Comcast’s $10 Service is Smoke and Mirrors

One of the conditions placed upon Comcast’s purchase of NBC Universal was to start offering a cost-conscious Internet plan for low-income households. This also includes a plan to offer cheap PCs to those families so that they can actually use the service. As with any deal, though, the devil is in the details. Upon closer examination, it would appear that Comcast has simply found a way to create a new revenue stream with some great PR. Combined with the stringent terms of use, it’s obvious that the entire thing is puffed up well beyond what it actually is.

For starters, let’s consider the restrictions on who can actually get the service. For some reason, it is only extended to those who can qualify for the federal free lunch program. I suppose you have to set the bar somewhere, but this seems like an odd bar to set. It ends up excluding childless homes and a lot of seniors, the latter of which are the second-largest group of Internet users behind the very young. You also can’t be a current subscriber or have subscribed in the last 90 days, so the current poor who have eked out enough for service are out in the cold. And if you’ve ever been behind on a bill? Forget about it. You (along with those who have unreturned equipment) are right out. You also have to hope that your neighborhood isn’t one of the many redlined by Comcast’s deployment efforts. If service isn’t available right now, no way you can get it, and odds are against Comcast expanding there. These terms very drastically limit who can actually get it.

As for the service itself, it’s a 1.5Mbps/384Kbps service for $9.95 per month. The normal price for the service is almost triple that at $27.95 per month, so this may seem like a good deal. Not so fast. Free Press found that Comcast produces a gross profit margin around 70% on its broadband service, so that $27.95 service costs Comcast about $8.39/mo to actually deliver. Sure, Comcast is cutting profit margins, but it’s on a product that they are unlikely to deliver in any quantity. I’m also left wondering how such margins can be justified given that the actual networks are paid for and the cost of DOCSIS 3.0 upgrades is running about $7 per port. Private companies are entitled to a profit, sometimes even astronomical ones, but there is a lot of evidence to suggest that these margins could be considered gouging, especially with the limited competitive choice available to most consumers.

One of the few silver linings is the computer purchase program, but it’s still not as great as you might believe. The offer is a Windows 7 Netbook for $150. Those systems retail for around $200 right now, and I’d bet Comcast is getting a pretty good price on them. Odds are good that Comcast is taking a minimal loss, if any, on each unit. It works out in favor of those who qualify, but it’s not quite as great as they make it out to be.

Is all of this better than nothing? Sure, and it’s a great deal for those who can get it. That said, the amount of PR hype surrounding it papers over why the base service is so expensive in the first place and how even at deep discounts, it’s not like Comcast is giving away the farm. In a truly competitive market, they couldn’t get away with it. In most areas limited to a handful of choices, it’s what we end up being stuck with.

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3 Responses to Comcast’s $10 Service is Smoke and Mirrors

  1. G says:

    The fact that Comcast is doing this is great. The fact that they are advertising it as though anyone can get it is misleading at best and boarders of fraudulent! At the Utah Broadband Conference last week they had signs all over the place lauding the fact that they had $9.99 internet – All this to mislead the public. As a Comcast customer for more than 13 years (not-much choice where I live) I still can’t understand why Comcast treats their loyal customers worse than someone who is a) new or b) switches plans on you every time a promotion comes up. When UTOPIA comes I’m GONE!

    • I feel for anyone who does not have, at least the ability, to access the Utpoia Fiber Network. It simply mid-blowing. My friends like using my internet, as they comment ‘What, did you download the entire Internet to your hard drive?’, as my page loads faster than some local operations. Consistently too, not because of some alloted 10Mbps Turbo Boost(TM) theory. And if you have more than just internet delivered over the cable (ie TV, phone) say goodbye to worry free communications.

      The truth is cable Tx is almost more outdated than DSL. Even though its usually faster and relies less on disance than DSL, its based on a mathmatical theory vs actual physics law; such as fiber Tx.


  2. u235sentinel says:

    Plus if anyone really uses the service they can justify getting rid of them according to the TOS/AUP. After all, what real competition is there when comparing these tards out there (cept for UTOPIA in limited areas).

    CenturyLink has done a nice job of (finally) expanding the service area and speed but comparing the two services is like comparing a motorcycle to a moped

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