While Comcast (NASDAQ:CMCSA) licks its wounds after pressure from federal regulators caused it to drop its bid for Time Warner Cable (NYSE:TWC), the company has not stopped evolving its product offering.
Though cord cutting has yet to become a major problem, with major cable companies losing about 125,000 net paying video subscribers in 2014, according to the Leichtman Research Group, Comcast has been proactive in dealing with the threat. Broadly this has meant offering more packages in which broadband access is the star (and the bulk of the expense for the consumer) and cable becomes the secondary offering.
Comcast, which lost nearly 200,000 net subscribers to its pay-TV services last year, according to LRG, has been aggressive in trying new models meant to appeal to would-be cord cutters. These packages have been marketed under the Internet Plus name, and not all are offered in every market the company serves.
This strategy acknowledges that some existing and potential customers will primarily want Internet service and that any pay-TV offering will essentially be an add-on. The company clearly does not know the exact mix for this offering, but it is testing varying offers in different cities
It's not a promotion
Unlike many cable company offers, the Internet Plus deals are not promotional prices. They're also not on long-term contracts. In my home market of Newington, Conn., Comcast has an Internet Plus offer that includes Internet access, a very limited set of local channels, and HBO for $44.99 a month on a one-year agreement. The company also offers a $54.99 plan that includes 45 cable channels, faster broadband speeds, Showtime, and HBO.
It's not a direct comparison, because the broadband speeds offered vary, but these prices are actually better deals than buying only Internet service. In my 06111 ZIP code, the company offers these broadband-only deals:
- 3 Mbps for $34.99
- 6 Mbps for $49.95
- 25 Mbps for $66.95
It's silly to pay $34.99 for 3 Mbps Internet service with no television package when an extra $10 a month gets you a handful of cable channels and HBO (which sells as a stand-alone through various providers for $15 a month).
In other markets, Comcast is trying a package called "Internet Plus 25." That deal offers Internet service, 25 basic cable channels, and HBO for $67.95 a month, GeekWire reported. Just getting the Internet service included in that package would cost "$61.95 per month, so the video programming can be seen as a $6/month add-on," the Seattle-area tech news site explained.
Comcast does not always make it easier for customers to find its best prices. The deal GeekWire cited appeared in the fine print of customers' bill. But the company generally will bring out its best offers when existing or potential subscribers call a customer retention specialist.
Those are the Comcast employees who have at times gotten in trouble for being too aggressive when it comes to retaining subscribers who want to leave. That zeal, however, can work to your advantage if you simply want to make the best deal possible to stay (or become) a customer.
Why is Comcast doing this?
The writing may be on the wall for traditional cable. Comcast can't make Netflix (NASDAQ:NFLX), Hulu, or Amazon.com's (NASDAQ:AMZN) Prime Instant Video disappear, nor can it stop services like DISH Network's (NASDAQ:DISH) Sling TV digital live, streaming TV service.
What it can do is play a little defense and acknowledge that using any of those services requires an Internet connection. If the company can use creative bundles to keep people from bolting for alternate broadband providers (in the markets where those exists) it at least retains a profitable customer relationship. Doing that allows Comcast to essentially live to fight another day by keeping the cord cutter at least somewhat in the fold.
It's easier to sell more stuff to a subscriber who has a limited package than it is to get someone who does not use your service at all to come on board. Comcast has recognized that and is creating packages that reflect the new reality.
The company might not want to more or less give cable away, but it's a proactive move that shows the cable and broadband provider understands that its market has changed.
Daniel Kline owns shares of Apple. He likes knowing he has hundreds of channels even if he only watches a few of them. The Motley Fool recommends Amazon.com, Apple, Google (A shares), Google (C shares), and Netflix. The Motley Fool owns shares of Amazon.com, Apple, Google (A shares), Google (C shares), and Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.