How Cable Companies Seek to Keep Their Customers in The Dark


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Promotional Pricing to Keep People Hooked on Cable TV

Cable operators "recognize that their most advantaged product is broadband," said Craig Moffett, analyst at Sanford C. Bernstein. "They don't want to sacrifice that advantage by giving the opportunity for customers to cherry pick their best product at a low price and take the rest of your services from somebody else. In effect, they are pricing the broadband at a price that discourages you from taking broadband only."

Comcast runs a promotion called "Blast Plus" which gives customers in certain markets the option to buy Internet service at a speed of 30 megabits per second and "digital economy" TV service, with broadcast networks and cable channels like CNN, Comedy Central and Disney, DIS +1.41%bundled together for $50 a month for the first six months. The same 30 mbps speed of Internet bought on its own, however, costs about $70 per month.

In a similar vein, Time Warner Cable Inc. TWC +0.12%offers 20 mbps "Turbo" Internet for about $45 a month—but for just $5 more, the New York-based cable operator throws in basic TV with broadcast channels and video on demand features. Verizon Communications' VZ +0.93%FiOS charges customers in the New York market about $80 for standalone 50 mbps Internet service, but adds in more than 290 TV channels for just $5 a month more...

On the face of it, such offers appear counter-intuitive. Cable executives and analysts say that about 90% of the money cable operators charge for broadband goes straight to gross profits, since there are minimal operational costs for providing Internet service.

In contrast, only about 35% to 40% of what they charge per TV customer goes to profits, largely because of the programming costs they pay to media companies for the right to carry hundreds of TV channels. In theory, a $70 broadband customer would make more money for a cable operator than a $50 TV and Internet customer.
Read More: Cord-Cutting: Cable's Offer You Can't Refuse -

90% margins? I wish I could get that for my products. Let's face it, traditional channel based cable TV is buggy whip technology. Digital broadcasting and internet streaming have made it obsolete. So, why on earth are cable companies trying to keep it alive? Because they can. In many areas they are the only viable internet provider, and if they can just keep people in the dark as far as their options are concerned (digital broadcast TV and internet streaming) they can continue to take advantage of them.


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Why Cable Deals Can't Stop Cord Cutting

At first I felt like an idiot when I read this. How had my math come out so differently where I would have been saving $195 per month if I went Internet only with Time Warner Cable?

Then I realized it wasn’t that my math was wrong, it’s that the WSJ article is only comparing prices during the cable company’s initial bargain rate time frame. All cable companies offer great bundling deals to new customers but those prices shoot way up after the six months are over.

The WSJ article acknowledges this but I think it takes a lot of the air out of their argument. Most consumers are savvy enough to cut their services back after the initial, cheap, offer ends. For someone who wants to cut the cord, especially a young person getting their first cable service after having Internet for free at school, those video channels are just a temporary bonus and they aren’t going to keep someone on a serious budget from going back to Internet only.

I’d say a more important bulwark against cord cutting is something like HBO Go. The pay TV service offers access to most of HBO’s excellent series and more movies than are on HBO on demand plus you can watch it anywhere. But (for now at least) the service is only available to people who subscribe to HBO through a cable or satellite company.

Economically, it still makes sense to go Internet only but not if you can’t get the shows you really want to see.
Read More: Cable Deals Won't Stop Cord Cutting - Forbes

$195 for HBO? Are you kidding me? Sure HBO may have a few good shows, but if you're paying close to $200 so you can have it, you simply have too much money to spend.
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