Xfinity is Closing The Door on Unlimited Broadband.... This Is A Troubling Sign For You and The Country!

Xfinity (aka Comcast)  dropped a service announcement in my inbox a few days ago. The announcement isn't news in so far as the death of "unlimited" broadband has been the subject of chatter for several months. The "roll out" of this evolution to my geography (and Xfinity account) is new.

I find many aspects of our current economy, political system, and morality disheartening and truly hazardous to this country's longstanding promise of innovation and prosperity through self-driven hard work. I could easily list a dozen events and trends spanning local, national, and international theaters which bring real concern not only for myself, but (immediate) future generations. Some of the issues I take umbrage with span "hot button" topics.

Sadly, some of  my most profound concerns serve as flash-points for often derisive political diatribes amongst my friends and family. This site is devoted to technology and more broadly how technology impacts business and personal lives for better and at times, worse. I shall continue to try and refrain from using this "dais" as a sounding board for broader economic and political circumstances which don't have a direct impact on technology, business, and/or marketing.

Click to Enlarge- Chart from The Next Web

Xfinity's decision to formally cap broadband access is a harbinger of a trend which can cripple our fragile economy more than many other forces today! Let me provide a bit of a macro perspective before opining about the impact of this change on society at large, my clients, and business. As the nearby chart details (you can see the original chart here), the USA lags fourteen (14) other industrialized countries on every important broadband metric! The United States has far slower access (4.8 mbps versus globe leading Japan's 61 mbps); broadband penetration (around 75% versus nearly 90% in Iceland and the Netherlands) and cost per month per 1 mbps  ($3.33 versus 27 cents in Japan; 45 cents in Korea and others).


These statistics are shameful! If the United States is going to have any hope of leading the world in innovation  this century, we must also provide a twenty-first century infrastructure to allow a free, ubiquitous, flow of ideas, thoughts and information. Not only have we willfully allowed ourselves to fall to the middle of the international pack on all these metrics (and this is a kind analysis), this "highway to the future" isn't getting any meaningful discussion outside of tech circles.

Our politicians, lost in election year posturing, infighting, and a seemingly limitless ability on both sides of the aisle to spend vast sums of newly minted dollars on pet projects while arguing about "shovel ready jobs" and "rebuilding our country's roads and highways," don't ever bring up the most important highway project of the coming twenty-five years, the "information highway!" Rapidly, the USA is becoming akin to a one lane, unpaved, road in a backwater third world, whistle stop! This isn't a "sexy" topic, or something which is likely to incite "swing voters" to go to the polls next November, but is a terribly important component of our ability to compete (or not) in an unarguably global marketplace.

And this situation is getting worse.... Xfinity is taking the "slippery slope" approach to ending unlimited broadband in exactly the same fashion the country's mobile providers have shoved the same capped restrictions down consumers' throats in recent months-- arguing this change will only impact the top "one percent" of users who take up a "disproportionate amount of resources." And by the way, for the rest of you, "don't worry" you aren't going to see anything change! Hell,  Xfinity tries to make this sound like a "win:"

The vast majority of XFINITY customers use far less than 300 GB of data in a month. Based upon your
recent usage history, it appears this new data plan will have no impact upon
you, and you won't need to do anything, or change your Internet usage. If you are
not sure about your monthly data usage, please refer to the Track and Manage Your Usage
section below.

We want our customers to use the Internet for everything they want and your
service will not be limited to the 300 GB monthly data allowance we provide as
part of XFINITY Internet. While we believe that 300 GB is more than enough to
meet the Internet usage needs of most customers, you can always buy more data
in additional blocks of 50 GB for $10 each.

