The Washington Post Thinks Overpaying For Broadband Bundles Is A Hoot
from the you're-really-not-helping dept
Apparently, you don't actually hate overpaying for cable, broadband and phone service. At least that's the takeaway from this bizarre editorial over at the Washington Post by columnist Megan McArdle. In it, McArdle ineffectively argues that while the rise in streaming video competition is great and all, over-paying your regional telecom monopoly is something we all secretly love.
The odd part is there's nothing in the piece that actually supports that argument, outside of logically-flimsy comparisons between telecom services and the crappy, free shampoo you get at hotels:
"When you book a hotel, you expect “complimentary” mattresses, sheets and towels, rather than renting each individually. When you go to a restaurant, you don’t pay extra to enjoy the use of a plate. And you get very testy indeed upon discovering that your bargain airline charges you to choose a seat or bring luggage. Bundling, it turns out, is valuable."
So one, "hotels are really nice to not charge you to rent sheets" isn't really an argument, it's just words kind of stapled together. Including some crap shampoo the company pays a pittance for in bulk isn't a "bundle," and it's not remotely comparable to the telecom and TV sectors, where consumers are often punished with higher prices when they try to buy standalone broadband and avoid services they don't want and may not be able to afford. Yet the Post rushes forward with that comparison undaunted:
"Bundling is especially valuable in businesses where fixed costs account for a disproportionate share of the total price. Once you’ve gone to the monstrous expense of building and staffing a hotel, providing extra amenities generates little additional cost while adding a great deal of value for the customer. And the same is true of cable. Much of the expense comes from laying and maintaining a wire to your house; adding another channel is relatively cheap."
That's misleading. In the States, Americans pay more than a long-list of developed nations for broadband and TV service. The cost of deployment was covered by rates and taxpayers decades ago (and covered, and covered) in most areas, and while there's certainly costs to maintain and support that infrastructure, profit margins on broadband (and phone service in particular) are arguably stellar. Phone service in the IP era in particular costs a pittance to provide, but prices for all three bundled services are artificially high thanks to limited competition in broadband and regulatory capture. Realities all ignored by the Post:
"Right now, cable companies sell you phone, Internet service and entertainment products, all of which share one wire, one maintenance operation and one customer service staff. Without those other services, the Internet division would have to cover all that overhead. So if you pay less for the entertainment, you’re probably going to have to pay more for connectivity."
Again, that's simply a bogus argument. TV profit margins are certainly getting squeezed as streaming erodes TV market share (which is why some smaller cable companies are considering only selling broadband), but broadband and phone revenues are as fat as they come. Just because an AT&T or Comcast customer decides to cut the cable cord doesn't mean the company has to charge you more money for other services. They charge you more money (usually in the form of usage caps and overage fees) because there's limited competition and they all but own many state and federal lawmakers.
From there, the piece settles into the lazy, trendy media hot take that cord cutting doesn't save you money anyway:
"Start adding up the cost of the subscriptions you’d need to replicate your current viewing habits, and you’ll quickly see that it looks...surprisingly like a cable bill."
We've noted time and time again how that claim ("when you sign up for every single streaming service you pay a lot of money!") doesn't hold water, and if you spend more than twenty seconds with real consumers they'll consistently tell you that cord cutting saves them plenty each and every month. All told, trying to argue that consumers really secretly love overpaying mammoth telecom and media monopolies is just a bizarre hill to die on, especially with so many other pressing issues of the day worth opining on.
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Filed Under: broadband, bundles, megan mcardle, monopolies, monopoly rent
Reader Comments
The First Word
“What she doesn't say in her argument...
If a hotel started charging like that, we would go to the one down the street. Good luck with that kind of choice with cable/internet.Subscribe: RSS
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The Airline Experience
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Better Analogy
So does her SO work for Big Cable or did they just make a generous donation to her bank account?
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Exactly. One wire. Three separate bills for services which are now all digital.
I'm sure she'll follow up with an article to boast why people love paying for HDTV "upgrades" in their cable package, never mind this is now a standard resolution.
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straw man argument
Straw man argument. She specifically says add up "the cost of the subscriptions you’d need to *replicate your current viewing habits*," not every single streaming service. Some users definitely save by cord cutting, but it doesn't take more than two or three streaming services on top of a decent broadband connection to start to approach cable prices, particularly if you are bundling phone. Don't undermine the reality that cord cutting does save money for a lot of people by making an argument similar to the one your trying to debunk--cord cutting doesn't save money for everyone.
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My last cable/phone/internet bill was $180.37
My current bill:
PS Vue TV: $44.99/mo
Verizon FioS 100/100 service: $39.99/mo
VOIP.ms Phone Service: ~ $2.80/mo
Total monthly cost: $87.88
Total monthly savings: $92.49
Upfront costs
Linksys VOIP adapter: $28.00
Roku Premiere+: $49.99
Roku Streaming Stick+: $49.99
Total upfront costs: $127.98
Time to break even on upfront expenses: 42 days.
