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Incumbent Cable, Phone Companies Will Tighten Bundle Pricing to Battle Cord-Cutting

triple play

A typical promotional offer from Comcast for a bundle of broadband, TV and phone service.

Cable and phone companies will continue to raise the price of broadband-only service while also increasing the value proposition of bundled packages of broadband, television, and phone service to keep customers from cutting the cable television cord.

For at least four years, cable companies have refocused rate increases and fees on Internet access, especially for broadband-only customers. At the same time, cable-TV rate hikes are easing, especially for customers subscribed to two or more services. Today, customers face prices as high as $67 a month for standalone Internet service. But that price can drop in half if customers bundle broadband with television and phone service. Most triple play promotions in markets where AT&T U-verse and Verizon FiOS compete can be as low as $90 a month. In less competitive markets, a similar promotion often costs $99-119 a month.

Recent research by Sanford Bernstein reveals these pricing strategies are not happening by accident.

Media analyst Todd Juenger recently held his second cord-cutting focus group in Comcast-dominant San Francisco and found some of those most likely to cancel cable television decided to keep their Comcast bundle after they discovered the cable company charges $66.95 a month for Internet-only service, excluding the modem rental fee. For $10 more per month during the first year, customers can get that same 25Mbps broadband service bundled with 140 TV channels. Assuming the customer doesn’t protest the subsequent rate increase beginning a year later, that rate will eventually reset to $136.90 a month. But price-sensitive customers who complain often avoid any rate increase at all.

Juenger’s focus group surveyed 18 men and women in the age group most likely to drop cable television – 21-38 year-olds. Despite their love for Netflix, Hulu, Amazon, and other online video services, the participants broadly recognized the cable/telco bundle now delivers a better value proposition and as long as cable and phone companies continue to price up standalone Internet service, many will choose to stay with the company they hate and not try to cobble together a comparable package of broadband and television service from other providers.

cablecord“Hence, we remain cautiously optimistic that cord-cutting, in large numbers, isn’t likely to happen,” Juenger wrote his clients. “It’s one of those ideas that sounds great in the abstract but crumbles when faced with the reality.”

As cable television pricing continues to exceed many household budgets, providers are seeking new customers that can afford cable TV but choose not to subscribe. One of their primary targets: broadband-only customers and cord-nevers who might be persuaded to add cable television at a starting price of $10-20 above what they pay for broadband service. That price is less than what Sling TV or PlayStation Vue charges for far fewer channels.

The challenge competing online video providers face is finding a compelling limited channel lineup that will appeal to all-comers. Although the average cable subscriber generally watches fewer than a dozen cable channels regularly, not having access to one or more of those favored channels is a deal-breaker for many.

Juenger’s focus group was most open to a hypothetical a-la-carte package of any 10 customer-chosen channels for $20 a month. But Juenger reminded his investor clients no such package currently exists and probably never will.

“Simply put, for existing pay-tv subs, the content [available to Sling or View customers] is too limited (relative to the cost savings); and for cord-nevers, the price is too high (relative to the appeal of the content),” Juenger wrote.

But Juenger did warn that customers are enthusiastic about sticking it to their current provider, if they can get the programming they want. That could make some programmers, especially broadcast stations and networks, more vulnerable to revenue loss. If a company can reliably offer a variety of theme-based slimmed down cable packages coupled with an effective and seamless over-the-air antenna, no retransmission fees would be paid to over-the-air stations and networks.

If the bundled package pricing argument doesn’t work with cord-cutters, the broadband usage cap probably will. Customers will quickly learn they can eat through their monthly Internet usage allowance watching live television online, or avoid that prospect by subscribing to cable TV, which offers unlimited viewing.

Time Warner Cable Restoring Service in Parts of SE Texas Nine Years After Hurricane Rita

The Golden Triangle of southeastern Texas encompasses the cities of Orange to the east, Port Arthur to the south, and Beaumont to the west.

