The real strategy behind tiered data plans

Over the past year, Comcast and other broadband providers have been forcing tiered data plans on customers. The New York Times recently speculated that these plans might be part of a strategy to stunt the growth of internet video.

The best way to figure out what these companies are really doing is to read Wall Street analyst reports. For example, here’s what a prominent Wall Street analyst recently said:

Most cable companies we met with have embraced tiered data plans, with tiering starting to move to total monthly usage rather than tiered speeds. The minimum tiers are set higher enough at this point that they impact only 1%-2% of users. However, we believe the concept is to establish an early precedent of usage tiers and then let the average consumer usage patterns move in their direction over time, as usage is growing 60% per year. This puts in place an effective long-term hedge against internet video. [emphasis added]

- Goldman Sachs research. “Americas: Communication Services”, May 23, 2012

In 2011, Comcast generated $55B in revenue and $8.4B in pre-tax profits. Goldman rates the stock a “buy” because Comcast “pushed through rate hikes on both video and broadband access across two-thirds of the [customer] base in Q1 2102″ (Goldman Sach, “Comcast Corp”, May 2, 2012).

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