In other words, "Don't worry, be happy!" this will only impact the "elite" users, you are going to be just fine..... If you believe this propaganda, I have a bridge (to nowhere) I can't wait to sell you! Once capped and tiered plans are introduced, all bets are off. If 300 Gigabytes doesn't effect "enough" users for the company to make its bottom line quarterly profit targets, the cap will simply be lowered. If your behavior doesn't change as the company desires (e.g. You Netflix and YouTube cable cutters who are no longer paying for those 200 channel HDTV cable packages any more in favor of a Roku box or Apple TV and a "dumb" internet pipe better "come back" and watch traditional cable television again!) the company will literally make you pay! (Since it is "illegal" and downright insensitive to throttle traffic based on competitive considerations-- there is already vocal concern that carriers such as Comcast are discriminating against competitors such as Netflix in terms of bandwidth-- the alternative is to classify heavy internet video customers as among the "elite one percent of users" and get their pocketbook and attention in this manner.....

This is just the literal tip of the iceberg. Your local coffee shop, restaurant, or watering hole which offers free wi-fi today may well change their policy after receiving their next xFinity bill. Hotels in this country will routinely charge for wi-fi access or face yet another uncapped fee eating into already slim profit margins. You may start telling your kids to stop using Facetime (Apple's marginally popular video phone service which until now has been relegated to wi-fi only use in part to keep users from burning through capped wireless data plans) when talking with their friends at home.


The changes will be far reaching and in many regards black swan events (inherently unknowable). No matter how individuals and companies modify their behavior and pricing, it will make us less competitive in the global marketplace and the changes will stifle the free flow of information and thought. This isn't about that Nerd down the street locked up in his room running a Bit Torrent Stream downloading dozens of illegal movies a month!, it is about capturing incremental revenue for the companies who have been given a de facto geographic monopoly to provide broadband access across our fruited plains!

And monopolies require regulation.... One can argue that wired broadband spectrum is fundamentally different than wireless data. There exist technical differences between moving data across federally regulated airwaves and landlines which have very different technical bandwidth constraints. There are some pundits who argue that wireless data should be treated more like a traditional metered utility (i.e. water; gas). This argument is far harder to credibly make for wired broadband. xFinity has ample "pipe" to provide a seemingly endless number of HDTV channels (as long as they can find willing lemmings to buy this "content"). The same lines that feed you seven or more HBO channels can also bring you NetFlix, YouTube and more..... Follow the money, it always works!

Further, every major metropolitan area in the country has four or more wireless carriers vying for your business. In Nashville, as in all other markets in which Sprint competes, you still have at least one mobile carrier differentiating itself with unlimited wireless data plans. (In point of fact, AT&T has continued to get my cellular patronage solely because they have "grandfathered" my iPhone and iPad accounts with unlimited data plans.) I would LOVE to have the option of switching to Verizon's wonderful FIOS product but it appears the company has severely curtailed, perhaps capped, expansion plans! The reality is, the majority of Americans have far less choice in broadband providers than wireless carriers! As far as I can discern, the only constituency which might be proactive about this trend toward capped data plans are Comcast/TimeWarner/Charter/et. al. shareholders who believe their stock appreciation from this change will outweigh whatever individual costs they may incur from the announced data tiers....

Sadly, I predict the company's will successfully mollify the clueless politicos by granting unlimited access to public schools (for the kids), public libraries, and government buildings (for the gatekeepers). Once again, the losers will be the small business owner and working middle class who will pay more even as we watch our country fall further behind the world we helped create.

Sadly, the "usage meter" applet xFinity is so kindly providing may become your "best friend" if you pay the bills in your house! Add "Internet Usage Police" to your roles in the family, if you have teenagers, they are sure to love you all the more! A few months ago, I argued that the big mobile providers should provide rollover data in addition to rollover minutes. By the end of September, I will extend this rant to include my broadband provider, what a shame and we are letting this happen in front of our eyes.....

If this development troubles you, please forward this post! Share through Google+, Twitter and Facebook! We welcome your comments (which you can provide via the comment form below). The complete xFinity/Comcast Change of Service Notification is included below for those of you wishing to read the company's response unedited and in full.

 
I currently participate in Associate Programs and certain item links included within this post may tie to these affiliate programs. By using these links, you help support Music Row Tech, We appreciate your support.

Companies: Comcast

This commentary is not meant as an endorsement of any company or to provide financial advice.  If the author has any financial interest in any company mentioned at the time of this article’s posting, it will be explicitly noted. I welcome feedback and comments. 