The Golden Triangle of southeastern Texas encompasses the cities of Orange to the east, Port Arthur to the south, and Beaumont to the west.

Nine years after Hurricane Rita swamped parts of the Golden Triangle region of southeastern Texas, Time Warner Cable is finally getting around to restoring service to parts of Orange County that haven’t had cable broadband since 2005.

A warm spring has allowed crews to start construction to parts of Orange County affected by the storm that wreaked havoc on the area nearly a month after Hurricane Katrina struck New Orleans. Although some properties were severely damaged by the hurricane, other utilities restored service to the area years ago. Time Warner Cable is the last, and it cannot come soon enough for Chelsey Walters.

The Orange, Tex. resident is forced to get usage-capped DSL broadband from AT&T, and her last monthly bill reached over $750.

“Both of my car notes are less than that and even with our Internet you cannot do anything because it drops and there are times when it does not work,” Walters told KBMT-TV in Beaumont. “When we first moved out there, they (Time Warner) came out and ran all the cables in my house, then called us and said – oh we do not service that area.”

The construction schedule for Orange County, Tex.:

  • Hwy. 105 East on Hwy. 62 to Caribou Ln. is forecast to be serviceable by the middle of May
  • From Woodcock St. to Michell Rd. is forecast to be serviceable by the middle of May
  • On Hwy. 62 from S. Meadow Dr. to Egan Dr. is forecast to be serviceable by the middle of May
  • On Tulane Rd. from Hwy. 62 to Burton Dr. is forecast to be serviceable by the middle of June
  • On Tulane Rd. from Burton Dr. to Old Hwy. 90 is scheduled to be on by the middle of June
  • On Old Hwy. 90 from Tulane Rd. to E. Wood Fern St. is forecast to be serviceable by the end of June
  • I-10 west from Med Davis Rd. to N. Lewis Dr. is forecast to be serviceable by the first of July
  • I-10 West from Naquin Rd. to Peru Rd. is forecast to be serviceable by the first of July
  • From Moss Ln. to Hartzog Rd. is forecast to be serviceable by the first of August

Comcast Screw Up Forces Washington Man to Sell His New Home; Quoted Him $60,000 Installation Fee

MasterMap_Oct2012A Washington state man who just moved into his new home is now being forced to consider selling it to somebody else because Comcast repeatedly misled him about its ability to provide service.

Seth told his extensive story to The Consumerist, which detailed his repeated attempts to get Comcast broadband service after multiple missed or unfinished service appointments. More importantly, Seth is representative of many Americans who have been told broadband is a fiercely competitive industry, yet they cannot sign up for service at a reasonable price from any provider.

For Seth, having reliable broadband service is not just a convenience — it is essential if he wants to stay employed. Before even considering making an offer on his new home in Kitsap County, Seth did his homework verifying Comcast provided service in the neighborhood. Comcast repeatedly assured him it did, and one sales rep confirmed a former resident at the same address had Comcast service. Seth was satisfied, bought the home and called to get Comcast service installed. But when a Comcast crew arrived Jan. 31, they quickly discovered there was no cable line strung to Seth’s property. That isn’t typically a deal-breaker and the techs completed a “drop bury request” that would normally result in the arrival of a Comcast cable burial crew to bring service from a nearby utility pole. Not this time.

Comcast determined the same home that its own sales rep promised used to have Comcast service was now suddenly too far away from Comcast’s infrastructure. If it decided to offer Seth service, the company quoted an installation fee approaching $60,000.

Seth consulted the FCC’s Broadband Map which depicted Kitsap County a veritable paradise of competition, with at least 10 providers fighting for his business. But Seth quickly realized the FCC’s map was misleading and inaccurate.

comcast whoppersFour of his options were wireless carriers that don’t provide a strong signal to his home or charge obscenely high prices for usage capped Internet access. ViaSat was on the list promising up to 25Mbps, but ViaSat satellite customers can testify the actual speeds received are much slower, and do not reliably support the VPN access Seth required.

