Comcast Corp. is among the first major U.S. cable operators to try out a pre-paid Internet service that mimics the wireless industry's model, Light Reading Cable has learned.
Comcast quietly introduced this contract-free, 3Mbit/s downstream Internet product in the Philadelphia area in late 2012, opening up access to a new market that could be worth billions of dollars when applied nationally.
Comcast is pitching the service under the Xfinity Internet Prepaid Service banner via a dedicated website and via more than 70 stores in parts of Philadelphia and nearby cities in Delaware and New Jersey, including select wireless retail outlets run by Alpha Wireless Communications, T-Mobile USA, Cricket Communications Inc. and Speed Wireless, among others.
The offer, along with some materials promoting the service, is also starting to appear on Craigslist.
According to Comcast, the Starter Kit carries a suggested retail price of $69.95, and includes an Arris Group Inc.-made Docsis 3.0 modem, the required cables, and an activation code good for 30 days of service.
Users currently have a couple of options: $15 for seven days of access or $45 for 30 days. Pre-paid customers can refill their account by making purchases via a Web portal using a debit or credit card, or by purchasing a refill card or code from one of the various retail partners.
The initial pre-paid tier is limited to 3Mbit/s downstream and 768Kbit/s upstream. The Federal Communications Commission (FCC) presently defines "broadband" as 4Mbit/s down by 1Mbit/s, which could be why Comcast has decided to affix the "Internet" label to its new pre-paid option. (See FCC: Broadband Starts at 4Mbit/s.)
The pre-paid offer also has some caveats. It's only available to people who live in serviceable addresses without an active Comcast account, and can only be accessed via the modem included in the Starter Kit.
Comcast considers this initial effort a trial, and is not saying if or when it will extend a pre-paid product to other markets. "A small number of customers" have signed up so far, Comcast said, but didn't elaborate.
Tapping a new market
Comcast, which ended 2012 with 19.36 million high-speed Internet customers, appears to be the first major U.S. cable operator to roll out a pre-paid Internet product that will give it access to a market of lower-income consumers without taking on the risk of non-payment and bad debt. The option also gives Comcast the opportunity to extend a new flexible option to consumers who don't have bank accounts, or don't otherwise qualify for post-paid services.
Last year, Novation Broadband co-founder and ex-Charter Communications Inc. exec Ted Schremp stressed on a Light Reading Cable webinar that a pre-paid Internet service could not only be profitable, but open up a market that's worth about $7 billion. That figure was based on an estimated addressable market size of 22.6 million U.S. homes without wired broadband connections that would also be willing to pay just $26 for a month of service. Comcast's first stab at this is already $20 above that. (See Pre-Paid Broadband Doesn't Have to Eat Margins.)
Schremp also admitted that cannibalizing the existing cable modem product would be the "A-number-one concern" for a cable operator. Comcast appears to be looking to avoid that by keeping the speed of its pre-paid offer low, and at a price that rivals some of its baseline subscription broadband tiers. For example, Comcast's 6Mbit/s Performance Starter service is $49.95 per month, while its 20Mbit/s Performance tier runs $62.95 (plus $7 per month if the customer leases the modem from the operator). Comcast's pre-paid tier makes no mention of any usage caps.
Developing a pre-paid Internet offer is not without its challenges. Cable operators, for example, must configure their OSS/BSS platforms to handle the new model. While Comcast is clearly big enough to take on such a project, it could be a daunting undertaking for smaller operators.
One company that's trying to help cable operators bridge that gap is Wipro Ltd., which is pitching Accelerate, a platform that handles the billing, customer care and operational support of a pre-paid Internet or video service. (See Pre-Paid Opens New Frontier for US Broadband and Pondering Pre-Paid Cable TV .)
— Jeff Baumgartner, Site Editor, Light Reading Cable