Bloomberg News

Comcast to Test Charging Heavy Web Users on Data Amount

May 17, 2012

Comcast Corp. (CMCSA:US), the largest U.S. broadband provider, said it will test charging more from Internet customers whose monthly data usage exceeds a certain limit, joining rivals as online video becomes more popular.

As part of the test, customers in some markets who reach a monthly limit of 300 gigabytes of data can purchase additional capacity, for example 50 gigabytes for $10, Philadelphia-based Comcast said today in a blog posting.

Comcast, also the biggest U.S. cable carrier, is following competitors such as Time Warner Cable Inc. (TWC:US) in trying different ways to charge for Internet access as consumers increasingly watch online video, limiting demand for traditional pay-TV services. Comcast reported its 20th consecutive quarterly decline in television subscribers this month.

“Times have changed,” David Cohen, a Comcast executive vice president, said on a conference call. “We want to send a message to even the most intensive high-bandwidth customers that they are welcome.”

Comcast is eliminating its current 250 gigabyte cap to allow all customers to freely use as much broadband as they’d like if they pay for it, Cohen said. The vast majority of Comcast’s customers don’t use “anywhere near” 300 gigabytes, Executive Vice President Cathy Avgiris said. The median Comcast customer uses 8 gigabytes to 10 gigabytes, she said.

To reach the 300 gigabyte limit, a customer needs to watch about 100 high-definition movies a month, said Vijay Jayant, an analyst at ISI Group in New York.

“It’s a start to rein in the guys that are excessive users,” Jayant said.

Netflix, Hulu

Comcast fell 1.7 percent to $28.35 at the close in New York. The stock (CMCSA:US) has advanced 20 percent this year.

Internet users are consuming more data each year as they watch online video from services such as Netflix Inc. (NFLX:US) and Hulu LLC. Netflix Chief Executive Officer Reed Hastings has said Comcast’s 250 gigabyte cap was “not a near-term issue” for his company, though he has expressed concern that companies such as Comcast could decrease the threshold.

Comcast said today its customers will be warned when they approach the cap and will be charged a fee for excess usage if they do not buy additional capacity, Avgiris said.

Comcast’s Xfinity TV app for Microsoft Corp.’s Xbox doesn’t count toward the 300 gigabyte threshold, Cohen said. Comcast doesn’t count usage from the application because the video comes from Comcast’s private network rather than the public Internet.

‘Discourage Subscribers’

“The notion that Comcast would charge an exorbitant rate for additional bandwidth -- while continuing to exempt its own traffic under its Xbox deal -- illustrates that Comcast is really trying to discourage subscribers from experimenting with online video alternatives,” said Joel Kelsey, a policy adviser at Washington-based Free Press, in an e-mailed statement. His organization promotes wide access to communications.

Time Warner Cable, the No. 2 U.S. cable provider after Comcast, said in March it was testing an optional usage-based plan. Time Warner Cable CEO Glenn Britt has said consumption- based billing is “inevitable” for the broadband industry.

To contact the reporter on this story: Alex Sherman in New York at asherman6@bloomberg.net

To contact the editor responsible for this story: Ville Heiskanen at vheiskanen@bloomberg.net


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Companies Mentioned

  • CMCSA
    (Comcast Corp)
    • $55.13 USD
    • 0.42
    • 0.76%
  • TWC
    (Time Warner Cable Inc)
    • $150.0 USD
    • 0.09
    • 0.06%
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