Neither Comcast or CenturyLink offer broadband service to Seth, despite the fact both told the FCC they did for the purpose of its map. StarTouch uses microwave signals to reach its customers, but not in Seth’s part of Kitsap County. It seems someone put up a large building in between StarTouch’s transmission facilities and Seth’s home, blocking the service for a significant part of the county.

XO Communications does provide reliable T1 service to businesses at speeds from 1.544Mbps – 6Mbps. The biggest downside is its cost — $600 a month. Finally, Seth’s only other alternative is a gigabit fiber network run by the Kitsap Public Utility District. But cable companies like Comcast effectively lobbied to guarantee those types of networks would never be a competitor by pushing for laws that forbid retail service to individual homes or businesses. In Washington, the law only allows the utility district to sell wholesale access to its network to companies like… Comcast.

In the end, Comcast decided it wasn’t interested in serving Seth even if he found the $60,000 to cover the installation fee. CenturyLink shrugged its shoulders over why it isn’t offering DSL in Seth’s neighborhood. Seth is preparing to put his home back on the market. It’s a perfect choice for Luddites everywhere.

The moral of the story?

  • Comcast is not always forthcoming and honest when signing up customers and led Seth through two months of missed appointments and misinformation;
  • The accuracy of the FCC’s broadband availability map is questionable.

Comcast Charging Some Customers Modem Gateway Rental Fees for Customer-Owned Equipment

comcastAfter a year-end customer audit, some Comcast customers report they are now being notified by the cable company they were not charged modem rental fees in error even though they previously purchased their own equipment.

“Late last year, I received a form letter from them notifying me that they had noticed that I wasn’t being billed for the modem they claimed they were renting to me,” wrote a Reddit contributor. “An hour-long phone call with four representatives later, the $8 charge was removed. However, it seems that since they increased the modem rental fee to $10 per month, they’ve brought my modem back into their flock.”

He isn’t alone.

Another customer found Comcast still billing him for a modem he returned to Comcast three months earlier.

“I’m now on my third month where I had to call, get a refund, and get a promise it won’t happen again,” wrote another Comcast customer.

The customer service representative argued the charges were valid, despite the fact the customer went to extraordinary lengths to document the return of the equipment to avoid being charged for it. Instead of claiming the customer never returned the modem, Comcast registered the customer’s newly-purchased modem as Comcast property.

“It shows that modem is with the customer,” said the confused Comcast representative.

“They are that s****y of a company, I saw this coming from a mile away,” said the customer, who recorded the return of Comcast’s modem in a video he made at the local XFINITY store. Despite that effort, he was unprepared for the possibility Comcast would unilaterally adopt his new equipment and claim it as their own.

Watching your Comcast bill like a hawk for unauthorized charges can also get confusing when Comcast keeps changing the name of the fee.

Customers with their own modems should find no charge for modems, gateways, or routers on their bill.

Customers with their own modems should find no charge for modems, gateways, or routers on their bill.

“I had to make three calls, each one more and more frustrating,” another customer complained. “The first was to remove the equipment fee, the equipment fee then morphed into a modem fee [… and the] final call was when the modem fee evolved into a router fee.”

One Comcast customer complained on the company’s own support forum he was charged modem fees for over a year for a modem he purchased himself.

“I have gone through customer service both on the phone and through chat,” complained the customer. “The charge will come off for a month and then get put back on my bill. I even went through Comcast Corporate Escalation and it was removed in October 2014. I went back through my bills and noticed that the charge went back on the very next bill and I have been charged ever since.”

To add insult to injury, Comcast now also bills a “change of service fee” to remove the erroneous charge, only to have it return the following month.

Because Comcast billing errors are so common, still another customer shared some tips on how to prove Comcast customer-owned equipment does not belong to the cable company.

“My advice if you are thinking about buying your own modem is to make sure you file all receipts,” said the customer. “I went through this same runaround with Comcast last year and luckily I still had both the sales receipt from Amazon as well as the Comcast document stating I had turned in my rented modem. It still took a few phone calls and a week or so for them to straighten it out. Pretty ridiculous.”

