A Blog by Jonathan Low

 

Oct 5, 2019

Report: Cable Companies Hidden Fees Raise Prices 24 Percent Monthly

Cable cutting has been rampant anyway, but this explains some of the economic basis for consumers' seeking alternative channels for entertainment. JL

Jon Brodkin reports in ars technica:

A Consumer Reports analysis of cable bills found that companies add $37.11 per month in fees to the average bill, raising consumers' actual costs way above the advertised prices. The $37.11 "in fees created by the cable industry" add 24% to the average base price of $156.71 a month. That doesn't include another $13.28 in government-related taxes and fees, which raise prices even higher.
A Consumer Reports analysis of cable bills found that companies add $37.11 per month in fees to the average bill, raising consumers' actual costs way above the advertised prices. The $37.11 "in fees created by the cable industry" add 24% to the average base price of $156.71 a month, Consumer Reports said. That doesn't include another $13.28 in government-related taxes and fees, which raise prices even higher.
"With the proliferation of add-on fees, it's nearly impossible for consumers to find out the full cost of a cable package before they get locked into a contract—and cable companies count on this," Consumer Reports Senior Policy Counsel Jonathan Schwantes said.
Consumer Reports analyzed 787 cable bills from 13 companies for a report released today. Nearly all 787 bills included TV service, while at least 426 of them included Internet service, and at least 282 included phone service, Consumer Reports told Ars. Some of the bills listed the services only as "double-play" or "triple-play," so it wasn't always clear which services were included. The bills were collected from 787 volunteers between June and August 2018.
The average base price was $156.71 a month, but the actual price consumers paid was $217.42. The data includes bills from Comcast, Charter, Cox, Altice USA (Optimum), Frontier, RCN, Verizon FiOS, AT&T U-Verse, SuddenLink, WOW, Service Electric, Grande Communications, and ImOn.


Chart from Consumer Reports study on cable prices.
Enlarge / Chart from Consumer Reports study on cable prices.
Consumer Reports
The amount added to the base price includes the previously mentioned $37.11 in company-imposed fees, $13.28 in government fees and taxes, $9.15 for premium services, and $1.17 in "miscellaneous" fees. The premium services are things that customers intentionally buy, like HBO or Showtime, so Consumer Reports said it doesn't object to those being charged separately.
The other fees are what concerns Consumer Reports. Making government-imposed fees and taxes a separate line item helps companies advertise prices much lower than the ones consumers will actually pay. Here's what Consumer Reports said about that:
The 1992 Cable Act allows cable companies to separately itemize government taxes and regulatory fees and pass them on to consumers. Examples include federal, state and local sales taxes, local franchise fees, and other regulatory fees (e.g. Universal Service Fund fees, E-911 support fees, and PEG channel fees). A worthy distinction can be made between taxes, like sales taxes, that the provider is effectively collecting on behalf of the government, and other fees that are best characterized as "regulatory pass-through fees." The latter are typically being charged to the cable providers, who are then choosing to pass those fees on to consumers. The practice, though legal, is somewhat akin to asking consumers to pay the company's corporate taxes. But at least these fees are a definable cost that can be verified, unlike company-imposed fees.

“Misleadingly named” fees

Most concerning of all are the company-imposed fees. These fees do not include taxes, regulatory-pass-through fees, or optional charges for premium services. That $37.11 per month adds up to an estimated $28 billion in revenue each year "in fees created by the cable industry," Consumer Reports said.
Some of the $37.11 in company-imposed fees are impossible for customers to avoid without canceling or downgrading service. Those include broadcast TV fees, regional sports fees, HD technology fees, "Internet service-related fees" that "cable companies claim support the upkeep of a provider's broadband Internet network," and administrative and "convenience" fees. These fees cover many of the cable providers' standard costs of doing business, and not including them in advertised prices misleads consumers about the true price of service.
The $37.11 in company-imposed fees also includes rental charges for set-top boxes, modems, and routers. Consumers can often avoid these by purchasing their own equipment, but that's not always the case. Frontier is charging $10 a month in a router rental fee even when customers use their own routers, for example."These confusing, often misleadingly named charges continue to drive up consumer bills, even if you lock in a promotional rate," Schwantes said.
Consumer Reports acknowledged that cable companies have been hit with rapidly rising retransmission fees charged by broadcasters and urged Congress to overhaul the retransmission consent system to lower prices. Broadcasters collected $10.1 billion in retransmission fees from TV providers in 2018, even though broadcast stations are freely available to consumers with over-the-air antennas. But cable companies could choose to include the broadcast TV fee in their advertised prices or at least make the fees more prominent so as not to mislead customers.
The average amount of company-imposed fees "ranged from $22.96 for AT&T U-verse and $31.28 for Charter, to $39.59 for Comcast, $40.16 for Cox, and $43.79 for Verizon FiOS," Consumer Reports wrote. However, the group said these averages "reflect a snapshot of the marketplace in 2018" and aren't meant for comparison purposes.

Secret shoppers get inaccurate pricing info

Consumer Reports contacted cable companies about the add-on fees. "Comcast and other companies we contacted all said that the fees help them pay for their own increasing costs for providing content," the group's report said. "But that doesn't explain why they don't present the full price for service in the promotional materials consumers rely on for choosing a provider and a plan."
It also doesn't explain why cable companies often give customers inaccurate information about the add-on fees. Consumer Reports did a "secret shopper" investigation with people, calling 74 customer service reps at Comcast, Charter, DirecTV, Frontier, and Verizon while posing as potential new customers.
"At least one CSR [customer service rep] of every major provider that our secret shoppers contacted misstated that fees were mandated by the government, without a clear distinction made between company-imposed fees and regulatory pass-through fees," the report said.
Half of the customer reps "acknowledged that additional fees would apply to the base price," but "only 18 specifically cited the Broadcast TV Fee or Regional Sports Fee."
"Though some CSRs offered our shoppers accurate information about company-imposed fees, the majority did not, and many calls resulted with incomplete and/or inaccurate information offered to would-be customers," Consumer Reports found.
Consumer Reports is pushing for regulatory changes to address the problem, saying that Congress should approve the TRUE Fees Act (Truth-In-Billing, Remedies, and User Empowerment over Fees). The bill, introduced by US Rep. Anna Eshoo (D-Calif.) and Sen. Ed Markey (D-Mass.), would require telecom companies to include all charges in their advertised prices and let consumers opt out of contracts without paying termination fees when prices are increased.
Consumer Reports also urged the Federal Communications Commission to require more accurate advertised prices and urged state attorneys general to file more lawsuits against cable TV companies that mislead consumers about prices.

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