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Nation/World

February 5, 2014

Cable merger future-proofs against Internet's rise

(Continued)

Ian Olgeirson, an industry analyst with SNL Kagan, says average cable Internet prices have risen just 10 percent over the past five years to about $43 per month at the end of 2013. The number of cable Internet subscribers has risen more quickly, growing 34 percent to nearly 51 million over the same period.

“For the most part, operators have still been in that mindset of gaining subscribers and making sure that they grow market share,” Olgeirson says. “They’ve favored that over being aggressive about increasing prices for high-speed data service. It’s been a successful approach.”

Yet that could change as people’s demands for greater bandwidth grow.

According to Time Warner Cable, its customers’ use of Internet bandwidth is up 40 percent from a year ago.

It aims to double top speeds in New York to 100 megabits per second in February and has done so in Los Angeles already. This year, it is also targeting five markets to upgrade to as high as 300 megabits per second to satisfy user demand, although it didn’t specify which ones. That faster speed would put it closer to Verizon’s offering of 500 megabits per second.

Charter is also in the midst of transforming its service so that the slowest speed across its service territory will be 60 megabits per second — double the current minimum — by the end of the year.

Having more customers would increase the benefit of even a small price hike to consumers. It also sets up cable operators to potentially begin charging the giants of the Internet world. According to Janney’s Wible, that sets up a long-term fight between “the collective interests of Google, Facebook, AOL, Netflix, Amazon, Twitter and many others against the cable lobby.”

“We’re in the very early stages of what will be an intense battle,” he says.

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