Sorry, That Competing Online Video/Cord-Cutter Competitor is Dead in the Water When Usage Caps Arrive

Phillip "It isn't so dumb to own the pipes" Dampier

Phillip “It isn’t so dumb to own the pipes” Dampier

In 2006, AT&T CEO Ed Whitacre thought his company was at a disadvantage being stuck with “dumb pipes” while Google, Yahoo! (remember them?) and Vonage couldn’t count their earnings fast enough. While AT&T sold consumers plain DSL service, content was king on Wall Street and Whitacre groused it was unfair for bandwidth hogs to use “the pipes for free.” That one statement was the equivalent of throwing a lit match on a hillside in Malibu Canyon and a predictable firestorm over Net Neutrality ensued.

Nine years later, Net Neutrality is now official FCC policy, although the sour grape-eating Republicans will continue to throw Congressional hissyfits along the way. While they rely on tissue-thin evidence to back their assertion the FCC secretly colluded with the Obama Administration to stick it to AT&T and demand its repeal, the future of Net Neutrality will more likely be decided in a courtroom a year or two from now.

Back in 2006 AT&T primarily sold DSL service and was looking for cash to finance its then emerging U-verse platform. AT&T planned to follow cable’s lead, devoting most of the available bandwidth on its fiber to the neighborhood network to cable television programming. Broadband speeds were limited to just under 25Mbps — even less if a large household had multiple television sets in use.

But as the Great Recession arrived and wages stagnated, the cost of what used to be a “must-have” service for most Americans increasingly began to exceed the household budget and the day finally arrived when cable companies started losing more television customers than they were adding. Even worse, cable programming costs continue to spiral upwards and no major cable company can increase cable television rates fast enough to support the usual profit margin the industry counted on.

What Whitacre failed to realize nine years earlier is that broadband providers did not simply own “dumb pipes.” AT&T, Comcast, Verizon, Time Warner Cable, Charter and other providers actually occupy two gilded catbird seats, with AT&T and Verizon dominating the wireless Internet business and Comcast, Time Warner, and Charter dominating at-home viewing and wired broadband. Lawmakers who deregulated both industries predicted pitting AT&T against Comcast or Verizon against Time Warner Cable would create competition not seen since Coke vs. Pepsi. Consumers would benefit and world-class service would result.

Instead, Time Warner Cable now sells Verizon Wireless phone service. Verizon gave up on expanding its FiOS network and is selling off its DSL and FiOS business in pieces to focus on its best moneymaker, Verizon Wireless. Comcast in turn threw in the towel on any notion of offering competing cellular service and, in fact, sold its acquired wireless spectrum to Verizon.

PlayStation Vue's lineup

PlayStation Vue’s lineup

The best way to make money is to avoid price wars with your competitors and the evidence shows there is growing peace in America’s Telecom Valley. Comcast can now raise your broadband bill because, for most, Verizon FiOS isn’t an option. AT&T U-verse does not have to hurry speed upgrades to customers if Time Warner Cable delivers no better than 50/5Mbps service in large parts of its service area. Google Fiber remains a minor threat, only available in a handful of cities. AT&T distributed more copies of its press release touting U-verse Gigapower — its gigabit Internet offering — than there are customers qualified to sign up.

Notice that we’ve drifted away from talking about cable television programming. So has the industry, now increasingly dependent on broadband rate increases to make up the difference in revenue they used to take home from their television packages.

But now that the biggest players have a predictable source of revenue, allowing disruptors to further challenge earnings isn’t something your local cable and phone company will allow for long. At the moment, those most likely to cause problems are the growing number of “over the top” streaming video services that do not require a cable television subscription to watch. But they do need broadband — Whitacre’s “dumb pipes” — to reach subscribers. To manage that, services like Apple, PlayStation Vue and Sling TV and their customers must deal with the gatekeepers — AT&T, Comcast, Time Warner Cable, Verizon and others.

