Snip: the cord has been cut. Beginning on 2 June, for the first time in my life since I became an independent adult, I shall be without cable television.
And I’m not alone. Comcast acknowledged that this spring, Comcast – the country’s largest cable television provider – ended up with more customers for its internet services than it had for its television programming packages for the first time ever. In the first quarter, it added 407,000 high-speed internet customers, while losing 8,000 TV watchers.
Ultimately, the final catalyst for my decision – which involved Cox Communications, rather than Comcast – wasn’t only financial. Yes, finances weighed into it – it was daunting to see the cost of my cable internet, phone and television package soar from about $163 a month to nearly $207. So, too, did common sense: like many other cord cutters, I realized that I could get much of what I wanted to watch online anyway, via services like Netflix, Hulu and Amazon Prime (some of which I already was paying for). But what really did my head in, and caused me to pull the plug on my cable television (and may yet cause me to reconsider my entire relationship with cable companies altogether) was the utterly incomprehensible nature of what’s known as the “cable bundle”.
After devoting far too many hours of my life to studying the economics of various possible bundles applied to a single account – mine – I can only conclude that their complexity and opacity might make them a suitable subject for study by the Consumer Financial Protection Bureau.
Admittedly, these are structures that we choose to sign up for: having access to cable, internet and television services that are properly priced and whose pricing is readily comprehensible is hardly as crucial as ensuring that our mortgages, car loans and student loans are fair and that we’re being dealt with honestly by the banks and other lenders with whom we’re negotiating. Let’s face it, whether or not we really understand how or why our mix of cable services is priced is hardly in the same league – it’s the epitome of a first world problem.
And yet … I find I can follow the vagaries of credit derivatives and complex Wall Street investment strategies with much more ease than I can decipher the intricacies involved in pricing cable services. The latter, in fact, seem to be utterly illogical – unless, perhaps, you are a cable company. Certainly, they are explicitly designed to keep you tied into paying for the largest quantity of services, at the highest net dollar cost to you. So the service representative at Cox Cable that I spoke to acknowledged: “The more services you have, the bigger the discount.”
I can understand the economics of cable television pricing, on a standalone basis. In some instances, the cable companies are in a tough spot: they’re caught between viewers like us, who want to watch whatever we want, whenever we want to do so, and pay as little as possible for the privilege. On the other side of the equation are the content providers – the HBOs of the world – who charge the cable companies big bucks for the right to broadcast that content. Those programming costs have continued to climb, and now are being spread across fewer subscribers, leading to earnings shortfalls on the part of companies like Time Warner Cable Inc.
So desperate are cable companies to keep us as customers, in light of the growing wave of cutting, that they seem bound and determined to make it as financially unappealing as possible to abandon the television services. Not only will they offer bigger discounts on the biggest rosters of television services – including channels you may not even have known existed and probably wouldn’t watch if you did – but find ways to make the economics look absurd to anyone who pauses to try to understand them.
So, for instance, keeping the same services that I signed up for two years ago when I opened my account with Cox – internet, phone and cable television – would see my costs jump 25.65%. Considering that the rate of inflation has remained below the Federal Reserve’s target of 2% for 35 straight months now, that’s rather remarkable – even once you consider the hardball negotiating tactics of the content providers.
That’s a lot less than it could have been. As the folks at Cox pointed out to me, without the benefit of all the discounts applied to accounts of customers who agree to sign up for certain minimum service levels for at least one or two years in their bundles, I’d be paying $265.09, instead of $206. That’s more than I paid to heat my home on the coldest day last winter – and I’m not even paying for premium content, like HBO or Showtime.
At the other end of the spectrum, stripping my account to the bare minimum, and leaving me with little more than PBS, a cluster of local channels and a handful of news channels, would still cost me $153.13 a month. I’d save about $14, and lose virtually all of my television broadcasting. Hmmm.
This is precisely why all those who recommend simply shaving down your cable subscription to the bare minimum get it wrong. The smaller your cable package is, the more minuscule the discount, as the helpful marketing folks at Cox confirmed. The only way to get the teasers and discount rates that make cable affordable, relative to its alternatives (the myriad standalone streaming services) is if you are a television addict and/or are happy to subscribe to lots of channels just in case there’s a show that pops up on one that you might want to watch down the road.
None of these television options seemed very attractive, at least on an absolute basis. But it was when I looked at the impact of unbundling on a broader scale – not removing individual channels from a television bundle, but removing television from the internet/phone/cable TV bundle – that the real shock registered.
We’ve got choices when it comes to our cable TV. Many of us also can deal without a home phone (if they are lucky enough to live in a zone that never drops calls). But the internet? Well, I could switch over to Verizon FiOS, but Cox is canny enough to know that I’m going to be uncertain about the turmoil of doing so, given that I rely on internet for work as well as communication. And the rock-bottom cost for a bundle consisting only of my internet service and my phone – with fewer features on my phone – didn’t go up 26%. It didn’t go up less, reflecting the fact that there aren’t those pesky content providers trying to demand more buck for their top shows. Nope, it went up by a higher percentage rate: 35%.
The bottom line, however, is that at least I’ll be paying a smaller bill each month, even if the price is vastly higher for precisely the same services and I still haven’t received a clear reason as to why that’s the case – other than the fact that I’ve chosen to cut the cord and stop cross-subsidizing the cable television offerings.
The whole experience of trying to puzzle my way through this is a reminder of the extent to which cable services and the way they are structured and priced are still stuck in the 1990s. Increasingly, consumers have to dig into the small print in the attractive-looking plans and packages that cable companies offer, and understand what they really mean. Then, too, they need to realize that what is on offer are teaser rates that won’t last past the lifespan of the six, 12 or 24 months of the initial contract, what is available then may not correspond to their needs. Even the growing ranks of cable company “retention specialists” can’t go past a certain point.
The cable companies know what they want to sell us; indeed, they are clear about what they need to sell us to remain profitable. They want us to sign up (ideally) for the full shebang: the cable television, the internet and at least a bare bones home phone service. If we do so, we’ll get rewards in the shape of big discounts – but we’ll be paying bigger bills in absolute dollar terms, sometimes for services we neither want nor need.
It’s time for those consumers who haven’t already done so to ignore the marketing and decide instead on what communications services we want to purchase – and then find ways to do so that don’t break our budgets. Increasingly, as has already begun to happen with television, that seems to involve making end runs around the cable providers. Maybe they’ll wake up and smell the coffee.
