[telecom] Price-gouging cable companies are our latter-day robber barons

Price-gouging cable companies are our latter-day robber barons

Monopolistic cable providers make internet access an unaffordable luxury for tens of millions of Americans

Heidi Moore guardian.co.uk

4 June 2013

Last year, about 1% of American households cut off their internet service. That's not as surprising as experts may suggest.

The internet - which promised to connect all Americans with everything from educational opportunities to Facebook status updates

- has become, unfortunately, a luxury even for the middle class. Cable companies that have functioned as oligopolies have made it that way.

Naturally, more Americans would cut off internet service considering how absurdly expensive it has become to pay to stay connected. The median income for a household in the United States is just over $50,000, which has to support a family with basics like food, mortgage or rent, a car and gas. Inflation has steadily driven up the price of food and gas, which has meant that American wages have actually dropped since the recession. School costs, healthcare and other costs mean many families depend on credit cards on occasion. That doesn't leave a lot of room for splashy purchases.

Yet, strangely, internet access - which is a necessity in homes where children get their homework online and parents may telecommute - has become the splashiest purchase of all. In many big cities, internet access can easily become a budgetary sinkhole for families. Think of $100 a month for cable and internet, another $50 a month for a smartphone, $40 a month for an iPad or a similar device; if you travel, add $70 a month for some kind of wireless hotspot like Verizon's Mi-Fi.


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***** Moderator's Note *****

Wow: I thought I was the only one who noticed. It's nice to see that the Guardian is still allowed to point out the obvious: this reminds me of when I was a teenager, and how I used to listen to the BBC shortwave broadcast to get the news.

Of course, this begs the question of just how obvious the U.S. economic debacle is to the rest of the world.

Bill Horne Moderator

Reply to
Monty Solomon
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Most of these are not even remotely necessary. You can do totally do without "an iPad or a similar device" (I do), and while I don't travel as much as expense-account journos do, I have never had the need for a portable wireless hotspot. (If I did, I would turn on that function in my smartphone, which costs closer to $80 a month for a relatively minimal but unlimited-data postpaid plan.) I have cable, but television is not by any means a necessity of life.


Reply to
Garrett Wollman

RE: Price-gouging cable companies are our latter-day robber barons [telecom]

Service cell towers? 97% profit? Wow ... the industry sure has changed since I was a cable guy!

If a cable company is indeed making 97% profit, that implies that the other 3% covers all other costs. Little things as payroll, employee benefits, programming fees, retransmission-consent fees, internet connection charges, administrative overhead, advertising, customer care, customer billing, maintenance, public relations, government relations, insurance, legal services, rent and lease expense, utilities, vehicle expense, franchise acquisition and compliance, franchise fees, copyright royalties, FCC registration and compliance, operation and maintenance of video-signal reception and processing facilities ("headend"), operation and maintenance of cable modem termination system, distribution and maintenance of video converters, distribution and maintenance of cable modems, outdoor distribution facilities ("outside plant") extending from the headend to every customer's premises, utility-pole attachment fees ("pole rental") for aerial outside plant, contractor-hotline ("one-call") notification services for underground outside plant, verification of the technical integrity of internal wiring inside customer premises (even though the company may not own it), access control (accurately connecting each subscriber), detecting and prosecuting unauthorized connections.

And yes, "servicing cell towers." Many cable companies rent tower space to PCS carriers, so obviously they have to maintain them. But does the writer actually believe that cable companies use cell towers to distribute their signals?

Neal McLain Retired Cable Guy

Reply to
Neal McLain

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If you read Susan Crawford's "Captive Audicence" you'll see she lays out what it really costs the providers to provide the service. For net service it's not ever 3% of what they charge you. So they could essentially charge you $10 a month for good net service and still make a profit.

And I'm hoping Google eventually wires up the entire U.S. It would put a shot across the bow of the likes of Verizon, at&t, Cox, Comcast et al. I mean, you've got options with Google like pay a $300 construction charge and get 3mbps/1mpbs service in perpetuity. Or pay for higher bandwidth.

But it would FORCE in my case Verizon and Cox to play nicely.

Reply to

So what does Google actually charge per month for an internet connection? Since I don't live in the KC area, there's no way I can "pick a plan" from their website.

I've heard that Google also offers a cable-TV like television service. What does that cost per month?

Neal McLain

Reply to
Neal McLain

Huh? Gigabit + TV $120/mo $300 waived construction fee Gigabit Internet $70/mo $300 waived construction fee Free Internet $0/mo $300 construction fee (one time or $25/mo for 12 mo) . Free internet is: Up to 5Mbps download, 1Mbps upload speed No data caps Free service guaranteed for at least 7 years

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Reply to

That's interesting! I'm currently paying $70 per month for 6Mbps DSL. I wonder how the cost of providing the service costs out. What was total construction cost? What percentage "penetration" is achieved (how many people subscribe)? What is upstream cost? What is maintenance cost? What is ROI? Is this a good business investment? Can others do it?


Reply to
Harold Hallikainen

Interesting indeed.

I suspect there's a minimum contract period for customers that sign up for a package that waives the $300 construction fee.

Back in my cable TV days, we charged an "install charge," with no specified contract term. But marketing people were continually coming up with "free install" sales promotions, so the de-facto install charge was essentially zero.

Every September, when 10,000 or so college students returned from summer vacations, we'd have to do hundreds of installs in a week. But students rarely stayed in the same place more than a year. I never thought that selling cable TV to college students was much of a money- maker, but under the terms of our franchise with the city, we were required to do it. Students not only got free installs, they were continually tampering with our facilities, often paid their bills late, and sometimes skipped town without paying the final bill.

A $300 "construction fee," with a minimum contract period of one year, would certainly have put a stop that that kind of nonsense.

Neal McLain

Reply to
Neal McLain

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