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Why Your Phone, Cable & Internet Bills Cost So Much

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The U.S. has fallen behind much of the Western world when it comes to phone, cable and Internet service. Americans actually pay much more for inferior service compared to their global counterparts.

In his new book, The Fine Print: How Big Companies Use 'Plain English' to Rob You Blind, Pulitzer Prize-winning reporter David Cay Johnston highlights these astounding facts:

  • Americans pay four times as much as the French for an Internet triple-play package—phone, cable TV and Internet—at an average of $160 per month versus $38 per month.
  • The French get global free calling and worldwide live television. Their Internet is also 10 times faster at downloading information and 20 times faster uploading it.
  • America has gone from #1 in Internet speed (when we invented it) to 29th in the world and falling.
  • Bulgaria is among the countries with faster Internet service.
  • Americans pay 38 times as much as the Japanese for Internet data.

Since the mid-1970's when Ma Bell was cited as holding a monopoly over phone service, Americans have been told more competition would lower their phone bill. But the promise of lower prices has actually led to higher prices, says Johnston.

In his book, he tells of a woman who in 1984 paid $9.51 for her local phone service. He writes:

"By 2003 her bill had swollen fourfold to $38.90. In the two decades since the breakup of the AT&T monopoly, even after adjusting for inflation, [her] telephone cost $2.30 for each dollar paid in 1984. And that was without any charges for long-distance calls."

Not only have prices increased, phone service providers now charge fees for everything, including options that used to be free, such as directory service. Bills have also become increasingly complicated. A poll of 1,000 people found that only three people actually knew how to read their statement. That means virtually no one understands their phone bill in its entirety.

Of cable service Johnston writes:

"Since 1995, average cable prices have been rising 2.6 times faster than the cost of living, reaching an average of almost $53 a month for basic, no frill service in 2009, FCC reports show....

According to SNL Kagan, a market research firm, the average cable bill in 2011 was $78, almost double the price of $40 in 2001 and significantly higher than the FCC figure.

How did this happen?

"The telecos got the rules changed while we weren't watching," says Johnston in the accompanying interview. Basically, the phone and cable companies lobbied Washington to change laws and regulations to favor their business over their customers.

And remember the so-called "Information Superhighway"?

Over the course of the last 20 years, nearly $500 billion has been collected by the telecom companies to (allegedly) bring America into the 21st century with an "Information Superhighway," says Johnston. That works out ot $3,000 per household to have access to high-speed Internet.

But America did not get what it was promised and much of the country will never get fiber optic lines, Johnston tells The Daily Ticker. And even in cities that do have the faster service, the service is not always accessible.

"This is terrible for commerce and our economic future," says Johnston, adding that our global competitors are investing in the proper infrastructure.

"The companies essentially have a business model that is antithetical to economic growth," he says. "Profits go up if they can provide slow Internet at super high prices."

The relationship between phone and cable providers has essentially become a cartel, says Johnston, who cites the relationship between Verizon and Comcast.

He writes:

Verizon announced in 2008 that it would stop building out its FiOS (fiber-optic system) once it reaches about 16 million of America's 100 million households....

Instead, it has made deals with Comcast to sell its services using Comcast cables. Verizon said it anticipates similar deals with other cable providers to sell of their systems.

In terms of phone service, what America really got was a duopoly, says Johnston, noting that AT&T and Verizon control 60% of phone service in America.

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