The Cable Industry's Response To A Banner Year For Cord Cutting? Massive Across The Board Price Increases For 2016

from the pouring-gasoline-on-a-house-fire dept

Wed, Dec 30th 2015 6:19am — Karl Bode

2015 was the year cord cutting stopped being written off as fringe behavior and truly went mainstream. 23% of consumers engaged in "cord trimming" in 2014 (reducing their overall package where they could), while 16% said they had unsubscribed from pay-TV services in the past year. Billions in stock value evaporated in a flash as Wall Street realized cord cutting wasn't a fad. in 2015, 4.9 million consumers called themselves former cable customers, a tally that's expected to jump 12.5% in 2016. Consumers are finally tired of paying an arm and a leg for bloated channel bundles, when they only watch, on average, about 17 of them.

Facing an unprecedented shake up in their industries and a dire need for evolution, cable and broadband companies are ringing in the new year the only way they know how: rampant tone deafness and major across the board price hikes starting in January. AT&T, Verizon, Dish, DirecTV, Comcast and Time Warner Cable are pummeling customers with $2 to $10 rate hikes for cable TV service in the new year. Not only are base channel bundles seeing a hike, but all providers are jacking up regional sports fees and so-called "Broadcast TV" fees:

"Comcast, the nation's largest cable provider, announced earlier this month that subscribers nationwide will see prices go up an average of 3.9 percent, and increases already have taken effect in some markets. The company will also hike its "broadcast TV fee" by 66 percent from $3 a month to $5. This relatively new fee covers the cost of retransmission fees that over-the-air broadcast TV networks like CBS, NBC, ABC and FOX charge cable companies for redistributing their networks on pay-TV systems."

Those retransmission fees are simply the cost of doing business (read: the cost of programming). But cable operators have started breaking a portion of these costs out below the line in order to misleadingly keep their advertised rates low. In other words, fees like this are why your already absurdly expensive cable rate is usually significantly higher once you actually get your bill.

As all cable operators are quick to do, they cry to the media, stating they too are simply victims of the soaring cost of TV programming nobody seems able to do anything about:

"Cable and satellite companies say the higher prices cover some but not all of the higher programming costs. The amount that Time Warner Cable pays local broadcast channels has risen 85 percent in the past two years, while its costs for carrying sports networks have increased 116 percent since 2008, according to spokesman Bobby Amirshahi."

While it's true many cable operators (especially smaller ones) are finding TV profit margins tightening, there's a few problems with cable operators' faultless narrative. One, many companies like Comcast/NBC Universal are also broadcasters and -- like Time Warner Cable -- own the regional sports networks contributing to higher costs. More importantly, it's worth noticing that many of these cable operators -- the same ones breathlessly pretending to be consumers' friends on the issue of soaring programming rates and retransmission disputes -- are busy raising rates on most of their non-TV-related services as well.

For example, Time Warner Cable's going to be ringing in 2016 by jacking up the cost of cable modem rentals from $8 to $10 a month (if you're still renting a modem, do yourself a favor and buy your own). DirecTV's jacking up the cost of the company's "TV fee," which the provider's website (seriously) claims is a monthly equipment fee that "allows us to keep our monthly fees low." Most providers are also jacking up the rental costs of set top boxes, and even the fees charged to pay your bills in person or over the phone. That's before you even get to the relentless pursuit of usage caps and overage fees.

And to tie these new year rate hikes off with a bow, most providers insist on insulting their customers' intelligence by claiming these increases are about improving the customer "experience," ignoring most of these companies rank lower in customer service and satisfaction than any other U.S. industry or company. In other words, the cable and broadband industry plans to respond to a banner year for cord cutting by pouring gasoline on a house fire, highlighting why they're absolutely begging for a disruptive ass kicking in the new year.

Thank you for reading this Techdirt post. With so many things competing for everyone’s attention these days, we really appreciate you giving us your time. We work hard every day to put quality content out there for our community.

