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posted by LaminatorX on Monday February 09 2015, @01:55PM   Printer-friendly
from the all-the-traffic-will-bear dept.

The Huffington Post reports

In our Petition for Investigation of Time Warner Cable (TWC) and Comcast, we point out that TWC's High-Speed Internet service has a 97 percent profit margin and a number of people asked how that statistic was derived. Simple. Time Warner Cable provides the information, (with some caveats).

Below is the actual financial information excerpted from the Time Warner Cable, 2013 SEC-filed annual report. (Please note that this same mathematics is also used by Comcast and probably Verizon and AT&T, though they do not explicitly detail their financials in this way.)

Moreover, we need to put this financial information in context to what customers are paying, and more specifically with the Time Warner Cable Triple Play bill that's been featured in previous articles.
[...]
  Net Neutrality, Competition, and Fees to Competitors

In the current FCC proceeding about Open Internet, commonly known as "Net Neutrality", one of the issues surrounds what the competitors and content providers, such as Netflix, are paying to connect to the cable networks. On the other side, the 'slow-lane-fast-lane' discussion is all about charging end-user customers more or getting your service slowed down in some way.

To put it bluntly, with a 97 percent profit margin for High-Speed Internet, TWC has given its own services 'priority' favoritism, a sweet-heart deal,--call it what you want--but any other company would never, ever [be allowed to pay just] $1.32 a month to use the TWC networks to offer competitive High-Speed Internet, but this is what it costs Time Warner Cable's ISP, the part of the company offering the Internet and broadband service, to offer end users High-Speed Internet service. Competitors would most likely have to pay about 50 percent or more of the 'retail' average price of $43.92 to offer their service as a competitor.

If customers have been 'defacto' investors, paying an extra $5.00 a month since 2001 under the "Social Contract" to fund upgrades of the cable networks for High-Speed Internet, why shouldn't these networks be open so we can choose who offers us Internet or cable service over these wires?"

 
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  • (Score: 5, Interesting) by Anonymous Coward on Monday February 09 2015, @03:10PM

    by Anonymous Coward on Monday February 09 2015, @03:10PM (#142721)

    Little more to it than that...

    http://thismatter.com/economics/oligopoly-pricing-models.htm [thismatter.com]
    (the last graph is the important one)

    http://www.sparknotes.com/economics/micro/monopolies/section2.rhtml [sparknotes.com]
    (the formulas for it)

    Basically MR=MC is the 'sweet spot'. They figure out what it costs per person. Put there 'build out' at that point. Then jump up to the demand curve for the pricing. In a pure competition model the demand curve usually equals the marginal rev curve. In an monopoly/oligopoly situation that is not necessarily true.

    However, have you often wondered why TW and AT&T advertise like crazy and 'buy stadiums'? They are actually raising internal costs so they can increase margin (moving to the left on the demand curve). They are literally wasting money and resources so they can increase profits.

    97% is not too surprising for a monopoly sort of situation. I had several *very* successful businessmen tell me "buy for x sell for 2x if you own the market. You will make money. Anything more or less and you will lose money. We are not totally sure why it works." It worked for them because of where they were on the demand curve and marginal cost curve.

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