Cadillac prices for some sports networks you pay for whether you watch or not. (Early Summer 2012 – Prices have since risen for some networks)

About 50 percent of your monthly cable television bill covers the cost of live sporting events and the networks that cover them, and the price is not going down anytime soon.

At least $21 of that bill is split between more than 50 national and regional channels covering every imaginable sport.

What customers may not know is that a handful of self-interested giant corporations and major sporting leagues have successfully bid up the price to carry those events using your money.

The Philadelphia Inquirer took a hard look at spiraling sports programming costs last weekend, discovering a lot of cable subscribers are paying for sports programming they will never watch.

“Here is a little old lady who wants to watch CNN,” Ralph Morrow, owner of Catalina Cable TV Co. in Avalon, Calif., a 1,200-subscriber system, told the newspaper. “But I can’t give it to her without $21 a month in sports.”

In the last 20 months, some of the biggest names in sports programming including Comcast/NBC, Fox, ESPN, CBS, and Turner have agreed to collectively pay $72 billion in TV rights to air pro, college, and Olympic events over the next decade. Costs are anticipated to soar to $100 billion or more once those contracts come up for renewal.

To cover the growing expense, the pay television industry’s business model insists that every subscriber must pay for sports networks as part of the “basic package” whether they watch or not. Nothing fuels annual rate increases faster than sports programming, and there is no end in sight.

Many contracts specifically prohibit operators from selling their networks “a-la-carte” or in special “sports tiers” that carry extra monthly fees.  Any additional costs are quickly passed onto subscribers in the form of regular rate hikes.

Charlie Ergen from Dish Networks suggests at the current pace of sports programming rate increases, it won’t be long before subscribers will face cable bills up to $2,000 a year, just to watch television.

If you don’t believe him, consider estimates from NPD Group, which predicts the national average for cable TV bills could reach $200 a month as soon as 2020. That is up from the already-high $86 a month customers pay today, after all costs and surcharges are added up.

It was not always this way. As late as the 1980s, the overwhelming majority of marquee sporting events were televised on “free TV” networks like ABC, CBS, and NBC. For decades, major broadcast networks largely had only themselves and the economics of advertiser supported television to consider when submitting bids to win carriage rights.

With the advent of cable sports networks, supported by dual revenue streams from both advertising and subscriber fees, ESPN eventually amassed a back account large enough to outbid traditional broadband networks. If another network moves in on ESPN’s action, the cable network simply raises the subscription fee charged to every cable subscriber to up the ante.

Broadcasters have enviously watched this dual revenue stream in action for several years now, and have recently insisted they be treated equally. Today, cable operators face demands for similar monthly payments from television stations and their network owners. In effect, customers are paying both sides to outbid one another for sports programming.

Consider ESPN as a case study in sports programming inflation. From 1989-2012, ESPN rates increased 440 percent. Today, every cable subscriber pays at least $5.13 for ESPN alone. In fact, the actual amount is considerably higher, because ESPN has successfully compelled most cable and satellite programmers to also carry (and pay for) several additional ESPN-branded networks also found on your lineup.

But why do cable companies agree to pay astronomical fees for sports networks, only to later alienate customers with annual rate hikes?

First, because customers watch sports. If a cable company does not carry the network showing a game or team a customer wants to see, that company will likely hear about it, either in a complaint call or cancellation.

Second, watching live sporting events is not easy for a cord-cutter. With fewer games appearing consistently on broadcast television, a cord cutting sports fan risks missing the action only available from a pay television provider.

In a defensive move, many cable and satellite companies assume the more live sports a  provider offers, the lower the chance a sports enthusiast will consider canceling service.

Cross-ownership also muddies the water for consumers. Comcast, the largest cable operator in the country, has an obvious self-interest loading its systems up with its own sports programming and compelling customers to pay for it.

Comcast owns about a dozen regional sports networks, NBC, NBC Sports Network and Golf.

Other large cable operators are concluding if you can’t beat ’em, join ’em. Time Warner Cable found one lucrative reason to own its own sports networks: its ability to charge competing cable and satellite providers sky high prices to carry that programming.

Time Warner is asking fellow cable, telco, and satellite providers to pay $3.95 a month for its SportsNet English and Spanish language networks, which feature the Los Angeles Lakers. For good measure, the same cable company that routinely complains about being forced to pass on mandatory sports programming costs from others insists companies place both of their sports channels on basic lineups, which guarantees every subscriber will also pay the price for two more sports channels, one in Spanish, they may have no interest in watching.

Major cable and phone companies are rolling out new bundled packages and promotions designed to protect their cable television packages from cord cutting.

Verizon, Comcast and Time Warner Cable have all run promotions that carry a clear message: cancel your cable television and your wallet gets it.

The Wall Street Journal shared the story of Comcast subscriber Cathy Vu, who decided she no longer wanted cable TV and tried to downgrade to a broadband-only account.

Comcast gave her an offer she could not afford to refuse when the representative explained canceling cable television would increase her monthly bill $20. As a result, Vu decided she would save more money keeping her cable television turned on.

Welcome to the new world of double and triple play bundled pricing promotions that bring downgrade penalties customers cannot ignore.

