10 Things Cable Companies Won't Say

SmartMoney

1. "Deregulation is a joke -- but it's probably not as funny for you."

For years the cable business had acted like a typical monopoly, providing less than ideal customer service, skyrocketing prices, and little choice of service. Then along came the Telecommunications Act of 1996, which opened the door for competition and promised weary cable customers relief at last. Too bad that relief never came. Nearly four years after the bill was passed, a mere 286 of the 30,000 U.S. cable markets were being served by more than one provider, according to the Federal Communications Commission. And in the FCC's most recent report, in 2005, not much had changed; only 294 out of about 33,000 U.S. cable markets were served by more than one provider -- meaning that for all the effort to create change, few customers today are being served by the smaller providers that generally offer better deals.

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The lucky few who live in markets with more than one cable company to choose from pay about 17 percent less than those in single-provider markets, according to the FCC. "The Telecom Act was meant to generate more competition, resulting in lower prices for cable TV customers," says David Butler, formerly of the Consumers Union, a Washington, D.C., consumer-watchdog group. "We have seen just the opposite -- more mergers, less competition, and rising prices for customers."

Meanwhile, the only real alternative to cable -- satellite television -- has its own issues. While subscribers have been lured with the promise of competitive prices and more programming, about 8 percent of satellite customers still subscribe to cable television, since most satellite services cannot carry local broadcasters' signals, which cover events like city council meetings and high school football games. And satellite service delivers only one channel to a household at any given time -- unless users purchase an extra settop box for each TV, which may cost up to $69 apiece.

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2. "We raise prices recklessly..."

Perhaps you've accepted the fact that cable prices move in only one direction -- up. But what's really shocking is how quickly they rise. The average price increase for cable service in 2005, the most recent year for which data is available, was more than 5 percent, and from 1995 to 2005, cable rates nearly doubled, according to the FCC.

Will things get better? Not likely. The cable industry has been undertaking a massive upgrade of existing wiring in order to beef up its offerings of services like high-speed Internet access and local phone service -- all of which will cost you. "The cable industry is constantly updating its infrastructure to provide consumers with better service," says Brian Dietz, vice president of communications at the National Cable & Telecommunications Association, and the increase in prices is designed to help cover those costs.

3. "...and manipulate the dial."

Even as prices increase, it seems that the programming choices cable companies offer are somehow more limited. With the most popular channels intentionally divided into different tiers, consumers often must buy several packages of programming to get all the channels they want, says Mark Cooper, director of research for the Consumer Federation of America. "They're not giving consumers the full à la carte choice," Cooper says.

Cable companies that also own a lot of programming -- like Time Warner, which owns HBO, CNN, and TNT among other channels -- especially benefit from these package deals. "Only a portion of subscribers are going to watch, say, ESPN," says Chris Murray, senior counsel at Consumers Union. "Meanwhile, ESPN gets paid a certain amount for every subscriber, so the customer ends up subsidizing content he doesn't watch," Murray says. A spokesperson for Time Warner Cable says, "The tiers of channels are determined ultimately by viewer popularity, and we offer tiers that we feel will satisfy customers."

4. "Bundling your services can end up costing you more."

Increasingly, consumers are getting bundled telephone, cable television, and high-speed Internet service from one provider for an average price of $100 per month. Sounds like a great deal, especially when it can shave hundreds off the amount of money spent on telecom and TV per year. But it doesn't make sense for everyone, says John Breyault, research director for the nonprofit Telecommunications Research and Action Center in Washington, D.C. "Most bundled packages are based on an all-you-can-eat model," he says, adding that the majority include unlimited local and long-distance calling, for example, which some customers won't use. "Many consumers will find that they're able to save money by buying services individually that more closely meet their needs."

Another thing about these cablephone- Internet bundles, also known as "triple play" packages, is that they can be complicated and sometimes misleading -- especially when they're advertised through special promotions. For starters, it's important to know when the offered deal expires. Time Warner, for example, offers New York City residents a triple-play package for $89.95 per month. But after the first 12 months, the monthly fee jumps to $114.95 -- something you wouldn't notice unless you did some digging. (A spokesperson for Time Warner Cable says, "It's a promotional deal. We want you to try our service because we believe in it. To get you to try it, we offer a discounted price, and later, the real price.")

Fortunately, there are some good triple-play deals out there, which is why it pays to shop around. Packages vary from provider to provider, so Breyault recommends doing your homework to find the one that best fits your individual needs. In addition, pay careful attention to the fine print, which should spell out early-termination fees and any additional charges.

5. "We want to control the Internet the way we control your TV ."

In October 2007, an Associated Press test revealed that Comcast had deliberately blocked Internet users from sharing files online. In the AP test, computers that were connected to the Internet via Comcast cable modems would not let users send the King James Bible from one location in the U.S. to another using the file-sharing program BitTorrent; however, computers with other connections, including Time Warner Cable and Cablevision, had no problem sharing and uploading the text. (A Comcast spokesperson says that the company doesn't "block access to any websites or online applications, including peer-to-peer services like BitTorrent.")

Industry experts say that Comcast was blocking internal content because the BitTorrent application potentially competes with the company's video service. And there are fears it could be the start of a push by cable companies to control content on the Internet. "We hope we'll continue to have an open Internet," says Murray, of Consumers Union, "but the dinosaur seems to be gnashing its teeth and not wanting new technologies to thrive or survive."

6. "Our fiber-optic cables are a real eyesore."