What Whitacre thought was a disadvantage is now becoming the best thing in the world — manning a toll booth on the only two roads most Americans can use to access online content.

Today, Sony officially launched its Internet-TV service, “PlayStation Vue” in three cities (New York, Chicago and Philadelphia) with a base price of $49.99/month. In includes more than 50 cable networks and in the three launch cities — local network affiliates. In Chicago and Philadelphia, where Comcast provides cable service, potential customers will need to pay $50 a month for Vue and another $64.95 a month for 50Mbps broadband — the least expensive broadband-only tier that is suitable for high quality viewing. Your combined bill for both services is $114.94 a month. Comcast charges $99.99 a month for its double play – 220 TV channels and 50Mbps broadband — almost $15 a month less for its package, and it includes around 150 more channels than Vue.

Comcast explans its new usage caps.

Comcast explains its new usage caps.

But Comcast also has another weapon it is testing is several of its markets — the resumption of usage caps and overlimit fees on its broadband service. Comcast customers in most test markets are given 300GB a month, after which they face overlimit fees of $10 for each additional increment of 50GB. While web browsing and e-mail fit more than comfortably within those caps, watching HD video may not. That leaves a potential Vue customer with a major dilemma. Should they pay $15 a month more for service than they can pay Comcast for a better package -and- chew away their usage allowance using it?

Comcast has yet to figure out how to install a coin collector on top of your television set, so you can watch as much Comcast cable television as you’d like. But watching streaming video could get very expensive if it exceeds a future Comcast usage allowance.

Smaller video packages from providers like Sling TV or the forthcoming Apple streaming service might make more sense, but will still be subject to Comcast’s usage caps if/when they are reintroduced around the country, while Comcast’s own television service will not.

This is why cable and phone companies hold enormous power over their potential competitors, even if Net Neutrality is fiercely enforced. Usage caps and usage-based billing represent an end run around Net Neutrality and both are permitted. The FCC has consistently refused to engage on the issue of broadband usage caps, leaving providers with a useful weapon to deter customers from dropping their television package in favor of an online alternative.

With most Americans having a choice of only one or two “dumb pipes” over which they can reach these services, being an owner of those pipes and getting to set the rates and conditions to use them is a very comfortable (and profitable) place to be.

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  • Jason: I am curious if the 50Mbps speed as the fastest they ever achieved if that was wired or wireless? What environment are they in? An apartment or a sing...
  • Angel: it should read "I’m NOW paying 4$ less than the original promo I bought last year". and you actually have to get to the cancellation department, the p...
  • fit body: Excellent blog you've got here.. It's hard to find excellent writing like yours nowadays. I honestly appreciate people like you! Take care!! My ...
  • Angel: It helps if you call back a few times, talking to different people yields different results. I had to talk to 3 different people before I finally land...
  • tacitus: I have found it's getting harder and harder to get the full price of a deal without going through the signup process. I tried to find out how much I w...
  • tacitus: The problem is that it works. It's the same psychology that lets people buy a second candy bar they don't need because they can get it at half-price, ...
  • John: I tried everything in this guide to no avail. TWC refused to lower my price. Oh well, I'm having the service disconnected. What good's the threat...
  • John: Which is why we have caps. Gotta love American "capitalism"...
  • John: Just tried this out, I have U450 and 24mps internet. My bill just jumped from $140 to $220, called and tried this, he originally told me that could dr...
  • fndjdkdkdkj: I don't see any value in god damn TV only to watch 20minutes of Ads ever god damn hour. I cut the cord long ago and have zero intention of ever going ...
  • Rod: But it's not a better value proposition if you simply don't want cable tv or landline. What's the value in paying an extra $25 dollars a month for so...
  • Matt Larsen: For $1500 and the cost of plane tickets to Seattle, I will get this guy service at his house so he doesn't have to sell it. A WISP will find a way t...

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