Shortly after Verizon (NYSE:VZ) launched its 300 Mbps broadband offering priced more than $200 per month, Comcast (NASDAQ:CMCSA) announced its 305 Mbps offering. The companies seem to be neck-and-neck in an effort to establish their leadership. But does it really matter to Comcast? The direct financial impact of this high-priced high-speed broadband service is limited for a couple of reasons.
First, the 5 Mbps edge over Verizon is really not much of a competitive advantage. When you are dealing with speeds of 300 Mbps, an additional 5 Mbps doesn’t make any difference for most customers. Second, this offering will appeal only to a very small proportion of the U.S. broadband subscribers since their net usage don’t really demand such high speeds. It appears that this move is more of a brand building ploy in a quest to appear as the technology leader in the broadband industry.
What really matters to Comcast is how effectively it can bundle and market multiple products to the majority of its subscribers. And in doing that, broadband speed is not the only factor. Subscribers tend to go for bundled products to save bills and, hence, the overall appeal of the package including pay-TV and broadband is what counts.
Our price estimate for Comcast stands at $32.50 roughly in-line with the market price.