Techdirt is one of the few remaining truly independent media outlets. We do not have a giant corporation behind us, and we rely heavily on our community to support us, in an age when advertisers are increasingly uninterested in sponsoring small, independent sites — especially a site like ours that is unwilling to pull punches in its reporting and analysis.

While other websites have resorted to paywalls, registration requirements, and increasingly annoying/intrusive advertising, we have always kept Techdirt open and available to anyone. But in order to continue doing so, we need your support. We offer a variety of ways for our readers to support us, from direct donations to special subscriptions and cool merchandise — and every little bit helps. Thank you.

–The Techdirt Team

Filed Under: broadband, cable, cord cutting, price increase, tv
Companies: at&t, comcast, directv, dish, time warner cable, verizon

39 Comments

If you liked this post, you may also be interested in...

Reader Comments

Subscribe: RSS

View by: Time | Thread

That One Guy (profile), 30 Dec 2015 @ 4:49am

When all you have is a rate hike...
Every problem looks like an excuse to raise prices.

If I wasn't enjoying the schadenfreude so much I'd almost feel sorry for them. So used to raising prices any time they want to boost profits, any exec brave enough to suggest maybe dropping rates for once in order to make sure that they have customers past the next few years would probably soon find themselves given the boot.

With no-one willing or able to face the unpleasant truth that there's actual competition in the market and it's only going to get worse(for them), it's only a matter of time until they have no choice but to admit it, and once it reaches that point it will be far too late.
[ link to this | view in chronology ]
- Anonymous Coward, 30 Dec 2015 @ 6:40am
  
  Re: When all you have is a rate hike...
  Just watch, data caps will come down and overage charges go up as cord cutting goes up. When you control both cable and broadband services, you can increase your income from one faster than the income from the other goes down.
  [ link to this | view in chronology ]
  - Anonymous Coward, 30 Dec 2015 @ 10:21am
    
    Re: Re: When all you have is a rate hike...
    That plan is brilliant as drinking antifreeze. You know what would happen? Over the next twenty years or so Google will clean house. I have Google back home and I use 7+ TB per month with no issues. You know why? Data transfer is dirt cheap.
    
    ISP's buy their data by transfer rate not volume. If they buy 1MBPS for $1 they get the max 324GB over 30 days.
    
    If they insist on keeping caps that's fine, but it's their funeral. Death by attrition is a pathetic uneventful way to go, but don't expect any sympathy from me. Nope not when the cause is greed.
    [ link to this | view in chronology ]
- Jeremy Lyman (profile), 30 Dec 2015 @ 11:41am
  
  Re: When all you have is a rate hike...
  Makes me think running the "Marshmallow Test" on them would be interesting.
  
  Tester: You can eat this Cookie now if you want, but I'll give you two cookies if you wait 15 minutes.
  Cable Exec: I understand; I choose two now and two later.
  Tester: No, you don- where did you get that bag of Marshmallows?
  Cable Exec: It was in the lab next door. So where's my three cookies?
  Tester: Next door? That's where we're testing the streaming video execs. And what are you talking about THREE cookies?
  Cable Exec: Four now... chop chop, time's a wastin'.
  Tester: Hey! Give back my watch!
  [ link to this | view in chronology ]
- Andy, 30 Dec 2015 @ 1:09pm
  
  Re: When all you have is a rate hike...
  Next year is the year of the popcorn what with Trump running for president and possibly getting the white house and cable collapsing and being unable to pay there massive overheads. We could be in for a very interesting time overall as long as you do not have massive investments in cable that is.
  [ link to this | view in chronology ]
Berenerd (profile), 30 Dec 2015 @ 6:34am

You know, I think we have the cable industry all mixed up, or atleast their motivations. Maybe they actually WANT cord cutters. Maybe they want people to go forward with their innovation without them.

Ok, maybe they are just dumb....
[ link to this | view in chronology ]
- Designerfx (profile), 30 Dec 2015 @ 9:50am
  
  Re:
  I think they want to force cord cutting, because every savvy consumer is going to change their plan come January.
  