Dear XFINITY Internet Customer:
At Comcast, we recognize the ways our customers are using the Internet are
evolving, and that our services should evolve as well. Starting on August 1, 2012,
Comcast will introduce a new Internet data usage management plan in Nashville
that increases the data usage allowance for all XFINITY Internet customers from
250 GB to 300 GB and provides more options for usage.
What This Means for You
The vast majority of XFINITY customers use far less than 300 GB of data in a
month. Based upon your recent usage history, it appears this new data plan will
have no impact upon you, and you won't need to do anything, or change your
Internet usage. If you are not sure about your monthly data usage, please refer
to the Track and Manage
Your Usage section below.
We want our customers to use the Internet for everything they want and your
service will not be limited to the 300 GB monthly data allowance we provide as
part of XFINITY Internet. While we believe that 300 GB is more than enough to
meet the Internet usage needs of most customers, you can always buy more data
in additional blocks of 50 GB for $10 each.
In order for our customers to get accustomed to this new data usage management
plan, we are implementing a three-month courtesy period. That means you will
not be billed for the first three times you exceed the monthly 300 GB allowance
during a 12 month period. Should your usage exceed the monthly allowance after
the courtesy period expires, you will automatically be provisioned for
additional $10 blocks of data each time you exceed the 300 GB allowance.
For more information on the data usage plan, please visit
www.xfinity.com/datausageplan/nash
Track and Manage Your
Usage
Comcast provides you with several tools to easily track and manage your data
usage:

• Usage Meter
  - See how much data you have used with our usage meter, available in the Users and Settings
  tab at www.xfinity.com/usagemeter.
  


• Data Usage Calculator - Estimate your data usage with this tool available at
  www.xfinity.com/datacalculator.
  Simply input the quantity of your typical Internet activities and the
  calculator will estimate your monthly data usage.


• In Browser Notices and Emails - We will send you courtesy "in-browser"
  notices and emails to your Comcast.net e-mail account letting you know
  when you reach 90% and 100% of your monthly data usage allowance.

If you have any additional questions about the
new data usage plan, please visit
www.xfinity.com/datausageplan/nash.
Thank you for being an XFINITY Internet Customer.
Sincerely,
Comcast 

Boutique Retail-- Focus Is Paying Dividends Across The Retail Landscape

Much of my past corporate life was focused on using technology to maximize some of the most valuable real estate in the world. I am not talking about Malibu beachfront or secluded sea side property in Maui. On a per cubic foot basis shelf space within high volume retail stores is more precious than  beach property. Not surprisingly, retailers micromanage the utility of this space. During my corporate tenure, we were able to analyze and measure a product's "true costs" throughout the distribution chain. This wasn't an easy process,often involving identifying and quantifying hundreds of discrete activities.

In many instances, a group of seemingly similar products had strikingly different cost components. A loaf of bread produced and distributed by wholly owned bakery and transportation group often sits on a retail shelf next to another loaf of bread which has been delivered directly to the store by a third party vendor on a privately owned company truck. In the latter case, store employees may never touch the bread until it is scanned at a register at the time of sale, in the former example, dozens of company paid employees may touch the product during its creation, transit, shelf positioning and ultimate sale.

This single example highlights some of the variables required to understand a product's "true cost" and ultimately, "real profitability" to the retailer. Multiply these issues by tens and perhaps hundreds of thousands of items and you have a perfect storm of complexity; a problem seemingly perfect for modern computational software and hardware to help us resolve. This exercise is of great value even for companies not focused on traditional retail sales. Analyzing every aspect of delivering value to your company's customers can be quite eye opening. Many business fail due to a lack of true understanding of underlying fixed and variable costs.

Of course, identifying and measuring all the elements of the supply process is very different from the even more complex task of determining an optimal outcome (i.e. cash flow, net profit, total retail sales) and managing the variables to maximize the desired result. If nothing else, this conversation should disavow you of the notion that "profit" can be measured by simply subtracting retail from cost!

