10 things cable companies won't tell you
1. “Customers are fed up with us.”
Cable giants Comcast and Time Warner Cable ranked among the top-ten most hated companies in America in 2012 (coming in fourth and seventh), according to the American Customer Satisfaction Index, which rates companies based on surveys. Cable customers have no shortage of issues to gripe about, from installation appointments missed to new charges added to bills. New York and New Jersey customers sued Cablevision for $250 million in November, alleging the company billed customers for TV, Internet and phone services they didn't receive because of superstorm Sandy. (Cablevision said in a statement that the lawsuit misstates the facts and is without merit, adding that its customers can request a credit by phone or online.) Time Warner Cable, meanwhile, was hit by a lawsuit of its own in mid-November from customers claiming that the $3.95 monthly fee for leasing modems violated customer agreements prohibiting such fees. Plus, some customers haven't forgotten an incident in 2010, when Time Warner accidentally aired pornography on some children's channels. Time Warner Cable says such technical glitches are rare and that it works with customers individually when content appears on the wrong channels.
Time Warner Cable declined to comment on the lawsuit, but said that such fees are commonplace in the industry. In addition, a pricing study from the Federal Communications Commission reported that cable operators often need to update their equipment from year to year to maintain or improve quality, which could explain the need for new fees or price increases. Both Time Warner Cable and Comcast pointed out that they're working on improving customer satisfaction by introducing new products for customers, including smartphone apps and services for viewing videos on other platforms like cellphones, tablets and laptop computers. Some of the fees, such as Time Warner Cable's new modem fee, can be avoided if customers buy their own equipment. And customer service representatives might give customers a break in the form of a discount or waived fee if they pick up the phone and complain, says Phillip Dampier, editor of StopTheCap.com, a group that fights usage caps from Internet and cable providers.
2. “Good service exists...just not in your area.”
Not all telecom providers get the thumbs down from customers. It's just that those companies that do manage to get high ratings are only available in limited areas, according to a Consumer Reports study from June. For instance, WideOpenWest, a regional cable company in the Midwest, got top ratings for its TV, Internet and phone services, and for its bundled packages of all three services. Another top-rated provider, Verizon FiOs, is available in 12 states and Washington, D.C. Verizon's top ratings are partly due to its method of running high-speed fiber-optic network directly to a house, instead of switching to existing copper wiring as some providers do, according to Consumer Reports.
Some more bad news, those cable customers who don't already have access to one of these popular regional networks may not get connected for a while. Verizon, for instance, expects to stop building out its fiber-optic network in 2013, after it reaches its goal of being available to 18 million households (with the remaining expansions planned primarily for New York and New Jersey), says Verizon spokesman Bill Kula. WideOpenWest says it expanded to the Southeast after acquiring a smaller cable company, Knology, in July.
3. “We don't have a monopoly, but we may be your only option.”
After the enactment of Telecommunications Act of 1996, which was intended to increase competition among telephone and cable companies, some experts expected relief for customers seeking better service and lower prices. But 15 years later, a 2011 survey by the Federal Communications Commission showed that 61.5% of customers still only had one main choice of cable provider. Mergers between cable companies and partnerships between providers have hampered competition over the years, experts say. The commission also found that those cable subscribers who have other options for TV service, either from a satellite provider or a rival cable company, also have a greater selection of channels ‘ 49 basic service channels on average, compared with an average of 41 in noncompetitive neighborhoods. They also tend to see smaller price increases.
Of course, most people also have the option of signing on to satellite television, and in some areas, service from phone companies, which sometimes offer competitive pricing and expanded programming for cable and Internet services. And those aren't the only threats to cable's dominance: Brian Dietz, vice president of communications at the National Cable & Telecommunications Association, a trade association for the cable industry, says cable companies have lost market share in the past 20 years, not only as consumers have switched to phone or satellite companies, but as some have given up cable services up altogether to use Web-based streaming services like Netflix, Hulu and Amazon Prime.
4. “Raising prices is part of our heritage.”
Consumers who stick with cable frequently face ballooning bills. The lack of competition means that cable companies have the upper hand when it comes to setting prices, says Michael Hodel, an analyst for Morningstar. Indeed, price hikes are getting steeper: The average cost for expanded basic cable service, the most popular level of cable service, grew by 5.4% in 2011 from the year before, according to the FCC. That compares with a 1.6% increase in the price of most other consumer goods as measured by the Consumer Price Index. And prices more than doubled from 1995 to 2011, according to the FCC. While the FCC regulates the rates of basic services and equipment in markets without a viable competitor, all other rates and services ‘ including add-ons like DVRs and the cost of premium channels ‘ are unregulated.
That said, price hikes are milder today than they were in the '80s and '90s, when cable companies had a monopoly in the TV industry. Back then, 10% annual price increases were the norm, says Arthur Gruen, president of Wilkofsky Gruen Associates, a media and telecommunications consulting firm. But prices will likely continue to rise as providers offer more channels, and as they face higher costs for carrying key sports and television networks, says Gruen.
