Behind these duplicitous tactics lies the urgent need to increase revenues as cord-cutting reduces pay television subscriptions. JL
Patrick Thomas and Lillian Rizzo report in the Wall Street Journal:
Cable and telecom companies are leaning heavily on their broadband businesses to propel growth as demand for pay TV subscriptions declines. They are using a range of tactics to shift consumers onto faster, premium speed tiers. That means boosting speeds free temporarily, then raising fees later. Consumers say that when they call to complain about their bill, the provider assuages them by offering a higher speed at a promotional rate that gives way to a higher price. Speed upgrades compound an experience customers say is confusing already. Cable TV cord-cutters pay more for stand-alone connections that aren’t bundled with television.
Melissa Shank and her fiancé moved into their apartment in late 2016 and bought a $90-a-month cable and internet package.
Two years later, the couple noticed their bill had spiked to $121. When they complained to their provider, Comcast Corp. , they were told their speed had been boosted from 75 megabits per second to 150 Mbps, without their requesting it.
There was no additional cost at first, but price increases eventually kicked in after promotions and discounts ran out. “It just doesn’t seem appropriate,” said Ms. Shank, who lives in Lock Haven, Pa. “I wouldn’t be surprised if they purposely make the billing messy.”
Cable and telecom companies like Comcast, Charter Communications Inc. and AT&T Inc. are leaning heavily on their broadband businesses to propel growth as demand for pay TV subscriptions declines.
They are using a range of tactics to shift consumers onto faster, premium speed tiers. In some cases, that means boosting speeds free temporarily, then raising fees later. Some consumers say that when they call to complain about their bill, the provider assuages them by offering a higher speed at a promotional rate that eventually gives way to a higher price.
Major internet service providers including Comcast, Charter and AT&T say they do offer complimentary speed upgrades to customers, and disclose that in emails or on a user’s bill. They say any fee increases down the road are unrelated to those higher-speed packages and simply reflect normal pricing changes.
The companies say consumers are demanding faster speeds to stream more high-resolution video and use more devices in their home networks. “To meet this increasing demand for data, Comcast has made many investments in its network and products and has increased speeds 17 times in 18 years,” a Comcast spokeswoman said.
An AT&T spokesman said the company often offers “speed upgrades as a ‘thank you’ to loyal customers at no additional cost.” The company occasionally raises rates, but “that applies to every customer in a particular pricing tier,” the spokesman said.
Ben Kurland, co-founder of the company BillFixers, which haggles with providers for lower bill prices on behalf of their customers, said while many consumers actively seek upgrades to higher speed tiers, many are moved up unwittingly. His firm reviews tens of thousands of cable and internet bills a year and runs into such issues regularly.
“They’ll say, OK, we will do a free speed upgrade, and then 12 months later they’ll say that speed upgrade was at a promotional price and now you are in the upgraded speed-tier price,” he said.
Nearly 61% of U.S. households had speed packages of at least 100 megabits per second as of December 2018, according to research firm Kagan. Providers are pushing even faster speeds like 150 or 250 Mbps, or 1 gigabit (1000 megabit per second) connections for power users.
But typical households that stream services like Netflix or YouTube use only a fraction of the bandwidth they are paying for, according to a study by The Wall Street Journal and researchers at Princeton University and the University of Chicago. For such households, the benefits of a speed above the 100 Mbps range are marginal, the researchers found.
Speeds of 100 Mbps aren’t available everywhere. Many Americans in rural areas don’t even have access to 25 Mbps connections, according to data from the Federal Communications Commission and Microsoft Corp. , one reason Democratic presidential candidate Elizabeth Warren is calling for an $85 billion investment in public broadband.
Comcast internet customer Brian Goldsack, a Scranton, Pa., resident, said he and his wife switched from Verizon Fios to Comcast in 2017, signing up with a promotional offer. A year later, the promotion ran out and the price rose. Mr. Goldsack called to negotiate a better deal and was told he could upgrade to a higher speed, 250 Mbps, for a new promotional discount. Though that price was higher than what he was paying earlier, it seemed like a better return for his money.
