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Verizon’s ‘Custom TV’ Fixes Overpriced Channel Bundles — or Does It?

Rob Pegoraro
Contributing Editor
Yahoo Tech

Photo: Rob Pegoraro/Yahoo Tech

Over the weekend, Verizon rolled out a way to pay for TV that appears to break the channel-bundling model, which leads to people paying more than they should, for channels they don’t want.

With its new Custom TV, FiOS subscribers don’t have to pay for 200-plus channels when they’ll watch only 50. Instead, they start with a core set of a mere 45 channels, then add packs of channels that focus on interests such as sports or entertainment.

It’s how Dish Network’s Web-only Sling TV works, except that it costs more and includes local networks. And while it does not offer the à la carte pricing that we may get in the future, it is the most promising move from a pay-TV provider in a while.

Or is it? Let’s look at how this seemingly low-cost, human-friendly pricing model really works out.

Packing them in

Verizon’s Custom TV pricing starts at $54.99 a month for 45 channels — including the major networks, PBS, AMC, Food Network, and CNN, as well as such oddballs as the Liquidation Channel — and two of its seven add-on packs.

Each pack covers nine to 18 channels in a defined area. “Lifestyle” covers the likes of Lifetime, Bravo, and A&E. “Pop Culture” features MTV, E!, Comedy Central, and others. “Entertainment” includes USA, TNT, TBS, and more. The “Kids” menu includes Nickelodeon, Disney Channel, and Cartoon Network. “News & Info” delivers Fox News, MSNBC, Discovery, and others.

And “Sports” adds ESPN, ESPN2, Fox Sports 1, and NBC Sports, among others. If you choose that, you can also get “Sports Plus” for channels such as your regional sports network, MLB TV, and ESPN News.

Leaving ESPN out of the core package is a gutsy move. ESPN — by far the biggest single chunk in a cable bill — says its current agreement with Verizon requires that its flagship channel and ESPN2 not be relegated to a sports package. While we wait to see how these two media conglomerates might fight it out, pass the popcorn.

Calculating channel costs

Custom TV runs $20 a month less than Verizon’s cheapest traditional bundle, the $74.99 “Preferred HD,” with its 235-plus channels. By traditional pay-TV math, that makes Custom TV an awful deal.

But traditional pay-TV math pretends that we have an infinite amount of time to watch all that content — and that pay-TV onscreen interfaces and remote controls can manage it all.

Still, not everybody would save much under Custom TV. USA Today’s Jefferson Graham found that he’d trim only $6 off his $209 (!) monthly bill. Telecom analyst Roger Entner told me that he’d pay $10 or $15 more for the channels he currently gets as part of a $160-ish set of services.

But Custom TV isn’t mandatory, and neither is valuing all those optional packs of channels enough to put them on your bill. And subscribers who opt in and save money get the added satisfaction of not having to underwrite a business model that denies them choice.

Pay-TV firms — which resent seeing sports networks jack up their carriage costs every year but also keep setting up new regional sports networks — should welcome this, too. There are few simpler ways to bring price discipline to the market than giving people a vote about subsidizing the sports-industrial complex.

A flurry of fees

All this is of personal interest: I’ve paid Verizon for FiOS Internet since 2010, but I’ve yet to pay it for TV service. Why? Because its TV bundles cost too much for the little TV that my wife and I watch.

So I did the math to see what Custom TV might cost (leaving out, for now, the promotional discounts that come and go as you add or remove phone service or move to a faster FiOS connection).

The total to put Custom TV with Sports and Sports Plus on a single set with a DVR was not $54.99 but $85.82. That’s an $11.99 fee for the screen, plus $6 for DVR service (discounted from the usual $12), a $4.99 regional-sports-network fee, a $1.99 “TV Broadcast Fee,” and $5.86 in “Taxes, Fees and Other Verizon Charges.”

Were I terrible at math, I might also rent Verizon’s required Wi-Fi router for $7.99 a month, but they sell it directly for $99.99. Never rent a Verizon Wi-Fi router unless you plan to skip town within 11 months.

Dropping Sports Plus and the DVR brought the total to $74.07 — a Ticketmaster-esque 34 percent over the advertised price.

Three Verizon publicists did not answer emails sent throughout Monday.

Verizon’s Custom TV pricing pages didn’t list another cost-saving option: using a CableCard with a TiVo DVR instead of Verizon’s own equipment at your house. But where Comcast gives you the CableCard for free, Verizon charges $4.99 a month for it.

It’s this kind of but-wait-there’s-more math that drives people nuts. And it’s a big reason why I will continue to pay Verizon for my Internet connection but still won’t sign up for its TV service, no matter how many flyers it sends me in the mail.

Email Rob at rob@robpegoraro.com; follow him on Twitter at @robpegoraro.