Cable companies have invested over $110 billion in infrastructure, according to a spokesperson for the National Cable and Telecommunications Association. But in a move to install fiber-optic cable throughout cities, they're littering neighborhoods with ugly new power lines. Take San Leandro, Calif. Since the winter of 2007, Comcast and AT&T have been competitively racing to install fiberoptic lines there. The results: Black cables roughly 2 inches thick are hanging below utility and phone lines, which are much thinner and less obtrusive by design. In addition, the companies have tacked big black canisters onto telephone poles. "You know, when you walk through your home and find a spiderweb," says San Leandro councilwoman Joyce Starosciak, "that's what the cabling looks like -- thick black spiderwebs around your neighborhood."

Starosciak says the cables have a negative impact on the neighborhood and could potentially lower property values in the future. A spokesperson for Comcast says its cables, which have 190 different strands of fiber in each one, are the "standard" thickness for fiber-optic networks. AT&T says it's not aware of any complaints regarding aerial wires in that area and that there are several other providers included on those lines.

7. "We're so goo d at making excuses that we start to believe them ourselves."

Every year when cable prices go up, cable providers rush to justify their rate hikes. Programming costs have increased, they tell us. They're investing heavily in infrastructure to upgrade cable lines. And when all else fails, there's always inflation to blame. But these excuses are often false or vastly exaggerated, according to Murray. "If increased programming costs was the whole story, then cable companies should let TV viewers who want new programming buy it and pay for it, rather than having the programming fall on the backs of all consumers," he says.

Then there's high-speed Internet. After years of investing in infrastructure, cable companies are justifying rate hikes by saying they're providing a menu of consumer-friendly applications and rolling out higher bandwidth that increases speed. At Cox Communications, for example, they're offering customers "faster speeds, greater online security and enhanced features to make their lives easier," says a company spokesperson. "We're continually looking at new features requested by our customers, including larger mailboxes, more online storage and applications like Cox Rhapsody music."

The cable companies "are telling Wall Street that high-speed Internet is the most profitable part of the bundle," Murray says. "And they're telling consumers that costs are going up. They can't have it both ways." But some companies say that's not true. Cablevision, for one, denies price increases on its Internet service: "For all of our customers, high-speed Internet cost has declined, and speed has increased," says a Cablevision spokesperson.

8. "We can't handle customer service."

After the FCC insisted in the mid-1990s that the cable industry do something about its dismal customer service, companies began promising such things as on-time installation and service calls. The move was so revolutionary that the National Cable Television Association, the industry's trade group, trumpeted it as "one of the most comprehensive customer-service programs offered by any industry."

Just don't mention that to Ray Lucas. Lucas, who works for a computer-services company in Gaithersburg, Md., called customer service because his Comcast cable Internet access had mysteriously stopped working. During the month-long ordeal of getting his service restored, Lucas says he made at least 10 calls to customer service, often waiting nearly an hour on hold. And despite the fact that he was given a "referral number" designed to ensure that each new representative would have access to documentation of his previous calls, he says he still had to start at square one with each new customer-service rep. A spokesperson for Comcast says the company has "reduced the hold times since then."

Cable companies aspire to become one-stop communications providers, offering everything from cable TV to local phone service. But you might want to think twice about relying on an industry with such a dismal service record for all your telecom needs. "Consumers have much higher standards for phone service and Internet," says Ken McEldowney, executive director of Consumer Action. "Unless it's the Super Bowl, they're willing to tolerate outages for cable, but not for their phone or Internet. This makes them feel cut off from the rest of the world."

9. "We're going to pummel you with advertising."

For years cable companies have been boasting about all their cool hightech features: More high-definition programming, extensive On-Demand offerings, cable DVR that provides easy recording and even classified ads available on-screen. But beware. As you give your cable company more and more information about your viewing and shopping habits, it's going to become more and more likely to make you the target of advertisers.

Take real estate company Re/max International, for example. During a two-month campaign in 2007, the company used technology that tapped into data from cable set-top boxes to find out how many homeowners were watching home-improvement shows and to see what other cable channels those viewers were likely to watch. After finding that home-improvement enthusiasts were also inclined to watch auto-racing programming on Speed channel and the TNT series Without a Trace, the company promptly placed ads on those shows. Re/max International says the pilot program was conducted on a local scale but did not comment on whether it has plans to roll it out on a national level. "The digital revolution has a dark underbelly," warns Gene Kimmelman, vice president for federal and legal affairs at Consumers Union. "A lot of these bits include personal information about viewing habits and interests that are easily transformed into marketing materials. It's a whole new realm for blitzing the public with advertising." It will also help cable companies sell advertising time. "That's the biggest piece of revenue," says Josh Bernoff, vice president and principal analyst at Forrester Research.

10. "We promise more high-definition programming than we deliver."

The availability of high-definition television has been steadily growing: Today about 90 percent of U.S. homes can access HDTV via cable. Unfortunately, HDTV programming isn't keeping up. According to a recent Consumer Reports survey, 70 percent of cable and satellite subscribers said the availability of high-definition content was average or poor. Bottom line: Viewers aren't getting enough channels in high definition.

Some cable companies offer basic digital packages, for about $15 to $20 per month, which provide only the major broadcast networks in HD. Premium movie channels in high-definition can run the bill up by as much as $100 a month. Still, selection is limited: "Stations were slow to roll out HD content, cable operators have resisted carrying content, and now there's this complete mishmash of analog and HD," says Cooper, of the Consumer Federation of America. "Not everything is available in HD, and the consumer can't count on or find out what is or isn't. It's a complete mess."

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