“If I’m going to pay more money, I might as well get a faster internet speed,” Mr. Goldsack reasoned. He said he didn’t notice any difference in his internet performance with the new speed.
It is getting harder for customers to find cheaper, lower-tier speed plans. Gerald McAlister, a Charter customer who lives in central Massachusetts, says he used to pay about $45 for 30 Mbps download speeds about six years ago. Charter recently boosted his speed to 100 Mbps free of charge. But when his promotional rate expires, his bill will rise to $65.99 a month.“I don’t do anything that really requires more than 25 [Mbps]” Mr. McAlister said, adding that he would like to pay less for a slower speed, but Charter doesn’t offer such an option in his area.
Charter, which operates the Spectrum brand, has steadily increased its entry-level internet download speeds, according to securities filings. The entry level is now 100 Mbps in many markets, even 200 Mbps in some areas.
Television typically generates the most revenue, for cable companies, but as more consumers cut TV cords, internet service is growing faster and is on track to become the top source of revenue. It also generates higher profit margins than TV, the companies’ financial results show.
“It’s a 100% profit if you can upsell people to a higher speed tier,” said Sascha Meinrath, a professor of telecommunications at Pennsylvania State University. “It’s a huge moneymaker for these companies.” Aqib Shaz and his family, Chicago residents, have been Comcast internet and cable customers for more than a decade. For years, when he lived with his parents, their internet speeds increased without the family requesting upgrades, and their bills crept up over time, he says. He moved into his own place in 2017 and signed up for a 75 Mbps Comcast connection. He was upgraded multiple times, without asking, most recently in July 2018 to 250 Mbps. Mr. Shaz is now on a two-year promotional deal that keeps his price flat until the offer expires.
I’ve never asked to increase the speed of my internet,” the 30-year-old Mr. Shaz said. He said he noticed no change in speed and quality after the speed upgrades, and primarily uses the internet to stream content and browse the internet.
Speed upgrades compound an experience many frustrated broadband customers say is confusing already. Discounts can be difficult to keep track of. A bill can include $10 modem fees, Wi-Fi fees and “network enhancement” fees. Cable TV cord-cutters often pay more for stand-alone connections that aren’t bundled with television.
Altice USA Inc., the cable and broadband provider, recently started marketing a “Price for Life” option for new customers. The deal includes a 200 Mbps internet connection and cable TV for $64.99 a month in perpetuity, although taxes and extra fees could still increase.
Pricing for broadband service varies drastically across providers and geographies. But in general, internet customers are paying more. Average monthly spending on internet bills in the U.S. was $66.24 last year, up 64% from 2010, according to annual surveys by industry tracker Leichtman Research Group. Some 59% of U.S. broadband subscribers don’t know what internet speed they are paying for, according to Leichtman.
In their marketing, providers say faster speeds can improve users’ streaming or gaming experience. A recent Comcast digital ad proclaimed, “Fast speeds for all your shows.”
When consumers experience internet glitches such as stalled connections during streaming, they could be from factors unrelated to the speed tier they purchased from an internet-service provider, networking experts say. Internet data travels over a number of potential chokepoints before it gets to customers
and users’ devices—phones, smart TVs, laptops—are another key variable.
In some instances, a customer’s router may not be able to handle the higher speeds being sold to them, said Harold Feld, a senior vice president at Public Knowledge, a nonprofit that advocates affordable internet access.
Providers are required by law to disclose accurate information regarding their network management practices, performance characteristics and commercial terms to allow consumers to make informed decisions.
But these regulations can be hard to enforce. Demonstrating wrongdoing requires showing that a provider’s marketing claims would deceive a typical consumer. “The FCC does not require much of anything from providers in the way of disclosures,” Mr. Feld said.
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