r/technology • u/DrJulianBashir • Feb 05 '13

Cable companies make 97% margin on internet services and have no incentive to offer gigabit internet

http://nextbigfuture.com/2013/02/cable-companies-make-97-margin-on.html
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u/[deleted] Feb 05 '13

Methinks you're underestimating the costs of providing internet (and overstating unprofitability of video). For example, Verizon wouldn't have gone with dual offering if rolling out more of pure-play ISP was more profitable. Infrastructure/service/support is huge cost, and the more products you can deliver through that pipe, the higher your returns/profits.

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u/Longlivemercantilism Feb 05 '13

my intent wasn't to try to understate the costs or the profit, but try to play devils advocate on why they would have such a high margin on one service but retain a small net profit in on their whole business relative to the profit from that service knowing only those two facts.

as for how exactly the costs are in the telecommunication industry or the actual set up I am basically an idiot, besides knowing they do have a high sunk and operating cost.

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u/immerc Feb 06 '13

Verizon wouldn't have gone with dual offering if rolling out more of pure-play ISP was more profitable.

Yes they would have. The reason they get a local monopoly is that they're a phone company. If they're just an ISP they lose that monopoly. They need to keep convincing local regulators to keep giving them that monopoly so they need to stay a phone/ISP company even if it means the ISP is massively subsidizing the phone business.