• Time-Warner Cable's 97% Profit Margin on High Speed Internet Exposed
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[url]http://www.huffingtonpost.com/bruce-kushnick/time-warner-cables-97-pro_b_6591916.html?utm_hp_ref=tw[/url] [img]http://images.huffingtonpost.com/2015-02-02-TWcablerevenuepercustomer2013-thumb.png[/img] [img]http://images.huffingtonpost.com/2015-02-02-timewarnercablecostofrevenue-thumb.png[/img] [img]http://images.huffingtonpost.com/2015-02-02-timewarnerprofits-thumb.png[/img] [quote] First, you may have noticed that there are other expenses detailed in these financials. But, where are any breakouts of the 'common costs' vs the costs to offer each service? A company doesn't supply the data for separate services unless there is a reason. One reason could be to manipulate the accounting of the Triple Play in general. Here's just a few of the issues. Where's all those dirty little additional charges? On the Time Warner Cable bill, there are franchise fees, 'made-up' fees, pass-through taxes, not to mention other revenues from the Internet modem rental, for example. Is the modem rental included in the 'costs to offer' High-Speed Internet or show up as part of the revenues as the rental fee cost the customer in NYC $5.99 a month? Does the cable TV costs to the customer include the set-top box at $11.25 a month? Are the made-up fees, pass-through taxes, etc., allocated to the Internet service or any of the itemized services? On the Triple Play bill these additional charges added about 20% to the total of $190.77 -- over $35.00, though some of these are not revenues. It would require an audit to see which of the taxes, fees and surcharges are pass-through taxes, i.e., the customer is charged taxes that are being applied to the company but they get to pass-it-through to the customer, or where the fees, like the 'broadcast fee', are being accounted for in these financials. These types of made up fees are buckets of money that go back to Time Warner; they are NOT mandated as an expense by any regulator or taxing authority--it's just pure profit; which are normal costs that should have never been a separate charge. Where are the Social Contract Revenues? Then we have the "Social Contract" monthly addition that was added in 1995-2001, which was a charge of up to $5.00 a month that was allowed by the FCC to upgrade the cable networks and high-speed services, as well as to wire the schools. As we uncovered, while the Social Contract 'expired' in 2001, the cable bills show no signs that this additional charge was removed. Was this revenue added as a cost to customers for the Internet service or did it just turn directly into profits? Who knows? There have been no audits. But with a 97% profit margin for High-Speed Internet, you would think some regulator in some state would have investigated. We found no such investigations. --------------- 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% 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 pay $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% 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?" Conclusion With High-Speed Internet showing a 97% profit margin in 2013, there's something very, very, very wrong with all of this. In our Petition for Investigation, which was filed with the FCC as well as the New York State Public Service Commission, we not only ask these regulators to halt the proposed merger of Comcast and Time Warner Cable, but to investigate the obscene profits documented in the companies' own financial reports. [/quote] Now keep in mind every company needs to operate on a healthy profit margin to account for growth, infrastructure, payroll, and general expenses. But 97%? Effectively the "cost" of doing business per customer on TWC is a couple of dollars at best, and that should theoretically cover infrastructure/payroll/expenses. Having a profit margin that high is proof of monopolizing a market (the same reason why healthcare in the US is 10X more expensive for lower quality care compared to other countries). This is what happens when you trust a corporation to have your best interests in mind, especially when they have no competition.
and then they want to get rid of net neutrality
[QUOTE=KorJax;47060410]Now keep in mind every company needs to operate on a healthy profit margin to account for growth, infrastructure, payroll, and general expenses. But 97%? Effectively the "cost" of doing business per customer on TWC is a couple of dollars at best, and that should theoretically cover infrastructure/payroll/expenses. Having a profit margin that high is proof of monopolizing a market (the same reason why healthcare in the US is 10X more expensive for lower quality care compared to other countries). This is what happens when you trust a corporation to have your best interests in mind, especially when they have no competition.[/QUOTE] I thought a 'healthy' profit margin was 10-30%?
[QUOTE=KorJax;47060410] Now keep in mind every company needs to operate on a healthy profit margin to account for growth, infrastructure, payroll, and general expenses. But 97%? Effectively the "cost" of doing business per customer on TWC is a couple of dollars at best, and that should theoretically cover infrastructure/payroll/expenses. Having a profit margin that high is proof of monopolizing a market (the same reason why healthcare in the US is 10X more expensive for lower quality care compared to other countries). This is what happens when you trust a corporation to have your best interests in mind, especially when they have no competition.[/QUOTE] At&t ran like that in the 1930s except the dumped billions into research and upgrades and things like bell labs where advanced tech like transistors and photocells were discovered. They had the first computerized network a decade before the need for so much bandwidth Now we have companies where the margin is never high enough, with the Comcast twc merger they probably will try to bump that up a couple %
[QUOTE=ZombieDawgs;47060432]I thought a 'healthy' profit margin was 10-30%?[/QUOTE] Yep! :v: Which is why this is so stupid. No other industry (except maybe healthcare) can get away with this sort of profit margin.
