comcast)
• Summer 2018: Warwick Township, Warwick Borough, Ephratah Township, Ephratah Borough and Lititz, Penn. (Blue Ridge Communications vs. Comcast)
• Nov. 2018: Laconia, N.H. (Atlantic Broadband vs. Comcast)

Grove

Comcast said it is only responding to the public’s demand for more choice and better service, which explains why it is expanding into territories already served by another operator. But so far, Comcast has only chosen to expand in areas adjacent to its current territory, and only in places served by smaller, independent cable companies. In short, Comcast is in no hurry to run cable lines into areas served by Charter/Spectrum or Cox.

A Multichannel News article on the subject suggests Comcast’s real interest is reaching lucrative commercial/business customers just out of reach of their existing service areas. 

“I can tell you that our primary focus is on business service expansion where from time-to-time we explore new opportunities, based on a case-by-case analysis, to bring our state-of-the-art products and services to more businesses,” Bob Grove, vice president of communications for Comcast told the trade magazine. “Some of our existing customers in the contiguous footprint and shared DMA have operations in this area, which is why it made sense for us to expand our commercial network here. We’re also exploring limited residential opportunities, but that’s in the very preliminary stages as well.”

“My heart and wallet skipped a beat,” Lennart Swenson, Jr., told The Laconia Daily Sun. “When we had Comcast, at our last home, they provided superior service and more options for less money than Atlantic Broadband. Comcast was also easier to contact and provided quicker service than has been our experience with Atlantic.”

Some customers also complain Atlantic lures people with temporary teaser rates that exponentially increase after introductory pricing expires. Others report it is difficult to get a representative on the phone.

Competition is “tiresome” for the cable industry

Comcast’s growing interest in expanding service into already-cabled areas means the company will have to convince customers to switch cable providers, something that runs contrary to traditional cable industry economics, where companies carefully avoid direct competition with each other.

“When I started in this business, we all helped each other,” former Buford Media CEO Ben Hooks told Multichannel News. Buford retired in 2018 after a 50-year career in the cable industry. “You don’t see that, especially with Comcast. As far as they’re concerned, there’s them and there’s the rest of the industry.”

Hooks remembers the 1970s and 1980s when cable companies did attempt to expand into each other’s territory.

“In most cases overbuilds were a disaster,” Hooks said. “Neither party won very much, both were fighting for the same customer, cutting prices and neither company was doing well. It was just a tiresome battle.”

But as costs plummet to less than $500 per home to extend fiber to the home service, and the costs to provide internet service continue to fall, cable companies like Comcast can afford the risk of upsetting smaller operators. 

“A company today like Comcast has so much more margin/size over a small company that if they want to expand into an adjacent territory, it is no contest,” Hooks told the trade publication. “Now, if they were to take on Charter, the competition would be a greater challenge. While Comcast still has the advantage, Charter is large enough that it would be ugly.”