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Comcast’s High-Speed Internet Business: A Key Growth Driver

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Comcast’s high-speed Internet business

A core growth driver of Comcast’s (CMCSA) Cable Communications division in 3Q16 was its High-Speed Internet segment. Comcast’s management is optimistic about the growth trajectory of this business.

In fiscal 3Q16, Comcast’s high-speed Internet business had revenues of $3.4 billion, up 8.8% year-over-year. This growth was mainly driven by an increase in customers, “rate adjustments,” and customers subscribing to higher-priced tiers. In fiscal 3Q16, Comcast added 330,000 customers, including residential and business customers. These net additions were up 3% over the same quarter last year. The company has added 1.4 million customers over the last 12 months.

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As the chart above shows, Comcast had 24.3 million high-speed Internet customers at the end of fiscal 3Q16. According to Comcast, over the last 15 years, the company has increased its Internet speeds 17 times. Around 80% of Comcast’s residential customers have opted for speeds of 50 Mbps (megabits per second) or higher, and the company has 15 million Wi-Fi hotspots that customers can access in the United States. These factors have differentiated the company from its competitors and increased customer retention for Comcast.

Innovation in the high-speed Internet business

Comcast stated at the Nomura Media Telecom & Internet Conference earlier this year that its high-speed Internet business had a penetration of 70%–75% in the United States. The company also indicated that, even though it has acquired a significant market share from its competitors, it still feels that it has a long way to go. Comcast management also mentioned, “From a volume perspective, we have both the size of the market working for us and then the ability to continue to take share within that market. I think overall we’re in the low 40% penetration in the areas that we serve and so significant market share opportunities still.”

Comcast indicated that one of the reasons for the success of its high-speed Internet business was that its network offers a speed of 2 Gbps (gigabits per second) across most of its footprint. Comcast has also started to offer a cheaper plan at an Internet speed of 1 Gbps with its rollout of DOCSIS 3.1 technology.

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