  I held off on the HBO bundle with comcast for a few months because HBO's product wasn't out yet, but now that it is I'm cord cutting comcast in January myself.
  [ link to this | view in chronology ]
Glenn, 30 Dec 2015 @ 6:41am

Not to "worry" ...their price hikes for Internet service will more than make up for their "losses" with TV. If they can't screw you one way, then they'll screw you another; but rest assured, screw you they will.
[ link to this | view in chronology ]
- Andy, 30 Dec 2015 @ 1:17pm
  
  Re:
  Then everyone moves to a smaller isp that grows and challenges the big boys, seen it happen many times all over the industry and this will be a time where a small isp will have the opportunity to completely destroy the big boys, yes there are not many options in some areas but there are more and more isps starting to grow very fast, damn i remember working for an isp that was making massive profits and the customer base was increasing by almost 30% a month yes a month at one stage.We could not grow our network fast enough and when we got new fibre we sold it out almost immediately, but with Google able to supply really fast connections in any area if they wanted they could help the smaller isps and destroy the cable companies completely over a very short time period.
  All an is has to do is provide 24mb speeds for most people they can upgrade later and they could take every single cable subscriber at less than 10% of the price they are paying for cable right now.
  [ link to this | view in chronology ]
- Anonymous Coward, 30 Dec 2015 @ 3:00pm
  
  Re:
  Just like the banks who aren't that worried about people not being able to afford home loans in the future. The banks now can control your education debt that can never be wiped out unless you pay up, even dying won't help you get out of paying, which is far better terms for the banks than home loans.
  [ link to this | view in chronology ]
Peter (profile), 30 Dec 2015 @ 6:48am

Quality reduction and price hikes - not the first dying industry wheeling in the accountants to rescue the bottom line, won't be the last either. Don't think the approach has saved a company that missed the train when the business model started to become obsolete, though.
[ link to this | view in chronology ]
Avatar28 (profile), 30 Dec 2015 @ 6:50am

Not that it in any way excuses the prices and rate hikes but I would like the point out that the broadcast transmission fees are paid out to the local tv stations (which more often than not are locally owned) and NOT to the network. So even though they own NBC, Comcast isn't charging the broadcast fee and then paying it to itself.

All that said, Comcast can't go suck an egg. Google will be here soon and I can't wait.
[ link to this | view in chronology ]
Anonymous Coward, 30 Dec 2015 @ 6:55am

$10 a month to rent a modem that used to be included? That's absurd. This seems like it would affect the poor and the elderly the most who might now have the time or the knowledge of how to buy and setup their own modem.
[ link to this | view in chronology ]
- Ninja (profile), 30 Dec 2015 @ 7:11am
  
  Re:
  We moved the other way here. I used to pay a rent for the modems but it's been a while now I haven't heard of such fees. The moment one of them started absorbing the costs the rest followed suit. Granted I live in a well served place. On less fortunate areas they still don't charge for the modem but I've seen they charge 10 to 50 times more for each mbit (when they offer more than 1 mbit of course).
  [ link to this | view in chronology ]
- Berenerd (profile), 30 Dec 2015 @ 9:02am
  
  Re:
  When I was on Charter, I bought my own modem but Charter changed my rental fee to "Modem configuration" fee. Same price and it appeared when I gave them their modem back. When asked, it was because they have to monitor my modem on their system to make sure it wasn't hacked.
  [ link to this | view in chronology ]
- Very Anonymous Coward, 30 Dec 2015 @ 10:52am
  
  Re:
  Yep. I gave my dad a christmas present of his own modem and we went down to comcast together to run their ancient outdated one that they were charging 10$ a month for.
  [ link to this | view in chronology ]
- Anonymous Coward, 30 Dec 2015 @ 1:00pm
  
  Re:
  Hey don't worry... Verizon will SELL you THEIR router REQUIRED for THEIR service for just the low low price of $149... if you hurry and sign up for a 2-year contract now!
  [ link to this | view in chronology ]
Ninja (profile), 30 Dec 2015 @ 7:08am

"Cable and satellite companies say the higher prices cover some but not all of the higher programming costs. The amount that Time Warner Cable pays local broadcast channels has risen 85 percent in the past two years, while its costs for carrying sports networks have increased 116 percent since 2008, according to spokesman Bobby Amirshahi."

