Cable TV and internet customers will owe Comcast an extra $78 this year due to a price hike that went into effect this month. AT&T recently upped the price for its DirecTV satellite service, adding an additional $108 to customer bills.
Hulu just jacked up its price by $10 a month, although many of its customers are families who switched to the streaming service in order to cut the cord from high-priced cable TV companies. Other popular video-on-demand services like Netflix and Disney also will charge more this year.
The timing of the price increases couldn’t be worse for millions of Americans out of work, stuck at home and struggling to keep up with bills. But big media companies put the blame on the ever-rising cost of programming — most notably for broadcast TV and sports, which are the biggest factors driving the constant price hikes that get passed down to consumers.
“It’s always more than inflation. They do it every January, and there’s absolutely nothing we can do to stop this,” said Mark Cooper, director of research at the Consumer Federation of America (CFA) in Washington, D.C.
Price hikes for cable TV and internet service have practically become an annual tradition over the past two decades — about as certain as death and taxes.
The annual rate increase is part of an ongoing debate over competition and regulation in the cable/broadband business, and there will likely be more efforts to revisit the issue in the near future.
Biggest household utility bill
Households are paying through the nose in order to watch their favorite TV shows, and a recent report by DecisionData.org illustrates it with a sobering conclusion.
Using publicly available data from municipal utility providers and other sources, the home services comparison website found that the average household cable bill of $217 a month exceeds what families spend on most other utilities combined.
Cable bills stay relatively similar across household sizes, whether it’s one person living in a small apartment or a family of 10 living in a large house.
“It’s normal for the average consumer to look for ways to save money on things like their electric or water bills through conservation efforts,” the report said. “But what we still don’t hear discussed more frequently is how to cut costs on what is becoming every household’s biggest utility bill.
“It’s not as if cable is optional anymore, with having internet access at home being almost as important as electricity at this point.”
But who’s responsible for the out-of-control costs?
Cable companies point to rising fees they pay to carry TV networks. Networks like ABC, Disney and ESPN require cable and satellite TV and streaming services like Hulu to pay for the rights to carry their channels. The networks have their own rising costs, but they are willing to pay more for sports.
The big media companies that own the TV networks — like Warner Media, NBCUniversal, Viacom CBS and AT&T — also are faced with higher price tags for creating and producing content. The final season of HBO’s “Game of Thrones” cost parent company Warner Media $15 million per episode — in the neighborhood of a movie theater budget.
Jim Wilcox, an editor at Yonkers, New York-based Consumer Reports, said that when it comes to consumer choice, TV and internet are not in the same ballfields. While consumers have a lot of choice on how they get TV, there’s not a lot of choice on how they get online.
“Now people have dozens of choices that replicate what you used to get from a cable company and deliver it through the internet,” Wilcox said.
That doesn’t mean it’s easy. “Consumers have a lot of choice, but it can take a lot of work from them to put together a plan similar to what they used to get with a traditional paid TV cable package,” he said.
“Internet hikes are something we can’t control because there’s not a lot of choice among providers,” he said.
Neither competition nor regulation
Cooper at the CFA has been advocating for consumers against the telecom industry long enough to remember when Congress passed the Telecommunications Act of 1996, which allowed the industry to raise rates on customers with no oversight from government.
From February 1996 to December 2020, he said, the prices charged by cable companies have increased by 250%, which comes to 3.9% a year. The rate of inflation during that time frame was 2.2%.
“Consumers have only two possibilities for defending themselves against rate increases,” Cooper said. “Competition or regulation. Today we have neither of them.”
He said it’s important to stress that all cable companies deliver broadband, and more than half their income comes from broadband, which is astronomically profitable. Prices should be coming down, not going up.
He said cable companies are earning 80% before interest, taxes, depreciation and amortization. The average for U.S. firms is about 20%.
“That’s an enormously profitable service,” Cooper said. “It even beat Google and Facebook in terms of return. The reason they get away with this stuff is because there’s insufficient competition. They have market power and they abuse it.”
His organization is gearing up for another showdown on the issue.
“No doubt there will be a fierce debate among policymakers about how to fix it,” he said. “It will happen at the next Congress. People are angry about this.”
Change might be coming
And as cable costs climb, it has become more difficult to know how much the bill will actually be until it arrives because the advertised price hardly ever includes the laundry list of add-on fees that inflate the total price.
Change, at least on that last point, might be coming.
A law passed in 2019 — which went into effect this month — will usher in a new day for the telecom industry.
The Television Viewers Protection Act requires cable TV service providers to give customers an itemized breakdown of the extra fees and charges, as well as a good-faith estimate of the taxes that will be collected by the cable provider.
New customers will be able to cancel a cable contract within 24 hours, without any charge, under the act.
There is some relief for people who can’t pay their cable, phone or internet bills. The program offered through the Federal Communications Commission called Lifeline provides up to a $9.25 monthly discount on service for eligible low-income households, and some may qualify for a free phone as well.
The federal program helps ensure that low-income consumers can afford 21st-century broadband and stay connected to communications technology.