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Sometimes you're ripped off at a hotel. We should be grateful for these filthy matresses they tossed on the floor, because the Internet is hooked up to a big OLED TV?
Quality in some parts of a contract deal does not mean you get more value. You're still getting the crappy parts with the good. The only question is if whether or not you'll put up with finding another (probably smaller) hotel [ISP] no one's heard of or just deal with the rotten parts of the one you already chose... if you can in your area, that is.
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The may want to replace her
She writes mostly about economics, finance and government policy from a libertarian perspective.
If this was written from a libertarian perspective, that specific person has never heard other libertarians speak. If she honestly wrote this piece and it wasn't ghostwritten by Comcast or another large ISP, she needs help.
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Both WP and TD are missing the point
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Comcast:
125/25 - $79.99
That is also with all my own equipment. That is for upgraded speeds but I would much rather have 100/100.
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Re: Both WP and TD are missing the point
https://www.techdirt.com/search-g.php?q=competition
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Those things are not free, what a fool.
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What she doesn't say in her argument...
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"Why, they even give you free tap water!"
If she thinks those things are complementary, rather than simply part of what you pay for, I have to wonder exactly what does she think she's paying for, and what does she think she's getting for free in that situation?
Based upon that 'complementary' line it's as though she's saying that booking a room at a hotel is booking only the ability to use the room, with everything that's in it a generous extra offered by the hotel.
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Re: straw man argument
// She specifically says add up "the cost of the subscriptions you’d need to replicate your current viewing habits," not every single streaming service.
I'd love to meet the person who watches all 500 channels at once, 24x7x365. I don't believe they exist to "replicate your current viewing habits." Most people I know watch one or two channels occasionally, and despite having cable still pay for Netflix, Hulu, etc.
And I am not sure where you are getting your costs from. I pay $99/mo for 300/30 plus $40/mo for slingtv (I get Netflix for free...thanks T-Mobile.) I have everything I want. I paid $230/mo when I had cable. Let me do the math...nope, your wrong.
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"Bundling"
Karl, you keep mentioning shampoo in the hotel rooms, but none of what you quote says anything about that--and the one time I've stayed in a Motel 6, they didn't provide any. But the other examples she gives (mattress, sheets, plates, etc.) are not "bundles", but essential to the use of the product being purchased. What's the general purpose of a hotel room? A place to sleep for the night (and even if sleeping, as such, isn't in the plans, use of the bed is). But IP data service isn't a necessary component of TV or phone service, and TV and phone services certainly aren't necessary to providing IP data service.
However, the writer makes a good point that the marginal cost to the broadband companies is minimal, especially for phone service. That still doesn't explain why my Internet service is $100/mo cheaper when bundled with phone service than it is without it. That is, my monthly bill for Internet + phone is $100 less than it would be for Internet only. So, I'm signed up for their phone service, I have their box hooked up burning a few watts, and I have three phone numbers that I don't know what they are. And somehow that costs them less?
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Re: "Bundling"
So, I'm signed up for their phone service, I have their box hooked up burning a few watts, and I have three phone numbers that I don't know what they are. And somehow that costs them less?
Best I can figure the purpose behind making internet and cable cheaper than just internet is so that the number of cable subscribers don't plummet even faster, which would show just how little people actually cared about the cable half, potentially causing problems to the cable company.
How many other companies like advertisers are going to want to spend a ton of money on a service that they know people are fleeing in droves? Better for the cable company to present at least the appearance that people are still happy to pay for cable.
An unintentional side-effect from that 'cheaper for both than just one' 'deal' is that it shows how much they are overcharging. If they can add a service, making the price cheaper and still make a good profit from both then it's pretty clear the costs/gains equation is heavily weighted to the profit side, significantly outweighing any costs they have to deal with to offer the services.
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Put an OTA antenna up and bought a firestick and installed Kodi. Firestick 35$ Antenna 50$ onetime purchase. Kodi 0$ for firestick and my PC.
Internet just went up from 44.99 to 64.99 ( cheapest alternative is 80$ at half the speed and data cap at 1TB ). So instead of 180.00 per month I pay ~65$ per month and watch what I want when I want. No extras I never watch at bundle pricing.
Gotten to the point I just use OTA for local news and weather. Everything else is thru Kodi.
Probably eventually need to get a VPN so even at the high end that's ~ 15$ per month. That's ~ half of what I was paying.
I'd like to see the math where I am losing money/value by cord cutting.
DISCLAIMER: The use of Kodi is legal. The use of some add ons to get content that usually is paid for is questionable.
I am advocating neither.
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Re: straw man argument
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I think you’re forgetting all the hidden fees that cable companies tend to include.
