Post Media Consolidation Why Is America Overpaying for Cable?

Cable costs are out of control. Over the last six years, consumers’ cable bills have increased by a whopping 40 percent.

Let’s break down some of the contributing factors that lead to skyrocketing cable bills:

Misleading Advertising Promotions

The actual cost that a consumer will pay for cable is ultimately much higher than what providers advertise. Cable companies may advertise an attractive price, but after the promotional period is over, the consumer is likely to start receiving drastically higher bills. For instance, Comcast advertises a $49.99 package, which jumps to at least $69 a month within 12 months. The price continues to climb after that, leading to a long-term monthly cost of cable of $106 a month — over double what cable providers advertise in their promotional packages.

Also, consumers are likely to be unaware that the total cost includes many hidden fees which are not disclosed in their advertisements. These fees are later tacked onto the user’s monthly bill. Many of these below-the-line fees also have misleading names such as “FCC Regulatory Fee” and “Regulatory Recovery Fee.” These titles give the impression that these charges are imposed directly on consumers by regulatory agencies. In reality, providers typically pass along the fees that they are required to pay directly to consumers, while pretending that they are some kind of end-user tax. In any case, these fees are in addition to what the consumer expects to pay based on the advertised price.

Other surprising fees might include a “Broadcast TV Fee” or a “Regional Sports Fee.” Cable companies use these terms to recoup costs associated with the provider’s carriage contracts or costs they themselves have incurred in generated programming.

Cable companies simply do not need to add these charges. Government-imposed fees on providers as well as content costs are real costs, but so are rent and payroll. Imagine if you went to a store and the price that rung up on the register was 30 percent higher than the price tag because of some “rent surcharge” or a “health and safety compliance recovery fee.” Such a behavior would plainly be deceptive. Yet similar practices are routine for cable providers.

Lack of Competition

Ultimately, the reason cable companies are able to overcharge consumers and continuously increase their fees is due to a lack of competition. Research has shown that cable providers overcharge by over 20 percent in areas where there is no competition. Currently, there are a handful of cable providers that overwhelmingly dominate the market. In many locations, large cable providers face no meaningful competition or no competition at all, so consumers have no choice in which provider they use. By tying cable TV to broadband, these providers are also able to reduce the threat of competition from satellite TV online video providers. And the lack of meaningful competition gives the dominant cable providers the ability to overcharge consumers, even as they lose customers.

At Public Knowledge, we are fighting for more competition in a cable market that currently deprives consumers of choices and allows providers to overcharge them. Help us spread the word! Share our graphic on social media, tell us your true cable costs, and continue to follow us for updates as we work to ensure policymakers are supporting a fair and competitive marketplace.

Cable bill image credit: Flickr user sfxeric

About Meredith Whipple

Meredith is the Digital Content Manager at Public Knowledge, where she focuses on writing and communications for the organization. Meredith has an extensive background in internet policy, including previously holding positions at the Center for Democracy and Technology, Hewlett-Packard, Consumers Union, the Berkman Center for Internet and Society, and the Federal Communications Commission. Meredith earned her Master's degree in Public Affairs from the LBJ School of Public Affairs at the University of Texas in Austin, and her Bachelor's degrees in Communications and Political Science from the Ohio State University in Columbus. In her free time Meredith is active in performing arts in DC.