The idea of repricing cable service to protect vulnerable cable television and phone service began in earnest after analysts like Sanford Bernstein’s Craig Moffett began noticing customers were no longer addicted to keeping cable television, no matter the cost. He proposed a solution: price broadband service higher and cut the cost of cable television.

The result: carefully constructed promotional and bundled package offers that entice customers to purchase services they might not even want, to get the best (and sometimes lowest) price. Gone were promotions that offered phone, broadband, and television service for $33 each. In their place, new pricing that charges $60-70 for the first service, and heavily discounted prices for each additional service.

You know the pitch:

“Yes, I am calling to sign up for broadband service,” you say.

“Certainly, I would be glad to help you with that. But did you know that for just $20 more a month, you can also get cable television?”

“Really, it’s only $20 more? Sure.”

“I am thrilled to hear you say that. But I hope you are sitting down because I have more good news. For just $10 more, we can give you a phone line with unlimited local and long distance calling. How much do you pay the phone company now?”

“Too much, that sounds like an amazing deal, so I get everything together for $99 a month?”

“You sure do, for the first 12 months anyway.”

One year later when the promotion ends, you call to begin downgrading service to lower your bill. But cable and phone companies are increasingly ready for you.

First they will offer you a slightly less attractive promotional retention offer to keep your business. If you accept, the company gets to book the extra revenue and probably locked you into an annual service agreement.

If you don’t bite and insist on a downgrade, they have some bad news for you — that broadband service you still want will now cost you $60-70 a month, including the modem fee.

If you bail early on a promotional discount offer, the bite on your wallet can be significant.

The Journal found unbundling just does not pay:

• Comcast: TV + Internet for about $50/month for the first 6 months vs. standalone same speed Internet for about $70/month.
• Verizon FiOS: TV + Internet for about $85/month (two-year contract) vs. standalone Internet for about $80/month.
• Time Warner Cable: TV + Internet for about $50/month for 12 months vs. standalone Internet for about $45/month for 12 months, then up to $60 after that.

At the end of the day, Moffett and the rest of Wall Street get their wish — preservation of the all-important growing average revenue (ARPU) collected from each customer. Downgrades lower ARPU, so they must be discouraged at all costs.

Cable operators “recognize that their most advantaged product is broadband,” said Moffett. “They don’t want to sacrifice that advantage by giving the opportunity for customers to cherry pick their best product at a low price and take the rest of your services from somebody else. In effect, they are pricing the broadband at a price that discourages you from taking broadband only.”

Customers primed for cord cutting (or who have never bought cable TV) are likely to receive targeted mailings from Verizon, Comcast and Time Warner Cable encouraging subscriptions to cable TV and prices that nearly give the service away.

Comcast’s Blast Plus promotion in selected markets delivers 30Mbps broadband with Digital Economy television service, both for $50 a month for six months. Internet-only customers would pay $70 per month for the same speeds without television.

Time Warner Cable in New York City wants to be your cable TV supplier so much, it offers a package of broadband and throws in Broadcast Basic service for just $5 more per month. Combined, Turbo Internet and television will cost $49.99 a month for a year. Standalone Internet on a promotion runs $45 a month for 12 months.

On a strict cost basis, charging more for Internet does not make sense. The Journal reports that about 90% of your monthly broadband bill is pure profit for cable operators, because the cost of delivering the service has continued to plummet to all-time lows. Cable television is no longer the cash cow it used to be for cable operators because programmers increasingly demand a piece of the profit pie. Today, cable operators only get to book about 35% of your monthly cable television payment as profit.

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The Wall Street Journal examines the trend towards repricing broadband service so that customers feel compelled to keep their cable television package or face even higher bills.  (5 minutes)

Burlington Telecom, the troubled publicly-owned fiber broadband network for Burlington, Vt., is working on a comeback by finally boosting its speeds well beyond what competitors FairPoint Communications and Comcast can offer residential broadband subscribers.

BT will offer residents 40/40Mbps service for $99.99 per month and 1,000/1,000Mbps service for just $50 more per month (with a 12-month contract), starting Dec. 1:

Stop the Cap! previously recommended BT consider offering faster speed packages that give subscribers a compelling reason to switch from Comcast or FairPoint. Community broadband providers with fiber optic networks need to leverage those superior networks to drive new customers to sign up, and BT certainly could use a influx of new business as it fights through its financial problems.

We strongly recommend BT consider boosting its 40/40Mbps offering to at least 100/100Mbps at the $100 price point to better compete with Comcast’s Extreme 105 tier, which offers 105/20Mbps for just $15 more per month. Pricing and speeds must be comparable with the cable competition to compel a customer to go through the hassle of changing providers, and most subscribers still don’t value higher upload speeds as much as download speeds.

BT’s gigabit offering succeeds on all counts, but it is unlikely to draw a large percentage of customers willing to pay $150 a month for residential Internet service.

Comcast has announced it will extend free access to its Wi-Fi network in areas struggling to recover from the impact of Hurricane Sandy until Nov. 30, according to a company message on Twitter.

Further information about Comcast’s Wi-Fi network and how to access it is available here.