Back to the grains of sand on the beach, or should I say, nearly priceless store shelf space..... When analyzing a product's costs, and therefore profit contribution, the single greatest determining factor is how much "rent" a given product pays while sitting on a store shelf. Other inputs, while important, pale in relation to this charge. How do you determine a product's rental bill? Well, it is a function of volume (how many cubic inches) of actual shelf space an item consumes. And turns... How long does that tube of toothpaste sit on a shelf with the "meter running!?" This makes intuitive sense but it can create surprising results.

Seemingly profitable goods can become "loss leaders' simply by sitting too long and/or taking up too much precious real estate before you, your spouse, or your kids, are willing to trade cool cash for the right to own the product.

Why am I asking you to read this brief tutorial on modern product profitability? While this article may well make you look at your local supermarket or department store in a different light, I want you to reflect on changes taking place in traditional and virtual shopping arenas!

Apple is #1! (Credit: Retail Sales)

By most standards, Apple Stores represent the most profitable traditional retail experience in the world at this time. Generating in excess of $5,600/ square foot in sales! Apple leads the world in yet another statistic! The company accomplishes this using an average store footprint of just 7,800 square feet! By way of comparison, Best Buy manages to generate just $831 with an average store square footage of 13,900! Twice the square footage and less than one fifth the sales! (Click on the nearby chart to see how other retailers fare in this key metric.)

It gets worse, or better, depending on your perspective. Apple enjoys relatively high profit margins. The company is, first and foremost, a hardware company. They also sell relatively few SKUs (stock keeping units). There are only so many models of iPhones; iPads, and MacBooks stores must stock and maintain. In contrast, Best Buy must stock a dizzying assortment of items to satisfy its customer base, many of which are generic enough that they must compete on price. Not so Apple, whose products are distributed through a highly controlled distribution chain with virtually no price competition. Generally, fewer SKUs equate to far lower handling costs and most importantly from a true profitability measure, fast inventory turns. It may be "nice" for the consumer to have Best Buy stock twenty different flavors of home routers, consumers love "choice," but Apple handles just one router, and can do so with far greater efficiency online and in store!

The retail road has forked. Online sales through virtual stores-- organizations with no public retail spaces-- the most notable of which is Amazon. Traditional retail stores providing "instant" gratification but encumbered with many costs and distribution challenges making them easy prey for online competitors whose efficiencies allow them to sell more variety at lower prices.

Finally the zebras-- retailers trying to leverage both online and traditional retail presences. This final path has its own challenges not the least of which involves competing with yourself even on pricing. WalMart is experimenting with the "never ending aisle" concept which rewards the nearest local store for online sales (encouraging employees to recommend the web site for  products not stocked in-store rather than losing the sale entirely) and next day in-store pick up of online purchases (which is labor intensive and not ideally suited to the retailer's other strengths. Being a zebra may provide cover in the sahara, I am far less sure that this dual focus guarantees survival in the modern retail ecosystem.

One can argue each of these three retail philosophies each has various strengths and weaknesses. I leave this argument for another day. What I do find very interesting, and worth commenting upon, is a trend I see all three general formats adopting-- boutique sales often combined with a deal of the "hour" ever so vaguely reminiscent of K-Marts once iconic blue light specials!

Best Buy has recently announced that it is closing fifty or so "Big Box" stores while at the same time developing a new line of smaller footprint retail outlets which will carry a limited assortment of higher margin electronics. Clearly, Best Buy is being squeezed, becoming a "virtual showroom" for customers who want to view products before ultimately purchasing at the lowest possible price online through Amazon or another online "superstore" and retailers such as Apple Stores (and others) who have a laser focus on select, high demand (aka high margin), items. In many ways Best Buy is in the worst place of all, online and traditional retail locations carrying a  wide range of low margin goods many of which still require specialized sales expertise, setup, and maintenance. They must feel like they are captured in a retail Alamo with Indians on every side!

