Comcast Corporation ( CMCSA - Analyst Report ) , the largest cable MSO in the U.S. announced that it will come up with two new usage based billing plans for its customers. We believe that Comcast made this move to restrain the enormous growth of the online video streaming service provider Netflix Inc. ( NFLX - Analyst Report ) .

According to the company, they will abolish their current 250 gigabytes (GB) per month plan and replace it with two separate data plans for all Internet users. One of its plans will have a data capacity of 300 GB and the subscribers will be charged $10 for each additional 50 GB of data usage. Another plan will possibly have different tiers of bandwidth; and the customers opting for the lowest tier will get 300GB.

Recently, Netflix Inc. had criticized Comcast for its data cap policy. According to them, Comcast had excluded any charges to the subscribers using Xfinity TV via Microsoft Corporation’s ( MSFT - Analyst Report ) gaming console Xbox 360, from their 250 GB plan.In reply, Comcast argued that as the videos come from their own equipment and not from public internet, they don’t include it within the data plan. However, Comcast’s new Skype video calling services through TV uses a lot of data and since it travels through the internet it is included in the data plan.

Cable operators like Comcast are facing stiff competition from non-cable operators who provide live video streaming services over the internet. Non-cable operators who provide video streaming services use a lot of data, thus subscribers using Netflix might not find the given plan sufficient enough. We believe that the company has come up with the plan to discourage customers from using online video alternatives. The company’s new tiered-data-transmission plan which is coming up only as a trial is common with telecom Carriers like AT&T ( T - Analyst Report ) .

Recommendation:

Considering these factors, we maintain our long-term Neutral recommendation on Comcast Corporation. Currently, Comcast Corporation has a Zacks #3 Rank, implying a short-term hold rating on the stock.