Comcast (Nasdaq: CMCSA) has continued implementing a strange policy recently: It's unplugging its Internet customers. Not the overwhelming majority, mind you -- just its most voracious downloaders. Of course, unplugging your heaviest users is a strange approach on its own. At the very least, it means that we may be looking at the beginning of a change in companies' unlimited Internet usage policies, and it certainly raises some interesting questions about the direction of Comcast's industry.
Internet content has become increasingly complex. From streaming entire feature-length movies on Netflix (Nasdaq: NFLX) to downloading MP3s and TV shows on Apple's (Nasdaq: AAPL) iTunes to playing online games like World of Warcraft, the needs of computer users have increased significantly. Internet service providers have to stay on top of the growing demand, and Comcast's solution has so far been to cut people off.
So far, it's targeting those who download the equivalent of 1,000 songs or four feature-length movies per day, according to a Washington Post article. So we're not talking about many people, but given the current trend of Internet usage, companies will need to relax on a bandwidth cap or else risk alienating a growing number of subscribers. Otherwise, for consumers, this could mean an end to unlimited Internet usage.
Conversely, the companies could maximize their profitability by charging extra fees once a user hits a certain limit of downloads. This approach would also solve the short-run capacity problem.
For the longer term, companies such as Time Warner Cable (NYSE: TWC), Comcast, and Verizon (NYSE: VZ) will have to continue upgrading their systems anyway, to accommodate higher connection speeds.
The key to handling these usage challenges is to determine how people will use the Internet down the road. If more households begin streaming media -- such as television programs in high-definition -- through their computers, how will it affect the connection speeds of other users? Providers need to build with those scenarios in mind and charge accordingly with the latest trends.
For now, Comcast prefers to banish subscribers -- with advance notice -- and solve the problem later. But as Internet users adopt increasingly bandwidth-heavy habits, companies like Comcast may stand to lose. Given its triple-play option, the last thing Comcast would want is to lose three connections of revenue from a peeved subscriber.
Psst, Comcast. Want to know how you keep those greedy customers? Charge them for their heavy habits!
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