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FFH5
Premium
join:2002-03-03
Tavistock NJ
kudos:5

Cable TV subsidizes cable internet

said by Karl Bode:

Charging per gigabyte is more forced migration than natural evolution -- the impetus originates with investors and executives who fear the impact Internet video will have on TV revenues. Imposing such low caps in the age of HD video -- and charging users $1-$5 per gigabyte for bandwidth that costs a carrier pennies -- is a money grab, and it's only made possible by a lack of sustained, viable competition and napping regulators.
The problem with the above claim is that it neglects the fact that Cable TV revenues greatly subsidize internet costs. If the cable companies don't react to video watching migrating to the internet from the TV channels without replacing the lost TV revenues, than the cost to provide internet service rises drastically.

So cable companies have to start charging for the real costs of providing internet access as the subsidizing TV revenues start to dry up. And the method they rightly have chosen is to start charging users by how much bandwidth they consume. The best set of rates and charges to do that will have to be worked out as the users continue to drop Cable TV.

SO it is NOT a money grab, but it is a way to continue to cover the costs of providing infrastructure to millions of users.
--
My BLOG .. .. Internet News .. .. My Web Page


dsldude08
Premium
join:2008-01-03
La Crosse, WI
kudos:2
Well, that's not the customers fault is it? So why charge the customer more or put more restrictions on them? Maybe they need to change their offerings (prices, products, etc). You adapt to changes, you don't create imaginary dollar amounts and slap them on whatever amount of gigabytes you want. They need to publish EXACTLY how they are coming up with these dollar amounts for overages and for the "maximum". Obviously if there is a maximum amount to be charged, by then they've made well over their amount of money they need to sustain this "cost" associated with bandwidth. Until they show the exact details and math it IS a money grab.


FFH5
Premium
join:2002-03-03
Tavistock NJ
kudos:5

1 edit
said by dsldude08:

They need to publish EXACTLY how they are coming up with these dollar amounts for overages and for the "maximum". Until they show the exact details and math it IS a money grab.
Sorry Charlie - but companies don't owe their customers a line item breakdown of their costs. If you want high level costs; revenues, & profits then you can examine their SEC filings. They come up with their rate tables; publish those; and see what the customer will or won't buy. They then adjust rates as necessary to maximize profits. Welcome to the capitalist system.
--
My BLOG .. .. Internet News .. .. My Web Page


en102
Canadian, eh?

join:2001-01-26
Valencia, CA
reply to FFH5
What about those that are paying for Internet only ?

Internet itself is not _that_ expensive, but I think it has been more the other way. Internet has been subsidising TV.

TV rates have gone up all the time (more crap channels, HD service)
The _only_ thing that has improved on Internet is speed. Personally, I'd take an uncapped 3Mbps DSL-Extreme $20/month deal + basic POTS over $46/month capped 10/1Mbps service from TWC or 10/1Mbps service from AT&T Uverse.

This in general is more of a 'lean' business model, where companies like AT&T/TWC/etc. all expect a specific profit margin or ARPU. To do that, they need to make $X, and its cheaper to bundle. That being said, I would expect better cap deals given when bundled.


Karl Bode
News Guy
join:2000-03-02
kudos:42

1 edit
Everything subsidizes everything else, including ad income, DNS redirection advertising income, VoIP income -- again, arguing that the company isn't profitable under the existing flate-rate pricing model simply isn't accurate...and the idea that we "must" move to metered billing certainly helps TK's stock portfolio, but it's just not true.


FFH5
Premium
join:2002-03-03
Tavistock NJ
kudos:5
said by Karl Bode:

arguing that the company isn't profitable under the existing flate-rate pricing model simply isn't accurate.
But that doesn't change the fact that if more and more people drop the Cable TV portion to go internet only that the costs to provide internet access will have to rise. The only thing open to discussion is how to do that fairly. I propose that billing by bandwidth used is the fairest way. Flat rate unlimited byte plans only benefit the bandwidth hogs - which I agree is the typical BBR user and the type of customer that your editorials are aimed at.
--
My BLOG .. .. Internet News .. .. My Web Page


