Tuesday, December 11, 2012

Broadband Access To Cost More

As consumers see more value from their broadband access then their cable subscription, cable operators are grabbing revenue growth by pushing up broadband rates.  Both Cablevision and Time Warner Cable have announced plans to raise monthly fees, $5 and $3.95 respectively.  "Broadband is now the biggest cash driver for cable companies, in an era when a fast Internet connection is the gateway to online video applications that can be viewed on TVs and computers."

While consumers are more likely to shed cable networks, the price elasticity for a broadband connection is much more flexible.  These two cable behemoths are less likely to feel any drop in broadband subscribers as a result of such a move.  Yet analysts don't believe that other cable operators will also raise broadband rates.  "Marci Ryvicker, media and cable analyst at Wells Fargo Securities, told MarketWatch Friday that Cablevision and Time Warner are unlikely to start a trend."  I disagree.

When cable operators see that their was no backlash from the price increase, they will indeed follow.  Frankly, it's easy money.  Less likely, and subject to a far greater outcry would be if cable operators moved completely over to a usage model from the current "all you can eat" model.  As more an more consumers take their print, audio, and video content off the web, the desire to track household usage would create such an outcry.

Clearly broadband usage will continue to grow and grow. The rise in smartphone and tablet purchases this year all rely on the same access to broadband via WIFI.  And consumers are building more and more wireless into their homes while the cable operators enable WIFI in their communities.  The hunger for broadband access will only continue to grow at an exponentially faster rate and that is why cable operators can get some additional dollars today raising their monthly broadband subscriber fees.

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