5. “Even the phone companies are on our side.”
Instead of competing head-on for customers, as many customers hoped they would (because after all, they're both selling Internet, cable and phone services), phone companies and cable companies are starting to partner up to sell each others' services. In August, the FCC approved Verizon Wireless's $3.7 billion purchase of airwaves from major cable providers, including Comcast, Time Warner Cable and Cox. As part of the partnership, Verizon Wireless agreed to sell the cable companies' home TV services in the markets where Verizon FiOs is not offered. In exchange, the cable companies agreed to sell Verizon's wireless services.
For consumer advocates, the deal was disappointing, since they were expecting the cable companies to compete more aggressively for phone customers and for the phone companies to battle for television and Internet customers. But instead, “the phone companies waved a big white flag,” says Mark Cooper, director of research for the Consumer Federation of America. “Essentially there's a truce from a war we never really had,” he adds. Kula of Verizon, however, emphasizes that the company is still competing head-to-head for customers in markets where FiOs is available.
6. “We're at the mercy of the networks.”
In addition to giving consumers a few more options for cable and Internet service, competition from satellite and phone companies has also given the television networks more leverage in negotiations with cable providers. Now that there are multiple outlets vying for their wares, television networks ‘ especially those that broadcast popular TV series or live sporting events ‘ can charge their clients (the cable, satellite, Internet and phone companies) more in subscription fees, says Arthur Gruen, president of Wilkofsky Gruen Associates, a media and telecommunications consulting firm.
Of the 100-plus channels cable companies offer in their most common plans, subscribers have to fork over the most cash for the sports networks. Case in point: ESPN tops the list of the most expensive cable networks, charging subscribers $5.01 a month; the two next most expensive channels ‘ 3-D channel 3net and TNT ‘ charge only $1.29 and $1.18, according to market research firm SNL Kagan. (The average price for all channels is 26 cents.) And the costs are rising: ESPN's fees increased by 34% from the 2008 rate of $3.75, and TNT's fees are up 26% over the same time period.
Of course, cable providers push back when those fees climb higher, sometimes leading to disputes that threaten to rob viewers of popular shows or other sporting events. The president of AMC Networks, which charges an average of 25 cents a month according to SNL Kagan, has said he thinks the network deserves a minimum of 75 cents a month. The network also set up a website warning Verizon FiOs customers that they might lose access to hit shows like “Mad Men” and “The Walking Dead.” If the two sides don't agree on a deal before their contract expires at the end of the year, AMC won't be available on FiOs. Verizon says it understands how important it is for customers to be able to watch shows and sports broadcasts they like and that it is continually negotiating with its video content providers. AMC and ESPN declined to comment on subscriber fees, but both networks say they've improved their programming over the years by introducing original dramas and expanding their sports programming. TNT said in a statement that a combination of live sports coverage including NBA games and original TV shows like “Dallas” “reinforce the must-have status of the network.” (Full disclosure: MarketWatch's parent company, NewsCorp, owns cable channels that charge fees to distributors.)
7. “Buying services piecemeal hurts you, not us.”
While bundled packages will often offer cable, phone and Internet together for $100 bucks or less, some customers aiming to trim their monthly bills will find that it costs more buy services individually from separate providers than it does to pay for them all together from one. The reason: Some providers are now using tiered pricing plans where they charge the most for the first service, say cable or Internet, add on the second service at a discount, and the third service at a deeper discount, says Dampier. (A plan might charge, say, $60 for Internet, $30 for cable service and an extra $10 for a phone connection, he says.)
Verizon FiOs cable customers, for example, can add Internet to their package for an average of $15 more a month, says Kula. And Comcast offers some $50 plans that include cable and Internet; for Internet only, the charge would be $70. The strategy discourages subscribers from picking and choosing their services. But while some customers may resent being forced into choosing a single company for all their services, the cable companies say bundling actually helps them retain customers, since people who get multiple services from them are also less likely to cancel their plans. Such discounted prices, Dampier says, could in fact cut into cable companies' profits, while benefiting consumers. To be sure, some customers may still save by purchasing a single service ‘ especially if they don't need the other services. And in some cases, those bundling discounts don't last: They're often temporary or are available to new customers only.
8. “Use the word 'cancel,' and you've got our attention.”
Cable customers can often avoid price hikes if they threaten to cut back on services, says Dampier, who cut his own monthly Time Warner Cable bill in half to $100 last February after sending the company a message on Twitter saying he was considering a plan from the phone company in his neighborhood. Within a few days of sending the tweet, he received a call from a customer service representative asking him questions about his plan and discussing ways he could cut costs on his package, which includes two cable boxes, DVR, Internet and phone service. Time Warner Cable says it actively uses Twitter to address customer concerns and solve problems.