Does the cost per subscriber factor in peering agreements etc fees that TWC has to pay? It costs very little to keep a connection to an internet subscriber turned on (sans maintenance), the costs come high when your peers (who you share networks with) charge you per gigabyte.
[QUOTE=KorJax;47060410]Now keep in mind every company needs to operate on a healthy profit margin to account for growth, infrastructure, payroll, and general expenses. But 97%? Effectively the "cost" of doing business per customer on TWC is a couple of dollars at best, and that should theoretically cover infrastructure/payroll/expenses. Having a profit margin that high is proof of monopolizing a market (the same reason why healthcare in the US is 10X more expensive for lower quality care compared to other countries). This is what happens when you trust a corporation to have your best interests in mind, especially when they have no competition.[/QUOTE] [QUOTE=KorJax;47060456]Yep! :v: Which is why this is so stupid. No other industry (except maybe healthcare) can get away with this sort of profit margin.[/QUOTE] This is like using the cost of blank CDs to argue that games, movies, and music are all hideously overpriced because if you [I]just[/I] look at the cost to manufacture, it's a profit margin of 97+%. Actual cost to provide services in terms of electricity and wear-and-tear should be absolutely minimal for a company providing a purely digital product. That's not to say that cable companies aren't shafting their customers but the argument you're using is so stretched as to be meaningless. Of course they pay next to nothing to send electrons down a wire, but that doesn't tell us anything about all the other expenses they have to pay and that leaves us still stuck at step 1, wild speculation.
[QUOTE=catbarf;47060512]This is like using the cost of blank CDs to argue that games, movies, and music are all hideously overpriced because if you [I]just[/I] look at the cost to manufacture, it's a profit margin of 97+%. Actual cost to provide services in terms of electricity and wear-and-tear should be absolutely minimal for a company providing a purely digital product. That's not to say that cable companies aren't shafting their customers but the argument you're using is so stretched as to be meaningless. Of course they pay next to nothing to send electrons down a wire, but that doesn't tell us anything about all the other expenses they have to pay and that leaves us still stuck at step 1, wild speculation.[/QUOTE] This is what I thought at first, but profit margin = profit: as in, the actual revenue after all costs are taken into account. The actual cost to run TWC's internet is less than a couple of bucks per subscriber, and this cost should be including infrastructure spending, payroll, etc. This is why the profit margins are lower on TV, because a huge amount of cost with TV is licensing deals, ads, etc. Even still a 55% profit margin is pretty high as well, if a bit more reasonable. If you only took into consideration the cost per subscriber to send electrons down a wire the cost would be pennies per subscriber.
[QUOTE=KorJax;47060581]This is what I thought at first, but profit margin = profit[/QUOTE] Except it's not the profit margin, it's the gross margin, the amount that's taken in minus the amount it costs to take it in in the first place. That's why the second chart is showing the cost of revenue, and the sixth line is 'other [I]direct[/I] operating'. That's why note (a) specifies that these are only the employees directly involved in delivery. Those are the costs simply to deliver the service. Ongoing operational and infrastructural costs and capital spending aren't included in any of these charts, the profit margins they're listing are [I]per-service[/I] and say nothing about all the other costs that for any normal business account for the bulk of the price. Most restaurants keep the price of ingredients to no more than 20-30% of the menu price. If a chart of restaurant profits were presented the way this article is, it would be showing a profit margin (on revenue) of 70-80%. That's extremely misleading.