Karl Bode
News Guy
join:2000-03-02
kudos:42

4 edits

3 recommendations

But that doesn't change the fact that if more and more people drop the Cable TV portion to go internet only that the costs to provide internet access will have to rise.
So raise prices when that happens (which won't be for many years yet), assuming VoIP, behavioral ad and other creative revenue builders don't help offset those losses. You don't really make much sense.
The only thing open to discussion is how to do that fairly. I propose that billing by bandwidth used is the fairest way.
Says you, somebody solely interested in fattening your investment portfolio and who, though you'll protest with the utmost fervor (and several hey mods about how your honor is insulted), absolutely couldn't care less about the fate of consumers.
Flat rate unlimited byte plans only benefit the bandwidth hogs
Another distortion, given companies are perfectly profitable under flat rate pricing, and there are plenty of mechanisms (listed above) to help handle the most extreme users, which carriers admit comprise about 1% of their userbase. This move has nothing to do with handling a tiny portion of troublesome users, that's easily accomplished in other ways. It has nothing to do with fairness, or grandmothers and Luddites who use 70MB a month would be paying $2.00 a month for broadband under a truly metered billing model.

The new low cap and overage model is simply more profitable than the flat rate model. It's simple.

If people who are greedy simply stepped up to the plate and admitted they were being greedy, I'd probably have an easier time of it. But when these efforts always have to be dressed up as philanthropic in nature by people who couldn't care less about anything other than money -- I tend to get annoyed.


RARPSL

join:1999-12-08
Suffern, NY
reply to FFH5
said by FFH5:

said by Karl Bode:

Charging per gigabyte is more forced migration than natural evolution -- the impetus originates with investors and executives who fear the impact Internet video will have on TV revenues. Imposing such low caps in the age of HD video -- and charging users $1-$5 per gigabyte for bandwidth that costs a carrier pennies -- is a money grab, and it's only made possible by a lack of sustained, viable competition and napping regulators.
The problem with the above claim is that it neglects the fact that Cable TV revenues greatly subsidize internet costs. If the cable companies don't react to video watching migrating to the internet from the TV channels without replacing the lost TV revenues, than the cost to provide internet service rises drastically.
My Cable Company has two prices for Internet. The subsidy from Cable TV is only $5 (ie: If I want Internet-Only I pay $5/month more). Thus your subsidy claim sounds good but has little actual basis.

As to the overage charges, they are out of line with the actual cost Based on the Company's actual charges to the customer. If I pay $50 month (to pull a figure out of the air) for my service and have a 100MB cap, then based on that figure, my cost for overage should be no more than $0.50/GB since the cost of everything else to maintain/service my account has ALREADY been paid out of that $50. Another way of looking at it is what happens if I open 2 accounts and switch from account 1 to account 2 when I reach the cap - The result is that for $100 I get 200GB and use EXACTLY the same resources as my first case. Either scenario shows that the overage charges are inflated.

AVonGauss
Premium
join:2007-11-01
Boynton Beach, FL
reply to FFH5
Perhaps not, but having a bit of documentation to back up your claim that their video product still subsidizes their Internet (HSI) is a fair request. I personally do not believe you are going to be able to find recent documentation to substantiate that claim.


cpsycho

join:2008-06-03
HarperLand
reply to FFH5
Cable TV in rogers platform does not subsidize internet. Rogers makes approximately $45 dollers in the green off of every extreme user(if that user matches his cap that month if he/she does not they make more.). Its starting to look like the other way around where they are trying to use the internet sales to subsidize TV programming.

I don't know where you get your information but that piece is bunk.


espaeth
Digital Plumber
Premium,MVM
join:2001-04-21
Minneapolis, MN
kudos:2

3 recommendations

reply to Karl Bode
said by Karl Bode:

Another distortion, given companies are perfectly profitable under flat rate pricing, and there are plenty of mechanisms (listed above) to help handle the most extreme users, which carriers admit comprise about 1% of their userbase. This move has nothing to do with handling a tiny portion of troublesome users, that's easily accomplished in other ways. It has nothing to do with fairness, or grandmothers and Luddites who use 70MB a month would be paying $2.00 a month for broadband under a truly metered billing model.
The low-use customers would be paying $2/mo for usage... on top of the access fees. There is a fixed component to the service that is required to just deliver the access before the first bit is ever clocked across the interface, and that cost is the overwhelming majority of your monthly broadband charge.