It seems to me it is a failed business model when prices tend downwards overall and you are not only the few sectors displaying increase in costs and everything else AND at the same time your customers are leaving. Time to jump boat, no? Or, God forbid, adapt and evolve.
[ link to this | view in chronology ]
Anonymous Coward, 30 Dec 2015 @ 7:30am

I think TD's view on this is a little backwards.
Rate hikes can be used to push people off of deprecated services, so that the carrier can decommission old equipment. The idea that this isn't completely planned would seem a bit of a shill.

Hulu is a subsidiary of Comcast. Probably they are metering rate hikes against edge hosting rollouts for Hulu. (a subsidiary of Comcast) They want to ditch the old hardware but want to retain customers at the same time. (Zero rating)

I imagine the whole plan is on a whiskey stained spread sheet under a cocaine dusted mirror somewhere in Philadelphia. Periodically VP's crawl in on hands and knees to look at it, and retreat quickly before drawing any attention.
[ link to this | view in chronology ]
- Anonymous Coward, 30 Dec 2015 @ 8:54am
  
  Re: I think TD's view on this is a little backwards.
  Rate hikes is a sign, but of what is difficult to say.
  
  It is somewhat unlikely that they want to go all in on Hulu taking over since their revenue is about 1 billion per year, while their owners revenues are about: Comcast (68 billions), Disney (50 billions) and FOX (30 billions). That is a drop in the sea!
  Netflix with their 5.5 billions are already well ahead in that market and HBO has a well-established online presence too.
  
  Comcast is the only company with a real straw in both boxes (And they suck hard in both, ay?). The rest are looking at a darker economic transition. Particularly FOX needs to move off their burning platform.
  [ link to this | view in chronology ]
  - Anonymous Coward, 3 Jan 2016 @ 7:15am
    
    Re: Re: I think TD's view on this is a little backwards.
    Re: "Comcast is the only company with a real straw in both boxes."
    
    AT&T is trying to buy DirecTV presumably for their content management. So this seems to be the desired architecture for companies with frat house business practices. It is of course, bad for consumers at every level.
    
    But cord cutting itself isn't a sign of anything more than a technology migration. I find the number of articles balley-hooing this as a loose for Comcast strange. I don't want Comcast too loose, I want them to stop violating the right of their customers to communicate and trade freely without interference.
    
    Their history as a broadcast company has slanted their network architecture at every level, and it is why everybody hates them. It is like subscribing to a telecom carrier that is run by a nosy mother in law. Just drop the pipe off, and GO AWAY! We aren't interested in being a captured audience. Stop screwing around with the data of the citizenry without their knowledge or consent.
    
    The only way forward is to separate the carriers from the content providers. PERIOD. These guys need to get broken up. And there is only one candidate talking about anti-trust activities.
    [ link to this | view in chronology ]
Ryunosuke, 30 Dec 2015 @ 8:19am

until we get rid of the root of the problem, which is the duopoly/monopoly crap, things won't change.
[ link to this | view in chronology ]
Capt ICE Enforcer, 30 Dec 2015 @ 8:22am

Shocked
I am still amazed at how these companies are hated more than the big banks which took people's homes.
[ link to this | view in chronology ]
- That One Guy (profile), 30 Dec 2015 @ 8:38am
  
  Re: Shocked
  A matter of numbers I imagine. The number of people that lost their homes thanks to corrupt and/or incompetent banks is small, whereas the number of people that have to deal with pathetic or worse 'customer service' from cables companies is much larger.
  
  The first group may have caused more harm to those impacted, but the latter has the numbers, so that they impact significantly more people, even if not nearly to the same extent.
  [ link to this | view in chronology ]
- Anonymous Coward, 30 Dec 2015 @ 9:14am
  
  Re: Shocked
  Because the big banks aren't outright thieves.
  
