3 Comments

Summary:

Time Warner Cable’s $4 modem fee has cost it a few new customers suspect Wall Street analysts, but it is adding to sales and won’t have a long term affect.

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Remember that $4 per month modem fee time Warner Cable implemented — the one that had Wall Street all excited about its potential boost to revenue? Well, it seems that people were miffed enough about the charge to affect how many subscriptions the nation’s second largest cable company added during the quarter — 75,000, which is less than the 129,000 Wall Street anticipated. But before feeling vindicated, know this — the fee generated about an extra $1.83 per month from each subscriber.

And in the long term, analysts think it will pay off for the cable giant, which reported financial results Thursday. Especially as consumers find themselves stuck between Time Warner Cable’s modem fee and slower DSL-based service offering. From an analyst note issued today by Stifel Nicolas:

Residential PSUs declined by 20,000 versus our estimate of +48,802, primarily due to weaker-than-expected HSD [high speed data] adds. We believe that the company’s residential HSD net adds (+75,000 vs. estimate 129,000) were negatively affected by higher-than-expected churn as a result of the company’s recent introduction of a modem fee (~$4). While the “fallout” from the modem fee could spill over into 1Q13 results, we don’t expect this to be a long-term issue for the company’s residential HSD product. In fact, the modem fee contributed ~3/4 (~$1.83) to the 6.3% increase in HSD ARPU during Q4.

So there you have it. Customers clearly are put off by the modem fee, but it won’t last. Likely because they don’t really have another option for broadband in many areas. Yet, plenty of people are still unconvinced that ISPs engage in anti-competitive behavior in the broadband market.

  1. Sorry, that’s nails on a chalkboard to me.

    I’m actually allergic to mixups of “Affect” and “Effect.” It’s a sickness, I know.

    But to continue:

    “it won’t have a long term affect. ”

    Should read

    “it won’t have a long term effect. ”

    Whenever I’m exposed to a mixup in Affect vs. Effect, I dose myself with this page:

    http://www.dailywritingtips.com/affect-vs-effect/

    and I become tolerable again.

    Carry on, thank you.

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  2. Ender Wiggin Ksc Monday, February 4, 2013

    …just buy your own modem. you don’t want their refurb’d piece of crap to begin with.

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    1. Timothy Poplaski Tuesday, February 5, 2013

      It’s monopoly rent seeking behavior… they raise fees simply because they can.

      The logical next rent increase would be to ban owning your own modem due to “support issues” or at least make it challenging enough to do so that few would.

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