Comcast Corporation ( CMCSA - Analyst Report ) – the largest cable MSO in the U.S. has decided to introduce a usage-based residential broadband plan in Tuscon, Arizona whose internet speed will vary according to plans.
According to Comcast, the fastest plan will have a download/upload speed of 105/20 MB and will have a maximum limit of 600GB per month while the other plan will carry a download speed of 50MB/sec with a monthly data threshold of 450GB. Customers will be charged $10 for every additional bucket of 50GB usage but will not be billed for the first three times they exceed the monthly allowances during a 12-month period.
All other plans will have a monthly data ceiling of 300GB after which the overage charges will be applicable and the company will remind its customers via email and web browser notices when their usage limit reaches ninety percent of completion. Comcast is also offering a plan with a download/upload speed of 305/65 MB/sec targeting the high-end customers, but hasn’t yet launched it in Tuscon.
Tuscon is the second market where Comcast is launching this service after it has launched a similar 300GB plan in Nashville scrapping the older 250GB plan where the customers were not charged with overage fees but their services stop functioning after the said limit.
We believe Comcast is launching this service to keep the shortage of bandwidth problem within check as the overage fees will force customers to restrict their usage within the cap limit. However, the company faces competition from the likes of Time Warner Cable Inc. ( TWC - Analyst Report ) , Suddenlink Communications and AT&T Inc. ( T - Analyst Report ) , who have already deployed similar plans in certain areas.
The current Zacks Consensus Estimate for Comcast Corporation. is pegged at 46 cents for the third quarter of 2012 with a growth rate estimate of 40.00%. For 2012, the Zacks Consensus Estimate stands at $1.93 with a growth rate of 21.88% while for 2013, the Zacks Consensus Estimate stands at $2.23 with a growth rate of 15.92%.
We retain our long-term Neutral recommendation on Comcast Corp. Currently, it has a Zacks #2 Rank, implying a short-term Buy rating.
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