  Just frauds and charlatans.
  [ link to this | view in chronology ]
  - klaus (profile), 31 Dec 2015 @ 6:39am
    
    Re: Re: Shocked
    I think of them more as cretins playing with complicated and powerful instruments, well beyond their ken, regulated by third-rate wannabees...
    [ link to this | view in chronology ]
- Anonymous Coward, 30 Dec 2015 @ 2:54pm
  
  Re: Shocked
  The big banks may have agreed to an ARM loan on their homes, but those people knew they were taking a risk with an adjustable rate mortgage. If they didn't their mortgage broker (not necessarily the bank) would share their blame/negligence. The cable/internet company is just bending everyone over...
  [ link to this | view in chronology ]
- WalliParnell, 4 Jan 2016 @ 8:07pm
  
  Re: Shocked
  Monopoly laws not being enforced, banks still screwing Americans why?
  Their supporters, Vote, while the majority don't.
  Ha...choosing to voting is power in your life, stupid fools
  [ link to this | view in chronology ]
Anonymous Coward, 30 Dec 2015 @ 10:46am

I cut the cord earlier this year. The kids have whined a little about wanting "TV" back. Recently, we stayed in a hotel with cable. Before the end of the first day, they asked if I'd go get a Chromecast to plug in.
In just a short time, they got used to watching what they want when they want NOT what was on when it was on.
These kids will grow up and be on their own have to decide between $10/mo box rental without programming or $10/mo subscription with on-demand entertainment included. Good luck selling cable with that model.
[ link to this | view in chronology ]
Cynyr (profile), 30 Dec 2015 @ 1:36pm

Cord Cutting
I'd happily "cut the cord", however my only options for internet here in a first tier suburb of Minneapolis, MN are 1.5mbps DSL service from century link, or 50mbps service from Comcast; you guess which one I have. So the cheapest way to get 50mbps internet from comcast is by bundling it with basic cable. The cable box has been sitting off for the last few months; the chromecast and PS4 have been doing the heavy lifting of showing moving pictures on the "TV".

As soon as I can get gigabit internet only service from someone I'll be dropping the comcast account all together, but until then i guess i look like someone still interested in pay TV.
[ link to this | view in chronology ]
- Vladlagg (profile), 31 Dec 2015 @ 10:55pm
  
  Re: Cord Cutting
  Depends on the burb, but I just got 190 from Comcast in St Anthony Park for 59.99 but I had to sign a contract. Try going to a Comcast office and getting a better deal. Still wish St Paul didn't just enter a new franchise agreement with CC through 2025 though.
  Hell, US internet has 2.5 and 5 gig now in some neighborhoods in the west metro. Good luck man.
  [ link to this | view in chronology ]
Anonymous Coward, 30 Dec 2015 @ 7:15pm

Sounds like the dying gasps of the middle class. With only wealthy subscribers using their products of course they will have to raise their rates.
[ link to this | view in chronology ]
Moon Ahmed, 30 Dec 2015 @ 9:06pm

Google Fiber
Comcast is pure feces...our government is corrupt when they decide to fight for the people instead of the arrogant and greedy "capitalist" companies we will have fair market competition and decent pricing.
[ link to this | view in chronology ]
Kal Zekdor (profile), 31 Dec 2015 @ 9:43pm

Sinking ship.
I'm starting to think these companies know that they're on a sinking ship. If you accept that cord cutting is inevitable, their behavior does make a perverse kind of sense.

Assumptions:

1. Over the next decade or so, all media consumption will be done over IP streaming. No one will continue to pay for cable.
2. Fiber to the home will become the standard method of connectivity for urban/suburban population centers, making the cable infrastructure meaningless.

Analysis:

1. Assumption 1 indicates that a primary revenue source will dry up, regardless of their actions.
2. Assumptions 1 and 2 together mean that a large amount of capital infrastructure is about to become worthless.
3. Because of point 2, if they wish to continue to compete (long-term) in the ISP market, they'll need to procure a huge amount of capital expenditures.
4. Because of point 1, they will not be able to rely on their other service to fund the necessary infrastructure changes.

