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Why Comcast Is Pursuing Internet Upgrades

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Apr. 21 2017, Updated 10:36 a.m. ET

Faster Internet speeds

Comcast (CMCSA) recently announced Internet speed upgrades in several of its markets in an apparent Internet speed arms race with AT&T (T), Charter Communications (CHTR), and other ISPs.[1. Internet service providers]

The company had announced that beginning in March 2017, its Houston, Texas, customers on its Performance Internet plan would enjoy download speeds of up to 70 Mbps[2. megabits per second] instead of the previous maximum of 50 Mbps. This speed increase didn’t come at an additional cost to the customers. The company had earlier bumped up speeds for Houston customers on its Performance Pro and Blast Pro Internet plans.

The Internet speed increases have been made possible by the billions of dollars (UUP) that Comcast said it has pumped into upgrading its networks across the country.

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High-speed Internet revenues

Comcast’s Internet speed upgrades are strategic in several ways. Demand for high-speed Internet access is on the rise, thanks mostly to OTT (over-the-top) video services and IoT (Internet of Things). By offering faster Internet speeds, Comcast is putting itself in a better position to grow its broadband revenues by riding OTT and IoT trends.

Comcast’s high-speed Internet revenues rose 8.5% to ~$13.5 billion in 2016. The chart above shows the company’s revenue sources by segment.

Offsetting pay-TV losses

Faster Internet speeds could also help Comcast offset losses in its pay-TV business, which has come under pressure from alternative video services such as Netflix (NFLX) and Hulu.

Growing ad revenues

Superior Internet speeds could draw more customers to Comcast’s broadband service, potentially allowing the company to gather more customer data for targeted advertising. The US Senate recently voted to repeal a regulation that required ISPs to obtain customer consent before they could use data on their Internet behavior to sell ads.

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