Netflix’s Biggest Bingers Get Hit With Higher Costs
James Wright never worried about staying under his data cap.
Then he bought a 4K TV and started binge-watching Netflix in ultra high-definition. The picture quality was impressive, but it gobbled up so much bandwidth that his internet provider, Comcast Corp., warned that he had exceeded his monthly data limit and would need to pay more.
“The first month I blew through the cap like it was nothing,” said Wright, 50, who lives with his wife in Memphis, Tennessee. With a 4K TV, he said, “It’s not as hard to go through as you’d think.”
All that bingeing and ultra-HD video can carry a high price tag. As online viewing grows, more subscribers are having to pay up for faster speeds. Even then, they can run into data limits and overage fees. Some opt for an unlimited plan that can double the average $52-a-month internet bill.
Wright is what the cable industry calls a “power user” — someone who chews through 1 terabyte of data or more each month. Though still rare, the number of power users has doubled in the past year as more families stream TV shows, movies and video games online. They should continue to grow as new video services from Walt Disney Co., AT&T Inc., Apple Inc. and NBCUniversal arrive in coming months.
In the first quarter of 2019, about 4% of internet subscribers consumed at least 1 terabyte of data — the limit imposed by companies like Comcast, AT&T and Cox Communications Inc. That’s up from 2% a year ago, according to OpenVault, which tracks internet data usage among cable subscribers in the U.S. and Europe.
“The percentage of subscribers exceeding this level will continue to grow rapidly,” said OpenVault founder Mark Trudeau.
Wireless subscribers are familiar with data limits, but they are less understood — and more controversial — in the cable industry. A decade ago, Time Warner Cable dropped a plan to limit customers’ internet use after a public outcry. Charter Communications Inc., which sells internet under the Spectrum brand, agreed in 2016 not to implement limits for at least seven years to get regulatory approval to buy Time Warner Cable and Bright House Networks.
Cable executives prefer not to call them caps, referring instead to “data plans” and saying it’s a matter of fairness. People who hog more bandwidth should pay more, they say, especially since capacity isn’t unlimited. Either way, it’s added up to good news for cable providers and helped counter the loss of pay-TV revenue from cord-cutting.
“Our customers’ demand for speed and data usage keeps increasing,” Comcast Chief Executive Officer Brian Roberts said on an earnings call in April. The same month, Charter CEO Tom Rutledge said that data use was “rising rapidly,” especially among TV cord cutters.
Last month, Altice USA CEO Dexter Goei said customers are “consistently taking higher broadband speeds, and using more and more data.”
The top 10% of Altice USA subscribers consumed close to 1 terabyte of data per month and had an average of 30 devices connected to the internet, Goei said, calling that “just incredible.”
Cable executives boast about all that usage in part to convince Wall Street that ultra-fast 5G wireless services on the way from AT&T and Verizon Communications Inc. aren’t a threat, said Craig Moffett, an analyst at MoffettNathanson LLC.
So-called 5G, or fifth-generation, wireless has been touted as being as fast as cable service. Verizon plans to have 5G in more than 30 cities by year-end. AT&T said it will have nationwide service by the middle of next year.
“I’ve argued that their bandwidth option is obsolete.”
For now, consumers who get their broadband from cable companies are getting the better deal, Moffett says. Though they spend about the same for both services, cable customers use over 250 gigabytes of data a month, while wireless subscribers consume about 13 gigabytes, he said.
“As long as usage is 20 times higher for the wired connection, people aren’t going to substitute it for wireless,” Moffett said.
So far, the number of cable consumers who choose to pay for higher data limits is relatively small. Cable One Inc., a smaller operator serving 21 states, says about 10% of customers pay for unlimited data, which costs $40 more each month.
Cox, the third-largest U.S. cable operator, says 2% of internet customers choose unlimited data.
“It’s a nice source of additional ARPU,” Moffett said, using the industry term for average revenue per user.
Comcast, the largest cable provider, gives customers who go over the limit two months free before charging $10 for added blocks of data. Subscribers can also buy unlimited internet for an extra $50 a month.
Comcast spokesman Charlie Douglas said only a “very small percentage” of customers go over the limit, which the company increased to 1 terabyte from 300 gigabytes in 2016.
On its website, Netflix Inc. advises customers that they can adjust their settings to limit bandwidth use. Google has told potential customers of Stadia, its online video-game service that launches this fall, they can reduce the picture resolution to limit data use.
Wright, who was paying $120 a month for internet, TV and a landline phone, tried adjusting his viewing to stay under the cap and avoid the $50 charge for unlimited data. He stayed offline more and rented DVDs from Redbox instead of streaming movies. He also canceled his Hulu subscription and called Comcast to complain. Ultimately he accepted the new fee.
