TV and Internet Bundles: A Case Study

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A surefire way to break the ice with someone is to commiserate over your sky-high prices for internet, phone, or TV. Americans are finding that the costs of these services are too much to manage. As AT&T, Charter, Comcast, and Verizon continue to dominate the telecommunications industry, prices for their services have been inflated by about 25% above what competitive markets should deliver.

With few alternatives, many households are choosing to simply cancel the services they need. A 2015 study found that 15% of American adults had abandoned their paid cable or satellite television service. Meanwhile, only 67% of adults had broadband service at home, down from 70% from just two years prior.

These trends are especially pronounced among poor communities and communities of color. For instance, while 72% of white adults had home broadband in 2015, only half of Hispanic adults did. Additionally, 90% of adults with an income of over $100k had home broadband, while only 41% of those with an income under $20k did.

These striking figures are not to say that folks no longer see a need for home broadband. In fact, 79% of recent job seekers utilized online resources in their search for employment opportunities.

The glossy advertisements and websites for Internet and TV service providers tend to feature young professionals and middle-class families. These images neglect to capture the reality that all communities find immense value in these services--though some communities are more disadvantaged in their ability to access them.

This case study thus aims to examine a community absent from telecom companies’ field of view. The subject of this study is a working-class couple in their late 50s. Their characteristics and interests include the following:

  • Immigrated to the U.S. in the 1980s and reside in a California suburb
    • Speak English comfortably but favor television content in their native language
  • Work multiple jobs each but have evenings and Sundays off
    • Spend free time developing computer skills and watching news and scripted programs
  • Use their mobile phones and don’t need a home phone
  • Have children who are adults and have moved out of their house
    • Looking for affordable internet and TV options that fit their new interests

Through conversations with friends, the couple has decided they will either pay for a TV and internet bundle or for internet and subscriptions to various streaming services.

Though the many combinations of opportunities and their respective price tags are overwhelming, the couple decides the most favorable choice in the long run is to combine Xfinity’s internet plan with a Roku player and some streaming services (see Option 4 of Table 1). This option will be affordable, be easy to use, and cover their interests. The couple then considers various streaming subscriptions to supplement their internet and Roku player.

The couple decides to subscribe to both Netflix and Hulu based on each service’s pricing and available content (see Options A and B of Table 2). Ultimately, they will be able to enjoy a wide variety of shows and movies on their TV screen, find broadcast TV channels and programs in their native language offered for free through Roku, video chat with their children, and develop their computer skills.

Clearly, to say that the below tables (particularly the first) “organize” important information regarding the couple’s options is to be generous: a cursory glance or a meticulous perusal would equally induce a sense of overwhelmingness in the average consumer. Besides leveraging costly bills on its customers, TV and Internet Service Providers often don’t clearly communicate longer term monthly rates, data limits, and additional fees. This obscurity is annoying enough to the young professionals and middle-class families featured in telecom companies’ ads. Notably, it especially harms households like that featured in this case study. Older consumers may find it challenging to navigate a provider’s website in search of the monthly rate of service beyond the minimum agreement period. Immigrants may not have a command of English necessary to dispute unexpected fees over the phone. Working-class consumers may be unable to find the time to research their provider’s data usage policies. In these cases, these consumers may choose to simply pay fees that other consumers are able to successfully dispute.

Further, depending on the provider and plan, monthly charges reliably soar up in the second or third year of service. Many savvy consumers call their providers to cancel their services and switch to a cheaper alternative. In an effort to retain their patronage, providers then eagerly accommodate these consumers and charge them the original (that is, first-year) rate. Again, poor and non-English-speaking households are hindered. Without the ability to negotiate with company representatives, they may end up spending almost two times as much as their wealthier counterparts for the exact same services.

While the case study subject may be satisfied with their final choice, it is important to recognize not only the immense amount of time they spent researching their options, but also the frustration they experienced as they weighed the shows they are most committed to watching. This sentiment is not unique to this couple. In fact, a recent survey of pay-TV consumers indicates that many would prefer to pick and pay for the specific content they want: 83.5% of respondents watch 10 or fewer of the channels available to them, and 57.6% of “cord-cutters” cite internet streaming services as a factor that influenced their decision to abandon their pay-TV provider.

Americans have been vocal about their opposition to increasing TV and internet prices, sometimes opting to cancel their services altogether. As service providers start to recognize the threat of losing customers, they must acknowledge the extent to which their practices have harmed elderly, immigrant, and working-class households in particular. Most importantly, policymakers must take advantage of the role they may play in advocating for these communities through promoting competition among telecom companies.

Table 1 organizes information regarding the couple’s options for Internet, TV, and streaming media player services:

  DESCRIPTION DETAILS Pricing*
1 TV + Internet Bundle
  • AT&T U-verse TV + Internet
  • 12-month separate agreements for TV and Internet
  • Up to 50 Mbps Internet speeds
  • Unlimited monthly data
  • Free HBO and Cinemax for 3 months
  • $80/month for 24 months
  • Prevailing monthly rate applies after 24 months
  • Will automatically be charged for HBO and Cinemax, at then-existing standard rates, after 3 months unless cancelled
  • Year 1 Costs: $960 (not including 9 months of HBO and Cinemax)
  • Year 2 Costs: $960 (not including 12 months of HBO and Cinemax)
  • Year 3 Costs: information unavailable on AT&T’s website
2 TV + Internet 
  • $39.99/month for 12 months
  • $72.95/month applies after 12 months (subject to change)
  • $10 for each additional 50 GB
  • Year 1 Costs: $479.88
  • Year 2 Costs: $875.40
  • Year 3 Costs: $875.40
3 Internet + Streaming Media Player
  • $40/month for Internet for 12 months
  • Prevailing monthly rate applies after
  • $10 for each additional 50 GB
  • $29.99 for Roku device (one-time fee)
  • Year 1 Costs: $509.99
  • Year 2 Costs: information unavailable on AT&T’s website
  • Year 3 Costs: information unavailable on AT&T’s website
4 Internet + Streaming Media Player
  • $29.99/month for Internet for 12 months
  • $64.95/month for Internet applies after 12 months (subject to change)
  • $10 for each additional 50 GB
  • $29.99 for Roku device (one-time fee)
  • Year 1 Costs: $389.87
  • Year 2 Costs: $779.40
  • Year 3 Costs: $779.40
5 Internet + Streaming Media Player
  • AT&T Internet
  • 12-month agreement for Internet
  • Up to 50 Mbps Internet speeds
  • 1 TB/month of data
  • With Amazon Fire TV Stick
  • $40/month for Internet for 12 months
  • Prevailing monthly rate applies after
  • $10 for each additional 50 GB
  • $39.99 for Amazon Fire device (one-time fee)
  • Year 1 Costs: $519.99
  • Year 2 Costs: information unavailable on AT&T’s 

*Pricing does not include equipment, installation, activation, and other fees from AT&T or Xfinity


 

Table 2 summarizes popular streaming subscription options:

  SUBSCRIPTION Selected Unique Content Pricing
A Netflix
  • House of Cards
  • Orange Is the New Black
  • Master of None
$7.99/month for Basic
B Hulu
  • The Handmaid’s Tale
  • The Mindy Project
  • Black-ish
$7.99/month
C HBO NOW
  • Game of Thrones
  • Veep
  • Last Week Tonight
$14.99/month
D Amazon Video
  • Downton Abbey
  • The Americans
  • Transparent
$8.99/month

*Selected content includes original content and exclusive streaming rights

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