Conclusion:
In order to remain competitive long term, these companies need to spend a large amount on infrastructure. Even if they do so, however, there is no guarantee that a suitable RoI will follow. Competitors such as Google Fiber make the market uncertain.

However, there previous capital expenditures have not yet been completely devalued. By gradually raising prices and cutting costs, they can drain every last cent from the business before it inevitably goes under. By taking the funds wrung from the dying business and investing it in a different market, they can get a better return than if they had tried to pivot their business.
[ link to this | view in chronology ]
Scott Gilbert, 4 Jan 2016 @ 12:16pm

cord cutting
For just about forever, the attitude of cable companies towards their subscribers has been: Send us your money, and then go eff yourself. Over the last few years, people have been saying, no, eff YOU and cut the cable. Now it seems, since the cable companies have been losing customers at higher numbers than they thought, they have to make up their high profits on fewer subscribers, and to them, the companies say, you thought we were effing you before... Now we're REALLY going to eff you....
[ link to this | view in chronology ]
Michael, 4 Jan 2016 @ 1:56pm

Seems they are trying the US Postal model
Hey cable and satellite companies, remember when the post office was huge and ever time a little business moved off to digital they raised the price of stamps and bulk rate? Remember how with each price hike you saw a huge drop in volume as people stopped mailing?

This is the same thing they are cutting their won throats to make a little more today rather than protect long term success. Now is the time to lower prices not raise them. Now is the time to break up the forced package deals and let us buy Ala cart. It may not protect them forever but the lower resistance you create to make it easier to stay, the longer buyers will stay. The hard and more costly you make it, you create reasons for people to leave.
[ link to this | view in chronology ]
Richard, 4 Jan 2016 @ 3:23pm

Set top boxes
There is a large fee for not returning a set top box.
Even if you have the box 5-10 years. No depreciation discount. Really inconsiderate. And you've been renting it all those years.
[ link to this | view in chronology ]
d, 4 Jan 2016 @ 10:30pm

I haven't had cable for years. A good TV antenna (Terk tall rabbit ears) I get probably 40 stations. Monthly cost = $0.00 every month.
[ link to this | view in chronology ]
Cpl Langlois, 9 Feb 2016 @ 6:03pm

Monopolistic extortionist mob style tactics
I am extremely displeased with all cable companies. The price of generating or re-transmitting a signal is absolutely miniscule when compared to the insane prices that customers are charged for cable or satellite service. My particular nightmare of an experience is with comcast. They've taken to abusing the Armed Forces somehow. When I was stationed in the barracks in Joint-Base Lewis, McChord, a joint Army-Air Force Base, somehow the only cable that we were allowed to have was Comcast. We had to pay them to show up and install the device in the first place. And they dont set specific appointments, they give you a 24-hour window of when they 'might' show up. Hello, its the freaking Army! I cant gurantee that I'll be patiently waiting in the barracks for your lazy technicians to come and charge me for something that I could honestly do myself. And then they charge $90 a month. That was the only package that the Army would let us choose in the barracks room. I dont know what kind of backroom deal was reached between the Department of Defense and the Federal Communications Commission, but soldiers and airmen should get infinite free cable. Not like they have time to use it much anyway. But the worst thing about it is the billing. they force you to enroll in automatic billing. Theres no option to pay manually. But somehow, they'll for get to debit your account like 4 months in a row. So if youre not closely monitoring your funds, then you'll end up spending that money, and when they do, they take like $400 dollars all at once, leaving your account negative. Now I had Bank of America at the time, and I was a private, making crap pay. So by the time I got paid again, I had like $20 since the overdraft fees are $35 every 4 days. But I contacted Comcast and let them know what happened to see if they could refund part of it so I could live, and they pretty much gave me the whole "I understand but I cant help you" crap. Terrible customer service. Cable is an absolute rip-off, and no one should subscribe to it.
[ link to this | view in chronology ]