- By Dan Veaner
- Opinions
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About once a year I try to figure out how to save money on high speed internet and cable television. Cable television is very expensive, the cable companies tell us, partly because of contracts between the cable companies and the content providers -- I have read that the sports channels are especially expensive for the cable companies, infuriating to me because I don't watch sports programming -- and partly because the big cable companies tend to be monopolies that like to charge a lot of money. I keep thinking, it's just TV. Why don't I just drop it altogether? But to be truthful, I don't want to. For the number of hours I watch, it's pretty cheap entertainment. Except for one thing -- it's not cheap.
This year I finally felt that I could 'cut the cable', as it is called. That means keeping a high speed internet account, but dropping cable TV in favor of streaming services. By my calculations I could save a little over $500 per year even if I bumped up my Internet speed. I was all ready to do it, but my wife asked me to call the cable company and see if they would match the savings I had calculated. I didn't think they would, but she hates learning curves, so I agreed. What I learned is that our cable company' Web site is very misleading about the actual price of Internet, but, on the other hand, they are willing to offer a lot to keep customers. At least for a while.
Forbes Magazine reported that US pay-TV providers lost a net 357,000 subscribers in the third quarter of 2015 alone, and that subscriber losses are accelerating. That is almost a million and a half subscribers a year bailing on cable TV.
I can understand why. I didn't include our Netflix subscription in my calculations because we pay for that on top of what we pay for cable, but I figured with a combination of Hulu Plus, CBS's streaming service and Sling TV we would pay a total of $34 per month to get most or all of the shows we currently like or care about. I added that to what I thought Internet would cost and calculated I could save $672 per year. If I went to the next highest Internet speed I thought I could still save $552 per year. That's real money.
Except our cable company is not at all forthcoming about the real cost of Internet. I thought it would be about $40 for their standard package (15mbps download/1mbps Upload), or $50 per month for the next level up (20mbps Download/2mbps Upload). Cable companies like to tout their special deals for new customers, but it turns out they are experts in obscuring your real costs after those 12 magical months have passed. My provider's Web site says that you can get the standard package for $34.99. It says it was $39.99. So was it unreasonable for me to think that the cost after the first 12 months would be $39.99? If you saw this what would you think?
I had two reactions to this. As a long-standing cable customer, of course I am not eligible for these 'first 12 month' packages. Now, I knew I got some discount for having both Internet and TV, but seriously, that's a lot of money for Internet access all by itself. If that expense is what is needed to pay for the infrastructure, I can understand that. And any company is entitled to make some profit on goods or services they provide. But I was curious about how much they really have to spend that justifies what they charge, so I looked it up. A recent article in the Huffington Post (and several other publications) reported that our local cable company makes a 97% profit on their ISP (Internet Service Provider) business.
"We find that the High-Speed Internet, while it costs customers, on average, $43.92, the total costs to TWC to offer the service was only $175 million -- resulting in a 97 percent profit margin," the report, which got its data from a 2013 SEC-filed annual report, says. Based on those numbers the company is making $5.8 billion in revenues, but only spent $175 million to provide the service. That is for High-speed Internet only. It doesn't include TV, phone, or other services they provide.
I am guessing that most customers have package deals, which drives the average down to $43.92 per month. Because I was told that I would be paying a minimum of $57.95 per month if I dropped TV. Is that because it is a way to keep customers from jumping to the streaming services? Or do monopolies just charge exorbitantly because they can? Or both?
So if I kept the standard Internet package I would only save approximately $430 per year by switching to streaming TV. And if I bumped up to the next highest speed I would only save around $190 per year.
The very nice lady at the cable company offered me a very sweet deal. It would only save me $144 over what I am paying now, but would double my Internet download speed and raise my upload speed six times faster (not a big deal for most people, but I upload more than most) and add Starz to my package. She was banking on me concluding that $50 a year was worth surpassing the speeds I was planning to buy anyway, plus that I would care about Starz. She was wrong. I've been getting along just fine at a measly 15mbps download speed for many years, and I don't care about Starz (or HBO or any of those services).
What I do care about is my wife. You know what they say about marriage: happy wife, happy life. And mine hates learning curves. So was it worth $50 to keep things working as they are, and incidentally get an added Internet speed bonus? Well, yes.
But I still don't like it. If I owned a cable company I might be able to afford it, but this is a lot of money for me.
I have to be honest. I have been very happy for years with Time Warner's Internet service, My testing has consistently shown that they exceed their promised speeds, and support for Internet has been outstanding for that particular product. Not so much for television support, but even that has seemed to improve over the years. And the company has done a really wonderful job with the integration between DVR, mobile apps, pay per view and on demand.
The only beef I really have is price. 97% profit is obscene, especially for a service that has become as much a part of our lives as telephone, heat, and electricity.
And of course my deal is only good for 12 months. Does anybody every really pay the full retail price? I'm going to say a lot of people do. Because minimally you have to ask for a deal every year, or maximumly threaten to drop their service altogether (and be ready to really do it), and how many people think to call every year, and how many people get their bills and just pay them? Annoying people like me are cable companies' cost of doing business.
Even so, I am grateful for the next 12 months. It is a very good price relative to what they really want to charge me, even if it is $50 more per year than I would pay if I switched to streaming TV.
After 12 months, who knows? Apple has reportedly been trying to put together a television package that would cost less than cable, without all the extra channels that nobody cares about. I was hoping that would be launched this year, but evidently they are having a lot of trouble negotiating with the content providers (the networks) and it may never happen. I am still hoping they will succeed, but with the high cost of that cable Internet connection, will it be worth it? Time will tell.
I am not one for government intervention, but when companies get this out of control it seems time for someone to make an adjustment. the high price of high speed Internet creates an income class divide. It's like saying poor people can't afford heat or electricity, so they shouldn't have it. Even if you're not into social justice, it's not just TV. It's a rip-off.
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