Cable providers are willing to negotiate with customers because it costs less to keep a current subscriber than it does to bring on a new one, especially when a technician has to be sent out to install equipment, insiders say. And studies show that once a cable provider loses a customer, it faces an uphill battle in winning him back. Roughly a third of those people who eliminated their cable and satellite services said they would not reinstall them, even after a dramatic discount, according to a June survey by TechBargains.com, a deal aggregation site.
As a result, many existing customers can often get a better deal on their services by simply picking up the phone (or hitting Twitter) and letting a customer service representative know that they are interested in a plan from a competitor, experts say. Further, Dampier suggests, if the cable company can't match a competing offer, customers should ask for other perks like free premium channels or a waived installation fee. Still no luck? Set a cancellation date, which could spark some calls from a customer retention specialist ready to offer you a better deal, Dampier says. Cable companies are more likely to accommodate long term customers who pay their bills on time. Those who regularly pay late, or who switch companies frequently hopping from one promotional offer to the next, are more likely to be let go, he says.
9. “We will squeeze your Internet.”
Some cable providers are quietly introducing limits on how much Internet data customers can use to upload and download content each month. People who surpass those limits are charged extra. Cox, which has one of the lowest caps, according to Consumer Reports, limits Internet data usage to 30 gigabytes a month on some plans. Comcast eliminated its monthly cap of 250GB in May but replaced it with a trial multi-tier usage program that allows up to 300GB of data usage on some plans. Customers who exceed that are charged $10 for every additional 50GB of data. Comcast declined to comment on the switch.
Many consumers may not be impacted by these additional charges, says Dampier. Indeed, Cox says less than 4% of its customers exceed the monthly data usage, adding that its reps work with customers to help them find a plan that fits their needs. But the changes come as homes are substantially upping their Internet use. The average amount of data used in North American households increased to 51.3GB a month in the second quarter, up from 32.1GB at the start of the year, according to analytics firm Sandvine. And some customers who consume a lot of media, including music, TV and movies, are already crying foul. It takes roughly 5GB of data to stream two high definition movies, estimates Dampier, who led a 2009 protest in Rochester, N.Y., when Time Warner Cable proposed introducing an Internet cap for customers in the area. Street picketers were supported by Sen. Chuck Schumer (D., N.Y.), and Time Warner eventually backed down, citing widespread “misunderstanding” of its plans. Instead, the company introduced a plan for light users that offers a $5 discount on monthly broadband bills for customers who keep their usage below 5GB a month, charging them $1 for every additional gigabyte up to a maximum of $25.
To be sure, many cable providers have also improved the speed and quality of their Internet services in the past year. The average broadband speed offered by the major Internet service providers, including cable companies like Cablevision and Comcast, increased by 30% in 2012 from the year before, according to an FCC report on broadband speeds. And after the same report last year found that actual Internet speeds can fall short of the levels promised, Internet providers also got better at delivering advertised connection speeds: The companies delivered 96% of advertised Internet speeds during the peak hours of 7 p.m. to 11 p.m. on weekdays, up from 87% in 2011. (Speeds can be 5% to 10% slower during those busy hours, according to Consumer Reports.)
10. “We're cracking down on piracy.”
Time Warner Cable, Verizon, Comcast and Cablevision are among the Internet service providers introducing an antipiracy program commonly called the “six-strike policy” at the end of November. Customers who illegally download music, movies or other copyrighted content on “peer-to-peer” networks will be alerted that their account is potentially being used to share files illegally. It's not clear, however, what will happen to customers after six warnings, says Joe Karaganis, vice president of the American Assembly, a forum for public policy issues that is affiliated with Columbia University. The system calls for “mitigation measures,” which could include reducing Internet speeds or redirecting traffic until the customer contacts the Internet provider, according to the Center for Copyright Information, the collaboration between the Motion Picture Association of America, The Recording Industry Association of America and major Internet service providers that created the policy. But the penalties will likely vary by provider. Time Warner Cable, for instance, says it will not slow Internet service, but customers who repeatedly violate the policy may have their accounts terminated. Verizon says it has not yet detailed its process for handling customers who receive several alerts.
The policy does have a review process for subscribers who want to challenge the validity of alerts they've received. And the tracking isn't done by the Internet service providers like the cable companies, but rather by third party groups who work with content companies represented by the movie and record industry associations, according to a Sandvine report. Subscribers are then contacted based on the Internet Protocol or “IP” address which identifies which specific computer may have been used for illegal sharing. Still, cable companies offering internet services have more incentives to crack down on online copyright infringement now that more consumers are relying on online viewing services ‘ both legal and not ‘ and cutting back on their cable plans. “They're in the business of making Internet access less attractive than cable service, so enforcement is in their interest,” says Karaganis.
The above information is edited by 10GTEK.
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