"High speed"
Man, if they actually put down fiber and increased speed, their execs might not be able to afford 10 private islands each! It would be probably only 7
This is misleading and not particularly informative. It shows the [b]gross[/b] margin, not the [b]profit[/b] margin, and has some impossible math, to boot. Looking at their [URL="https://finance.yahoo.com/q/is?s=TWC&annual"]full income statement[/URL] paints a much clearer picture of the entire corporation. After [b]all[/b] expenses, the profit margin drops from 53% gross to 8.8% net profit, which is pretty reasonable. The numbers in the article are based on incomplete data and estimations; they fail to account for a very significant proportion of costs, as it is simply impossible to mix 55%, 97%, and 74% "profit" margins (actually gross margins) and get a 53% gross margin as indicated on their financials. They also simply ignore operating expenses, interest expenses, or taxes, so don't truly represent the true full cost of acquiring and maintaining a customer. 97% is not their profit margin, period. Whoever took that number and ran with it either has a very poor understanding of how financial statements are structured and prepared, or is trying to confuse people into thinking that the 97% (which was likely made up based on incomplete data) represents the true cost of maintaining their internet business. TWC is shit but bad math and misleading assertions are not the way to approach this. [QUOTE=KorJax;47060581]This is what I thought at first, but profit margin = profit: as in, the actual revenue after all costs are taken into account. The actual cost to run TWC's internet is less than a couple of bucks per subscriber, and this cost should be including infrastructure spending, payroll, etc. This is why the profit margins are lower on TV, because a huge amount of cost with TV is licensing deals, ads, etc. Even still a 55% profit margin is pretty high as well, if a bit more reasonable.[/QUOTE] Just because they say it's a profit margin doesn't mean it is. It doesn't account for any operating expenses, nor any interest expenses, nor any taxes. It's a gross margin calculated on inaccurate data - there is no way that these numbers are all correct. It's mathematically impossible. Seriously, this is some truly awful accounting.
I've had these mother fuckers for 4 years. They disrupt your service in the middle of the night without warning for like 4 hours and it's the only god damn provider in our area. They call it road runner here and it blows.
Yeah guys, the free market always sorts itself out. Arguably, we need less regulation so that these ISPs can compete more.
[QUOTE=RichyZ;47061407]what competing? with the current regulations, generally 1 isp moves into town and has a slightly better connection with double the price, and the others die out then that one isp has a monopoly until another moves into town whereupon that one stays at the same price for the same deal[/QUOTE] I was making fun of all the people that spew this bullshit. It's a goddamn shame that the ISP scene in the US sucks. You can really only pray that Verizon or Google come into your area if you're stuck with something like Comcast. Verizon is the lesser of the evils when it comes to AT&T and Comcast/TWC.
[QUOTE=RichyZ;47061407]what competing? with the current regulations, generally 1 isp moves into town and has a slightly better connection with double the price, and the others die out then that one isp has a monopoly until another moves into town whereupon that one stays at the same price for the same deal[/QUOTE] In my neck of the woods, what happens is that a new company tries to move in and Comcast lobbyists block them from adding infrastructure at every turn until the new company simply runs out of money in legal battles and withdraw.
imagine creating a competing business with a 97 % profit margin i mean youd literally be scrooge mcduck flying around in gold
Sounds like they can use 97% of those profits to make the internet 97% faster.
I hate being with Time Warner. One person downloading anything slows down the entire network to a crawl even if no one else is hardly doing anything, download speeds in general are abysmal, upload speeds are a complete joke, the connection just straight up DIES a lot and doesn't recover for 5 minutes or more and we've called them several times to fix it and they haven't done jack shit, the reception for our cable is shoddy at best and ruins a lot of recordings because the feed was just a garbled mess, and we pay at least over $100 a month for this shit. ... But there's no alternative. Just about every other ISP in my area either doesn't provide decent coverage here, or they're worse in terms of customer service. *CoughComcastCough*
[QUOTE=Cornish;47061741]imagine creating a competing business with a 97 % profit margin i mean youd literally be scrooge mcduck flying around in gold[/QUOTE] It's practically impossible to run a business with a 97% profit margin. That would mean for every dollar, after you deduct all of the costs and expenses of running the business (salary, equipment, materials, insurance, overhead, interest, tax, etc.), you'd have 97 cents in retained earnings. Unless you have completely monopolized the global market on an inelastic commodity (this will never happen) that is impossible. The highest profit margin today is boasted by Pfizer (42%). Apple (40%) is second, unsurprisingly. Ironically, the industry with the highest average net profit margin is - you guessed it - [URL="http://www.inc.com/sageworks/the-15-most-profitable-industries-for-private-companies.html"]accounting services[/URL].
[QUOTE=Snowmew;47062306] Unless you have completely monopolized the global market on an inelastic commodity (this will never happen) that is impossible. [/QUOTE] TWC [i]has[/i] monopolized their market. Maybe the numbers are slightly off but I could easily see them pulling in ridiculous profit off internet services since they have zero competition.