You like to constantly publish that carrier-level bandwidth is pennies per GB, even though that's not a realistic representation of cost. Yes, you can get to that price by saying 1mbps fully utilized over a 30 day month is 324GB, and at $10/mbps that means your cost per GB is $0.03.... While the math works out here, it's not an accurate model for the environment. The first problem is that bandwidth isn't used uniformly across the month, there is daily peak usage and then periods of low/idle time off hours. The net result is that you never ever see 324GB out of 1mbps of traffic because of the variation between peak/non-peak usage so your per-GB costs are actually higher. The other problem is that you fail to account for the fact that multiple megabit worth of bandwidth must be purchased to meet peak demand even for low usage.. basically high and low usage subscribers have overlapping requirements for demand in evening peak hours. So for a 250GB monthly cap you're not buying 768kbps of bandwidth, you need to have at least x mbps that lines up with the minimum tier of service you are offering, and you need to have sufficient excess capacity on top of that so you can deliver maximum rate during peak to a reasonable number of people.

The problem with flat rate pricing is that increasing utilization drives expansion, and the blocks of expansion are large and expensive. Say I need an Ethernet switch for home, so I go to Best Buy and purchase a $50 8-port switch. Even though that technically has a cost per-port of $6.25, when I need that 9th port I need to spend more than just another $6.25 to add it. It's a similar deal in the DOCSIS world .. to gain capacity you can only add it in 38mbps blocks, either through DOCSIS 3.0 to add multiple downstream channels or through node splits. Node splits require additional fiber ports on the CMTS, which drives the addition of new cards (one-time capital expense), but those cards also require maintenance contracts (recurring expense), plus the cost of trenching the fiber, re-engineering the node / amplifier design, etc. It's not quite like it is on the head-end where you can just work with your carrier to bump your commit up from 500 to 600mbps on a gige link and change no physical infrastructure in the process.

The other assertion you make is that 40GB or 100GB is a number that screws the average consumer. You love to publish articles about how countries like Japan are kicking USA's ass in providing high speed broadband access. So let's take the numbers from Japan:

»www.caida.org/workshops/wide/080 ··· ffic.pdf

In a study conducted of all of the major ISPs in Japan the average traffic utilization was only about 26GB/mo.

So now you're saying that here in the US, where we supposedly have crap broadband compared to Japan, our average utilization numbers are higher?


FFH5
Premium
join:2002-03-03
Tavistock NJ
kudos:5

1 edit

1 recommendation

reply to AVonGauss
said by AVonGauss:

Perhaps not, but having a bit of documentation to back up your claim that their video product still subsidizes their Internet (HSI) is a fair request. I personally do not believe you are going to be able to find recent documentation to substantiate that claim.
»www.comcast.com/2007annualreview ··· ndex.htm


For example, say they lose half of their TV subscribers and that revenue because they are now getting their TV video thru the internet connection.

The costs for TV video delivery will go down only marginally, if at all(some lower fees to networks can result). The costs to deliver video thru TCP/IP point to point connections thru the internet instead of the multicast method of Cable TV channels will require a large expansion in infrastructure costs.

Revenues go down much more than costs - and the result is that to stay solvent the costs for internet go up.

P.S. less TV viewers means less ad revenue and less revenue from their captive TV networks.
--
My BLOG .. .. Internet News .. .. My Web Page

AVonGauss
Premium
join:2007-11-01
Boynton Beach, FL
Unfortunately, that does not indicate anything is being subsidized - it indicates exactly what the chart says, where the revenue is coming from.

Skippy25

join:2000-09-13
Hazelwood, MO
reply to FFH5
Then maybe they just need to give up and admit they are nothing more than the dumb pipe they are and start acting accordingly.

Your unfounded "fact" that TV revenues greatly subsidize Internet cost is just that... unfounded and I would be willing to bet 100% wrong.

You are correct, this isn't an outright money grab. They are simply trying to restrict the way people use the Internet and get their video without it being so blatantly obvious because that ultimately effects their revenues.

So again.. they need to just become the dumb pipes they truly are and stop fighting it.