March 13, 2009 at 8:00 AM ET
Home telephone service is a utility bill you probably don't think much about. And why would you? Prices never change, right?
A study by the Utility Consumers Action Network released this week shows the prices for common services like call waiting and unlisted number requests have skyrocketed. Since 2004, call waiting is up 86 percent, while keeping your number out of the phone book costs 346 percent more, the study found.
Numbers like these keep Bruce Kushnick up at night. Kushnick runs New Networks Institute, which investigates the lingering impact of the breakup of the old AT&T. One impact, he says, is higher bills. As evidence, he points to his Aunt Ethel's basic phone bill service, which cost $7.63 cents in 1980 but $39.36 in 2006. Aunt Ethel has lived in the same New York City apartment the entire time.
Subscribers to the plain old local telephone service have probably noticed similar bill creep, no matter where they live.
Meanwhile, since 1980, a host of new utility-like bills have been added to Americans' monthly budgets -- all which may directly impact the price of your telephone. Among these are Internet access, wireless phone service and pay television. Enter the "bundle." Consumers can buy some combination of all these services (and perhaps all of them) from a single firm. But as many consumers quickly learn, seductive bundle offers often lead to even higher bills. They also tie your fortunes as a consumer to a single company. If that relationship goes sour, you'll put all those services at risk. And you'll probably face a hefty termination fee if you try a hasty breakup.
That said, it's smart to think of all these services as a group because there are ways to save money when you purchase them together. You may ultimately decide a bundle is easiest and cheapest for you. But it's always best to at least price the services separately and see if you can do better.
Many of the money-saving tips I'll offer today require a reliable broadband connection. If you want to watch cable TV programs over the Web, or use an Internet-based telephone, you'll need broadband you can count on.
It's hard to give generic advice on broadband pricing, because even national companies like Cox and Verizon vary their prices by locale. And thanks to bundling, it can be hard to compute the real price of broadband. In one deal I've seen from a cable provider, broadband costs $59 per month -- unless it's purchased with a cable TV package. Then the price drops to $33 per month.
The Pew Internet and American Life Project estimates the average monthly bill for broadband users was $34.50 in 2008. If you're paying more, you should find a better deal. Watch for advertisements from competitors.
Regardless, low-speed DSL is still the price champion in most area codes -- under $20 for most consumers who already have phone lines -- and it provides perfectly adequate bandwidth for most applications. You really can watch episodes of "The Daily Show" on Hulu.com over a DSL connection. If you're looking for a way to cut monthly expenses, downshifting to DSL is a fine way to do that.
In fact, while broadband providers often throw out through-put speeds the way teen-age boys brag about car engine size, many consumers end up unimpressed when they upgrade to high bandwidth. Speed is good, of course. But you just don't need 4 megabits per second to follow someone on Twitter, read your e-mail or update your Facebook status. And many consumers have PCs or modems that can't really handle that faster speed anyway.Read the whole 'How To Save Money On' Series
You also might not be getting what you pay for. Anyone who pays for Cadillac-level broadband should regularly check their real-life broadband speed. Speakeasy.net offers my favorite free test. One of the most nefarious hidden fees is paying for broadband you don't really get.
On the other side of the spectrum, bandwidth hogs who stream HD movies or play interactive videos should know that all Internet service providers are testing tolls that will penalize excessive users. If that's you, be sure to read the fine print on overage charges, and be sure to watch for new policies in the coming months that may increase your bill.
The arrival of Verizon FiOS in some U.S. cities is a great development for consumers, because it has forced cable Internet providers to either lower prices or raise speeds, or both. But beware trial offers. Broadband firms love to hook customers with low three-month offers that rise when you stop paying attention. So don't ignore those monthly bills.
Also, don't ignore smaller, local Internet service providers, which can sometimes offer surprisingly competitive deals.
Finally, one drastic way to cut back during the economic downturn is to dial your Web service all the way back to dial-up. Today, according to Pew, only 9 percent of Web users get their Internet over an old-fashioned modem. But dial-up providers seem to think they have an opening with the sour economy. Earthlink, for example, has just cut its price to $7.95 per month and is marketing the service as a budget-saver.
Dial-up service is inadequate for many Web services, and even many Web sites that are optimized for broadband. But it's certainly better than having no Internet connection at all.
There's a catch with dial-up and DSL, however. You need a phone line. There's really no way to get Internet access for $7.95 per month -- you have to pay $7.95 plus $25 or so for a home phone line. Ditto for DSL in most cases (so-called naked DSL, which doesn't require a telephone subscription, is still not widely available). The true cost of DSL is more like $45 per month.
This is why it's important to consider phone line, Internet and other services together. You might save money by backing down to dial-up Internet service, but perhaps you could save more by ditching your phone line, getting Internet through a cable provider and signing up for an Internet telephony service.
Plain old telephone service -- POTS -- is clearly in the autumn of its life on the American scene. The National Center for Health Statistics recently reported that the number of wireless-only adults exploded last year, jumping from 13.6 percent in 2007 of adults to 16.1 percent in the first half of 2008. In some parts of the country, one in five adults don't have a landline.
And why not? As Aunt Ethel found out, land line service is expensive. So if you haven't cut the phone cord yet, there are a few ways to do that and save a lot.
1. Cancel your land line phone and just use your wireless, taking advantage of free long-distance calling plans. If you need to call internationally, try an online service like Skype or an international mobile-phone/Internet telephone bridge service like CellularLD.
2.Keep the home phone line, but cancel long-distance service. This will lower your bill by 25-50 percent, because you'll save on phone costs and some federal taxes, such as the Universal Service Fund tax. You'll still need a calling card or cell phone to make long distance calls. If you go this route, make sure you actually formally disable your long-distance service. Otherwise you'll be subject to a monthly fee, like Verizon's "short fall" fee, which is assessed to callers who don't make any long distance calls. If you do disable your long distance calling, you may have to pay a $5 disconnect fee, but it's worth the savings you'll see.
3. Get rid of your land line and sign up with an Internet telephone product like Vonage or Skype. Be aware though that these products do charge monthly fees and may not be as inexpensive as they initially appear. Also note that not all IP phones handle 911 calls correctly, so be sure to discuss potential emergency calls when you sign up. The FCC has an information page here. Because of these 911 issues, Internet phones might not be for everyone. A cheap, local-call-only phone combined with an Internet phone might be a better compromise.
One VOIP product that's gotten a lot of attention lately -- thanks to a blitz of late-night commercials -- is Magic Jack, a small USB device that lets consumers plug telephones directly into their PCs. While the quality of the phone calls has received some critical acclaim, there are also numerous customer service complaints online about the firm, including some from unsatisfied customers who say they have difficulty obtaining refunds.
How do you save on phone and Internet services? Leave your comment below or visit Newsvine and join the Red Tape Raiders.