[QUOTE=TestECull;47063428]I could easily see them pulling in ridiculous profit off internet services since they have zero competition.[/QUOTE] And thankfully we have the numbers here to see whether that's the case. And it's pretty clearly not, unless you consider less than ten percent a ridiculous profit.
[QUOTE=ZombieDawgs;47060432]I thought a 'healthy' profit margin was 10-30%?[/QUOTE] It is. This highway rapery, pure and simple, and they give no fucks about it. NVM: Apparently it's inaccurate.
[QUOTE=catbarf;47060512]This is like using the cost of blank CDs to argue that games, movies, and music are all hideously overpriced because if you [I]just[/I] look at the cost to manufacture, it's a profit margin of 97+%. Actual cost to provide services in terms of electricity and wear-and-tear should be absolutely minimal for a company providing a purely digital product. That's not to say that cable companies aren't shafting their customers but the argument you're using is so stretched as to be meaningless. Of course they pay next to nothing to send electrons down a wire, but that doesn't tell us anything about all the other expenses they have to pay and that leaves us still stuck at step 1, wild speculation.[/QUOTE] If Google can deliver 1000mbps internet for the same price that Time Warner charges for 50mbps, there is a problem
[QUOTE=Rika-chan;47063803]If Google can deliver 1000mbps internet for the same price that Time Warner charges for 50mbps, there is a problem[/QUOTE] TW charges four times what google would charge here. Bear in mind Google is taking some pretty heavy initial losses to out service at that price, they make it up in service and logistical charges later on.
[QUOTE=Rika-chan;47063803]If Google can deliver 1000mbps internet for the same price that Time Warner charges for 50mbps, there is a problem[/QUOTE] That is an entirely separate discussion and has absolutely nothing whatsoever to do with the shitty, sensationalist accounting in the OP. Trying to pull a profit margin from gross income is nonsense. I never said Time Warner is a great company or that they [i]don't[/i] exploit their customers, but I'm calling a bullshit source when I see it.
[QUOTE=TestECull;47063428]TWC [i]has[/i] monopolized their market. Maybe the numbers are slightly off but I could easily see them pulling in ridiculous profit off internet services since they have zero competition.[/QUOTE] But if TWC suddenly bumped their prices on internet to $2,200/month (which would get them a 97% profit margin [b]assuming all customers were retained[/b], which would obviously not happen), they would be screwed. Internet access is relatively inelastic in the developed world, but it is not inelastic enough to maintain a 97% profit margin. Frankly it's useless to think of a scenario in which TWC could actually get a 97% profit margin because they still have costs to cover, and the higher they bump up the price to increase the margin, the more customers will quit. At some point nobody would pay them. Water would be an example of such an inelastic commodity that could reach profit margins like that. You [b]need[/b] water, and if some dick somehow managed to take control of every drop of water in the world, you'll pay just about anything to survive. [QUOTE=catbarf;47063896]That is an entirely separate discussion and has absolutely nothing whatsoever to do with the shitty, sensationalist accounting in the OP. Trying to pull a profit margin from gross income is nonsense. I never said Time Warner is a great company or that they [i]don't[/i] exploit their customers, but I'm calling a bullshit source when I see it.[/QUOTE] I don't get why everyone is rating you dumb for saying the same thing as me.
[QUOTE=Snowmew;47064269]But if TWC suddenly bumped their prices on internet to $2,200/month (which would get them a 97% profit margin [B]assuming all customers were retained[/B], which would obviously not happen), they would be screwed. Internet access is relatively inelastic in the developed world, but it is not inelastic enough to maintain a 97% profit margin. Frankly it's useless to think of a scenario in which TWC could actually get a 97% profit margin because they still have costs to cover, and the higher they bump up the price to increase the margin, the more customers will quit. At some point nobody would pay them.[/QUOTE] At the same time he's not wrong in saying that the lack of competition drives up price considerably, and that ISPs have been fighting tooth and nail to keep companies like Google (who can offer service as a loss-leader for their other services rather than a primary source of income) out of their turf. Even if TWC is only making under 10% profit as a whole, I would be willing to bet that their cable service is barely breaking even (especially as cable-cutting increases in popularity) while their Internet service is much more lucrative.
And this is not regulated? Why?
[QUOTE=BloodRayne;47073008]And this is not regulated? Why?[/QUOTE] If the FCC puts forward a vote on the 5th and passes it when it convenes to vote near the end of this month, the ISPs will be placed under Title II, and then their pricing [I]can[/I] be tightly regulated. Pricing regulation will probably not be enforced, but it's within the FCC's power to do it if it feels the ISPs are being predatorily scummy.
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