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Re: straw man argument
Which, inevitably, will be completely different for each individual, which is the point. Also, having the choice makes people re-evaluate those habits. Do you actually want to pay service X just for that one show, or can you do without? Do you watch enough sport to keep ESPN? Most people will find they will happily not bother with some things if there's a new monthly charge - and the new streaming services they subscribe to will offer new content they're not currently getting on top.
Will the old way still be better for some people? Sure. Will the old, one size fits all, hundreds of channels you never watch to get the ones you do approach be the best for most people? Almost certainly not.
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Erm, that's not bundling, that's the provider supplying a service in a usable state. Yes, I'd be rather annoyed if the service provider didn't provide a service that could be used at the basic price point. On the other hand, if all you want is an internet connection, the extra TV channels are needless waste and I'd rather not be charged for things I don't want to use.
"your bargain airline charges you to choose a seat or bring luggage"
Did the US somehow miss out on this kind of thing? The author should try flying Ryanair.
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Re: straw man argument
Your argument is invalid.
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Wow, "TripMN", you're WAY ACTIVE after 2 years 10 months DEAD!
Resurrecting from 2015 seems to be new pattern. My guess is because BARELY credible -- and the Zombie Master doesn't have any better ones to trot out.
OR, the stench of DYING Techdirt IS attracting the undead!
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Re: Wow, "TripMN", you're WAY ACTIVE after 2 years 10 months DEAD!
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Bundling, it turns out, is valuable
Hotels and restaurants do not provide these things as part of their service because they are so concerned about adding value to their service. They do so because they operate in a competitive market and if they don't do so their customers will go find someone who does.
And as for the other example mentioned, I don't even know where to begin. Airlines operate in a less competitive market (though still much more competitive than ISPs) and we've been able to watch as that bundling has disappeared over time. Far from being unique to bargain airlines, baggage fees now exist at nearly every US-based airline (Southwest, a traditionally discount airline, being the major exception). I don't know what argument they were even trying to make by bringing airlines into this, but the level of cognitive dissonance needed to claim that airlines support bundling is staggering.
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Current bill... $95 + Netflix and Hulu for Centurylink nearly symmetrical gig service.
I put on 5 lbs just hitting food carts on my walks in the neighborhood with the extra cash.
Ban Cord Cutting! it contributes to obesity!
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Of course, some people do want those things in their hotels, and that's fine. I'm not opposed to the existence of bundling; what I'm opposed to is a market where the Ritz is the only choice for where to stay.
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Re: Better Analogy
Either that or move.
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Re: Both WP and TD are missing the point
Yeah, by my count, TD pointed it out as a problem only three times in this one article.
Heh. :)
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At a reputable paper, even?
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Re: Wow, "TripMN", you're WAY ACTIVE after 2 years 10 months DEAD!
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Re: The may want to replace her
I'm dead serious here. I've seen real conservatives and libertarians arguing essentially this. Just read what some conservatives wrote about Hobby Lobby, and how the rights of the corporation should override the rights of the individual.
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Re: Re: Better Analogy
No, what would actually happen, in an actual freely competitive market would be to either A) go to the next town over to eat, or B) open an eatery with better service and food.
However, with last mile monopoly franchise agreements with the incumbent telecoms as the actual reality in most of the US, neither A nor B are possible.
Historically, there are valid reasons for utility monopolies, but those are highly regulated industries with price controls & subsidies for rural power where the populations are insufficient to financially support the infrastructure.
For those that don't know, the original reason for selling franchises for public utilities and rights-of-way is so we don't end up like this
The half assed way the governments in the US have tried to regulate modern telecommunications services as if we're still in the dawn of the telegraph and telephone era is making things far worse. Either designate them as utilities and regulate them properly like they're the power company (to avoid that nightmarish set of pictures above), or drop the regulations from the national all the way to last mile and make them truly competitive for both customers and infrastructure. You can't have it both ways. Hint: only one of those two will actually work, and it isn't the latter one.
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Trolling on a professional level
Well WaPo has taken this to a new level. You have to pay to view their website now (I think you get one or two freebies, then it's paywall). This article is clearly going to incense a lot of people. And those angry people? They're going to want to go all YouTube-Comments on WaPo's ass. But first, they have to pay for the privilege.
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Re: Re: straw man argument
If you bought everything on the buffet at a la carte prices it'd cost more than the buffet fee. Yeah, true enough, but I also can't eat everything on the buffet in a single meal. Why would I even try replicating a service that is excessive?
Subscribe to a service and consume what you want, then subscribe to another one with different offerings. It's like people can't understand NOT paying a subscription every month for the rest of your life.
