Cable Broadband Providers: What Ever Happened to “The Customer is Always Right”?June 6, 2017
The concept that “The Customer is Always Right” has such resonance that it has been popular around the globe for more than 100 years, from Marshall Field’s department store in Chicago to Selfridge’s in London, and from the Ritz in Paris, whose motto was “le client n'a jamais tort” (the customer is never wrong) to the German “der Kunde ist König” (the customer is king) and the Japanese “Okyakusama wa Kamisama desu” (the customer is like a god).
Unfortunately, America’s large cable broadband providers seem to have forgotten this maxim. Worse yet — from bloated programming bundles to antiquated set top boxes to misleading bills, the motto appears to be caveat emptor — let the buyer beware.
Consider just a few aspects of the cable broadband experience, some of which are detailed in a recent Senate Report. Perhaps, for example, you are enticed by this pricing offer — Charter’s bundled cable TV, internet, and phone, for $89 per month. But then, the next year your rates suddenly rise to $109 per month, and the following year, to $129 per month. These increases are buried in fine print and the price jumps come as a surprise.
You call to complain, but the customer service agent pushes back, and when you decide you are better off cutting off the service, he refuses — and tries to sell you again. A Time Warner Cable training document literally instructs customer service representatives to “do the opposite of what the customer is calling for. If the customer is calling into cancel, your goal is not to cancel the services! And if the customer wants to lower the bill, you’re going to try to avoid that, and perhaps even raise the bill!”
Finally, consider the truly absurd “Protection Plans.” Most cable providers have some sort of optional insurance-type service that consumers can purchase to cover repair charges or failures, should they occur. For Comcast customers, this could be $5.95 per month, so $71.40 a year, to avoid the cost of the service call, which would be $37.15. Most customers who pay for it never use it, and if you assume there could be multiple service problems, this calls into question the quality of the provider and whether the customer should be bearing the burden of faulty service or installation at all. (These examples are just some of the consumer abuses, see more topics here.)
The “Customer is Always Right” maxim was perpetuated because it reflected a truth: in a competitive market, the seller that gives the customer what the customer wants will succeed and others will fail. But there is not enough competition in cable broadband markets to force cable companies to focus on satisfying customer needs as a path to beating the competition and “winning” the customer.
Two large providers — Comcast and Charter — control more than half of American cable broadband connections. And, since they operate in separate regions and do not compete against each other, the majority of Americans have no choice of cable broadband provider. According to the Federal Communication Commission’s latest Broadband Progress Report (see Figure 4), three quarters of census blocks in the United States have at most one provider that offers a 25 Mbps broadband connection. Only about a third of Americans have a choice of two or more providers, less than 10 percent have a choice of three or more, and the picture gets worse as internet speeds increase.
No competition means no pressure to satisfy consumers with better prices and innovative products. Compare cable broadband to the wireless phone market, where there are four competitors. According to the Wall Street Journal, Verizon recently cut prices and added more data to its wireless plans to stop customers from fleeing to T-Mobile and Sprint, which offered unlimited data plans. Recall that T-Mobile attempted to merge with AT&T but was stopped by regulators. Instead of a merger, consumers got an innovative competitor. T-Mobile pushed the market by ending two-year contracts and cancelling overage fees. Furthermore, in this competitive market, prices for wireless phone service were down 11 percent in March 2017 from the previous year, and down 7 percent from the previous month. Four competitors is still not very many, and the wireless industry has its own problems, but even a little competition helps.
And, if you thought you could leave cable programming behind and rely on over-the-top internet to stream programming to your screen, that may be wishful thinking. Cutting the cord can actually be more expensive than an internet and TV bundle. For example, Comcast’s 100Mbps standalone internet service is about $85 per month and the same internet speed with 100 channels is about $75 a month. Needless to say, consumers expect that if they want to get less service, they should pay less. One of the explanations behind the high cost of standalone internet is that consumers are being overcharged. Based on this study, consumers are probably overpaying by at least $20 per month for standalone service.
Consumers are clamoring for plain broadband service so they can save money and choose only the programming they want by streaming it through services like Netflix, Amazon, Hulu and so many others. Comcast’s pricing scheme shows an attempt to discourage that behavior and thwart the development of a competitive market for broadband and programming. According to a Pew Research Center study, 15 percent of Americans are now “cord cutters” adding to 9 percent who are “cord nevers” — those who have never subscribed to cable or satellite TV. The market is evolving and so should providers.
Clearly consumers are clamoring for more choice at lower prices, but the cable broadband monopoly has no incentive to deliver. Instead, cable companies are dragging their heals, hoping consumers just give up. The only answer is competition. We need policymakers to change the rules of the road to put consumers in the driver’s seat.
|Comcast Standalone Product||Price||Comcast Bundled Product||Price|
|“Performance Internet” standalone internet at up to 25Mbps||$74.95||“Internet Plus” internet at up to 25Mbps with 10 Channels||64.99|
|“Performance Pro” standalone internet at up to 100Mbps||$84.95||“Internet Pro Plus” internet at up to 100 Mbps with 100 Channels||$74.99|
(We’ve used the prices after the 12-month intro discount in the table above. It’s worth noting that there is a ton of fine print, fees, and a new undisclosed price after the 24th month for many of Comcast’s services, making cost and service comparisons maddeningly difficult for consumers.)
Image credit: Flickr user alykat