Amazon is the epitome of online genius. Amazon has no expensive retail store real estate. They have arguably mastered the art of suggestive selling using only a web site and your inbox. The company "knows" synergistic items to suggest based on your walking through their virtual aisles. Once purchased, logistics is there business! Moving items from A to B with a minimum of human intervention and maximum efficiency allows the company to offer razor thin pricing undercutting all competition in the majority of cases. The brilliant Amazon Prime membership effectively gets customers to "pre-purchase" a year's worth of second day shipping (which also predisposes these members to look first to Amazon when purchasing). Most importantly, all of that very costly retail shelf space is replaced with highly efficient, inexpensive, warehouse slots. It costs virtually nothing to add another "department" to its web site or online Kindle Fire marketplace.

The biggest trend I see from this company isn't the addition of Netflix like video to its Prime Membership or the promise of color ink e-readers later this year, it is the growing attraction of its online boutique stores! Years ago Amazon acquired Zappos, a shoe store on steriods. Bezos and company decided to continue to run Zappos autonomously rather than roll its business into the larger Amazon organization.

Today, myhabit.com is getting a lot of buzz. This boutique is also an Amazon offshoot. Combining trendy deals with limited supply, myhabit.com has some of the feel of Woot and Groupon, but with the clout and pricing only a company like Amazon can provide. Boutique formats with focus appear to be the direction online and traditional retailers are moving towards. These venues make online shopping "fun." Liberal shipping and return policies makes the risk of online purchase virtually zero. (When was the last time you thought rumbling through your local Walmart or Kroger was "fun?" I know, me either and I helped create some of that "excitement" in another life!) Contrast this with a shopping experience at your local Apple Store. The cash register walks with you-- you can even use a convenient App to check yourself out with certain purchases. Even people walking into an Apple store with a damaged device seem to be smiling! Now that is magic! 

Online, myhabit.com and others, give you a sense of urgency--purchase now or forever hold your peace! The genius behind these sites is Amazon (and others) are able to build there very own virtual mall. Amazon's mammoth offerings and backroom efficiencies effectively serve as the mall's anchor. Building boutique specialty shops such as myhabit.com "around" this anchor is easily achieved in cyberspace. In many instances, customers may be wholly unaware as to who "Oz" is behind the curtain. This illusion is far more difficult (and expensive) to achieve  under the harsh light of your local shopping center. 

How about jewelmint.com? Another boutique online store which offers deep discount shopping with a limited number items. I always thought translating jewelry purchases to the web would be a (very) tough task. Based on how women seem to react to this site, I believe there is a combination of style and value which translates well and provides an exciting experience.

J.C. Penney has hired Ron Johnson as CEO. Johnson is widely credit with many retail innovations at Apple including the Genius Bar. He has a real challenge! An old brand, Penney doesn't evoke excitement, or even a yawn, in my daughter's generation. If he can instill some "Apple magic" at this chain, he will be the CEO of the decade in many people's opinion! I think the days of big box traditional retailers are numbered (or at least their best days are in the rear view mirror). Traditional 50,000 square foot supermarkets are probably a fixture of our retail landscape.  They are very efficient in many ways and serve a real, if unexciting, consumer need. I am far less optimistic about selling non-perishable, low volume (i.e. products with long purchase cycles), items in big format stores. The economics aren't there and the wolves are at the door!

How do you feel about the current state of retail? Are you willing to pay a premium for the ability to go down the street, find, and walk away with a purchase or is the convenience of shopping from your easy chair and paying substantially less, worth waiting a couple of days? Other than daily groceries, are there just some things you refuse to buy online? If so, why?


Enjoy! If you find this post of interest, please share through Google+, Twitter and Facebook! We welcome your comments (which you can provide via the comment form below).

 
I currently participate in Associate Programs and certain item links included within this post may tie to these affiliate programs. By using these links, you help support Music Row Tech, I appreciate your support.

Companies:   Best Buy, Apple, Amazon

I have a long positions in $AMZN, $AAPL

This commentary is not meant as an endorsement of any company or to provide financial advice.  If the author has any financial interest in any company mentioned at the time of this article’s posting, it will be explicitly noted. I welcome feedback and comments.