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Re: Re: Re: straw man argument
That is pretty much what I do anyway. A la carte prices work well for sling...where I don't pay for ESPN because I really have no interest in it. I wish sling would go even further in saying you register for free, add the channels you want, and pay for just those channels (at the price those channels ask for.) I like paying $15 a month for HBO. When I originally subscribed, I figured "I'll drop it when there is nothing on it to watch." I have yet to drop it. HBO must have figured it out, because they keep everything on their channel/on-demand that people will watch, and with Last Week Tonight and the other content they have been paying for, I've had a hard time dropping it. On sling, there may be three or four more channels I am watching, but other than that, most of the 45 channels they offer to me are wasted.
Of course, that is the problem. If sling offered true "a la carte", most of the 45 channels would disappear since they are supported by those channels that people do watch.
That is exactly and precisely the problem with cable. I don't want to pay $230/mo to support stuff that I have no interest in watching. If EWTN or ESPN or the Food Network can't survive on their own, then maybe they need to look at their market and either close up or figure out a way to be relevant.
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Re: Re: Re: Better Analogy
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Re: Re: Re: Better Analogy
They have an irrational fear of the free market because they are ignorant and have been successfully indoctrinated into socialist/communist ideas.
They don't understand that their calls for regulation is what created their "no choice" situation right now. Yes it would be nice to avoid having rats nest wiring all over the place, but there are solutions to that as well without creating monopolies.
The folks here just lack the intellectual capacity to understand that, making it very easy for politicians to fool them into voting for them with empty promises and lies to save them from big bad business boogeymen.
TLDR
Regulation implicitly "created" the monopolies everyone was afraid a "free market" would "potentially" create and resulted in them running into danger on the road they took to escape it!
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Re: Re: The may want to replace her
So yeah, theory and reality hardly ever meet.
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That "one wire" is meaningless... there are multiple services & devices that this "one wire" connects to. You are obtusely ignoring all of the infrastructure and effort in place to get that one wire to function!
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Re: Re: "Bundling"
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Re: Re: Re: The may want to replace her
Here is a link, maybe you can pay me or the owners of the internet for helping educate you properly.
https://www.merriam-webster.com/dictionary/corporation
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Re: Re: Re: Re: Better Analogy
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LOGISTICALLY
ALL of us would have to move 200+ miles to get ANY other service...Better or worse, than what we have..
When 1 corp has control of ALL, Cable/TV/SAT/PHONE/CALL/INTERNET...The LAST mile...(its not really a mile, its a WHOLE STATE)
What choices do we have..
ITS AN OLD PROBLEM..And abit stupid..As all the hardware is There, all the poles are on the streets, All the underground is Located.. AND?? there is only minor repairs needed(unless you are in Cali, and it takes 2 weeks to get s service call)
ALL they want is to collect your bill payments..
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Re: Wow, "TripMN", you're WAY ACTIVE after 2 years 10 months DEAD!
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Re: Wow, "TripMN", you're WAY ACTIVE after 2 years 10 months DEAD!
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Of course, Verizon and Comcast will probably jack their rates even higher as more people do the same thing....you know, instead of just reducing their outrageous "triple play" rates.
Seriously, if Verizon and Comcast just sold their triple play packages for $100/mo and didn't have the absurd box rentals and other BS fees they wouldn't have to worry about this.
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Re: Re:
CBS online? Nope, I get CBS with PS Vue.
Hulu? Nope, I already get all the networks with PS Vue.
Netflix? I was already paying for that with cable.
Amazon? I have had Prime for years and never watch video.
I can't even think of another streaming service, let alone one I need to pay for!
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Re: Re: Re:
Essentially, that seems to be one of the arguments from the content providers. You can't possibly be happy with one or 2 streaming services, you must have to subscribe to a whole host of them in order to replicate the content you have access to with a full cable package, and this saves you zero money!
As is often the case, the argument falls apart when faced with how things operate in the real world, where people either choose one or two services they're happy with and stick with those, or rotate as they find the content stale.
BTW - there's a *lot* of streaming services you're not thinking of, but many of them are geared toward niche tastes.
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Re: Trolling on a professional level
Admittedly I don't think I've tried to read any that were more than about a year or two old (at the time), but that's still a pretty big window when talking about news.
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Re: Re: Re: Re: The may want to replace her
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Price of Crude in <$1 per gallon and can make 100 times that amount, making it in the Pennies..
Add to this that in the Cracking process, you make other materials that can sell into the $ per oz..
The Avg cash return is over 100 to 1.
OLd days Each corp ran their own ships, back and forth..NOW 1-2 corps GATHER the oil and bring it up to the coast, and then SELL OFF the oil to other companies..Which increases the prices and costs..
The Companies sell the FUEL for about $0.50 per gallon, then there is taxes, then ?? (OH! YA, I forgot) we are paying the gov for a WAR..Oops...4 wars..and we borrowed money from CHINA..
Why are we fighting Civil wars in other countries??
I know..
WE Are developing areas to Build Manufacturing in the future..so we can Pollute MORE AREAS around the world..
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