Consumers are increasingly subject to sticker shock on their cable bills, suggests a new report highlighting the gap between advertised monthly cable prices and what customers wind up forking over.
The cable industry makes nearly $450 per customer a year from so-called company-imposed fees, according to a Consumer Reports report published Thursday, and could be generating some $28 billion annually from such fees.
These company-imposed fees effectively tack a 24% surcharge on to the price advertised, the consumer-advocacy group’s analysis of almost 800 cable bills in the U.S. concluded: While the average monthly cable bill totaled $217, just under $157 of that amount comprised the base package price. Company-imposed fees accounted for $37, government fees and taxes were about $13, premium services were $9 and miscellaneous fees were $1, it found.
Consumer Reports argues that these additional fees are often slapped on consumers for items that could be classified as a cable company’s basic “cost of doing business” — for instance, a “broadcast TV fee” meant to account for the cost of getting programming from broadcasters — and often aren’t made obvious to consumers. Companies sometimes offer inaccurate, confusing or partial details about their fees, the group charged, including misstating that some fees are government-mandated.
“A lot of times, people don’t know these fees exist,” report author Jonathan Schwantes, senior policy counsel for Consumer Reports, told MarketWatch. Even in what appear to be fixed-rate contracts, he added, companies sometimes allow themselves “wiggle room” in the fine print to increase fees.
Common company-imposed fees include regional sports fees, set-top box rental fees, cable modem and/or router fees, administrative and convenience fees, and installation fees, the report said. Other additional fees might include government fees and taxes, as well as optional charges for premium services.
And fees are only going up, Consumer Reports warns. Comcast’s CMCSA, -1.06% regional sports fee and broadcast TV fee cost a combined $2.50 a month in 2015, the organization said by way of example, but now cost a monthly $18.25.
“We acknowledge that yes, their costs are going up,” Schwantes said. “But it sure seems like the consumers are left holding the bag.”
A national survey published by the nonprofit in January found that 69% of consumers who had used cable, internet or phone providers over the previous two years had experienced “hidden or unexpected fees,” and 59% of customers who reported facing such fees said the added expense had made them blow past their budgets.
MarketWatch has reached out for comment from several of the cable and internet companies mentioned in the report about their fees, including AT&T T, -0.88%, Charter Communications CHTR, +1.27%, Comcast and Verizon VZ, -1.57%.
A Cox Communications spokesman told MarketWatch: “Unfortunately, the cost of content continues to rise at unsustainable rates, something that is becoming clearer with recent streaming video-service price increases once they have gained initial share. The primary drivers of costs continue to be sports content and local broadcast retransmission fees, and we try to be transparent by indicating that on the bill.”
An Altice USA ATUS, -0.11% spokeswoman reached for comment touted the company’s “incredibly competitive pricing” and investment in its network, but added that “rising programming fees are a large driver in rising costs.” “We break out those costs on bills to help educate customers to the impact rising content fees have on their bills,” she said, pointing to a company website that explains programmers’ fee increases.
And a Frontier Communications FTR, +1.05% spokesman said that fee increases “reflect the increased cost of providing services, including ever-increasing costs to access programming content, the growing cost to maintain and upkeep the infrastructure of a robust broadband network and the rapidly rising costs of supporting our customers’ increased demand for bandwidth through greater internet usage and over-the-top video content.” When possible, he said, the company seeks to minimize the increasing costs’ impact on consumers.
On the transparency front, the spokesman added, the company “provides specificity about and detail of all charges on its bill.” “Information about applicable fees is disclosed at the point of sale and on Frontier’s website,” he said. “Frontier also provides notice to consumers of in advance of any changes to these fees.”
“These companies take seriously the responsibility to provide their customers with clear and relevant information related to the services they enjoy, and work diligently to develop and use consumer-friendly ways of conveying such information, including websites, apps, delivery of monthly itemized statements and more,” a spokesman for the Internet & Television Association, a trade group, told MarketWatch in a statement.
Consumer Reports said it had also sent inquiries to cable and internet companies, outlining three main explanations of billing practices that emerged from the handful of companies that replied.
One explanation, according to Consumer Reports, was that such fees are perfectly legal. (“It is true that, in implementing the 1992 Cable Act, the FCC explicitly opened the door to itemization of regulatory pass-through fees and taxes, as well as company-imposed fees,” Consumer Reports noted.)
Another was that companies apply fees in a transparent manner and provide customers with sufficient information to make decisions. (“Can they get it right all the time? No, that’s hard for any company,” Schwantes said. “But we think they’re not as transparent as they claim they are.”)
A third, according to the report, was that obtaining programming from broadcasters has become increasingly expensive. (“Though there is a kernel of truth in this explanation, what is left unexplained is why these costs are passed on to consumers in the form of fees and not included in the base package price,” Consumer Reports said.)
Consumer Reports recommends a range of policy remedies to address the fee issue: For starters, it said, Congress should pass the TRUE Fees Act (short for “Truth-in-Billing, Remedies and User Empowerment over Fees Act”), legislation that would require cable and internet providers to include all fees in the advertised price. The Federal Communications Commission should change its stance on itemization of company-imposed fees, the group added, and state attorneys general should enforce consumer-protection laws in this arena.
Consumers, for their part, can “cut the cord” — that is, keep their internet service but cancel video services, relying on alternatives like streaming services. “Most of the company-imposed fees are attached to video service,” Schwantes said. “If you have the internet-only service, you’re going to avoid most of the fees.”
But this is an imperfect solution, he added, as some providers have recently begun charging internet service-related fees — take Frontier’s $2 internet infrastructure surcharge, for example. (The Frontier spokesman said that the fee “partially recovers costs for facility and infrastructure relocations mandated by state and/or local governments,” and only recovers about a third of costs incurred.)
Cable customers can also urge Congress to act, Schwantes said. “It’s not going to get rid of the fees,” he said, “but at least they’re all rolled into the advertised price.”