Time Warner Cable Expands Its Usage-Based Broadband Pricing

by Trefis Team
-13.66%
Downside
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Trefis
TWC
Time Warner Cable
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Although a small development, Time Warner Cable’s (NYSE:TWC) expansion of its usage-based billing in Texas indicates that the company is possibly seeing some success with this strategy and that customer satisfaction levels are being maintained. It is too early to make a definitive conclusion through. Nevertheless, one can extrapolate the expansion and ponder upon the effects it might have on the company and its subscribers. The implementation is a result of a broader trend of increasing Internet usage due to video streaming from companies such as Netflix (NASDAQ:NFLX).

See our complete analysis for Time Warner Cable

It is clear that while some subscribers will benefit from this billing system, others will not. Currently, only a small proportion of Internet users consume a large amount of data, as evident from statements made by Comcast (NASDAQ:CMCSA) about its broadband subscribers and by AT&T (NYSE:T) on its iPhone users. Thus, more subscribers may be satisfied compared to those who are likely to oppose the metered billing. However, the trend dictates that over time more customers are likely to shift their video usage from TV to Internet and that will have repercussions.

It is not clear yet that usage-based pricing is going to be a sustainable model devoid of customer backlash. Nevertheless, for now, Time Warner Cable may benefit with reduced load on the network and potentially higher revenue per subscriber, taking into account overage charges. Reduced load on the network could result from subscribers being more careful about their broadband usage, which implies the need for upgrading the network may reduce.

Our price estimate for Time Warner Cable stands at $75.50, implying a discount of about 10% to the market price.

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