Feb. 11, 2009 at 8:00 AM ET
As you scan your monthly bills -- rent, car loan, home phone -- I'll bet one sticks out like a sore thumb: pay TV. The average American now spends $1,000 a year on television. And suddenly, that's a luxury many people just can't afford.
But there's good news for long-suffering television viewers. The era of cable/satellite domination was already dying a natural death, with real competition like Verizon's FIOS service finally reaching many cities in America. But now the Internet appears ready to drive a stake through the heart of the cable/satellite duopoly. Thousands of TV shows are available for free on the Web, and the technology needed to watch is getting cheaper and simpler all the time.
These developments mean you don't have to pay the average $84.59 monthly cable bill anymore. Even if you elect to keep buying a television service, you can pay less. Finally, consumers have real bargaining power. So let's deal with both options: lowering your monthly bill or cutting the cable completely.
The cable television industry is running scared. Time Warner, for example, lost 119,000 subscribers in its fourth quarter. You'd be scared, too, if you ran a business and someone suddenly started giving away the product you sell.
The mistake nearly all paying cable and satellite customers make is not re-evaluating their bills frequently enough. We all know this story: A year ago you signed up for a $29-a-month service, but somehow your bill is now $105. Those HBO channels that were free suddenly cost $15 each month. The service itself is now $65 a month. And there are other fees that you don't even understand.
How did this happen? The $29 price is a teaser rate, of course, designed to suck you in and then suck you dry. And it works. Many people are busy and forgetful, and they just keep paying those high bills.
Here's how to lower your bill. Pay close attention to these teaser advertisements. I know they always say, "For new customers only," but that shouldn't stop you. At least once each year, you should call up your provider and ask for their advertised teaser rate. You'll be rejected on your first attempt, but keep trying. Eventually, you'll succeed, if you take advantage of your newfound leverage.
That means you must be ready to threaten to cancel your service ... and be willing to follow through. Front-line operators at many pay TV companies don't have the authority to give you a discount on your current rate. But if you are transferred to the "cancellation department," also often known as the "customer retention department," you will be playing a new ballgame. These people have all sorts of magic powers to keep you as a customer. You may not get the rock-bottom teaser price in the end, but you'll almost certainly end up with a better price than you are paying. Sure, this might take an hour of annoying phone calls. But remember, saving just $20 each month means saving $240 a year. Who among us would turn our nose up at a $240-an-hour job right now?
For a great example of what could be called the "just ask" strategy in action, visit Jeffrey Strain's Personal Finance Advice blog and read how he got his mom's cable bill cut from $79 to $39 per month with one phone call.
The key to success is taking advantage of your real bargaining power. Don't make the "just ask" call unless you have a competitor's offer in your hand, and you willing to follow through on the threat if you have to. So if you plan to call Comcast, have a DirecTV or FIOS ad in your hand and know that you can make that switch.
While we're on the subject, , here are a few other things to watch out for on that monthly bill: with the advent of HDTV, a whole new set of fees are in play. Many consumers are paying an extra monthly fee for HD service and rental of set-top boxes. Only pay for boxes you need! If your TV is already HD-ready, you don't need a digital converter box, for example. Don't expect the cable provider to tell you that. If you sign up for service with the promise of free installation, watch your bill for several months to make sure installation charges don't show up. And if you expect a refund or rebate as part of a sign-up package, make sure you understand the terms. Many rebates contain cleverly disguised early cancellation fees: you only receive them as credits if you continue to pay for the service.
Finally, cable customers shouldn't forget that they can file complaints about service and billing problems with their local government's "cable franchising authority," a surprisingly effective way to get satisfaction. The phone number is on your bill. Satellite customers aren't so lucky and can only complain to the Federal Communications Commission.
TV for FREE
In the past, many consumers who made these "just ask" phone calls were making idle threats because they had only one pay TV option. For example, about 30 percent of the U.S. population lives in multi-unit dwellings like apartment buildings, where it's often impossible to sign up for satellite TV, according the U.S. Public Interest Research Group.
But that is changing, and changing fast. Even if you are committed to pay TV for now, you should read on. Understanding the free TV phenomenon will give you much more leverage the next time you call your provider and ask for a better price.
A host of new services are racing to make Web TV easier to use. Some TV networks, like NBC, Fox, and Comedy Central, have taken downright aggressive steps. Hulu.com users are now treated to free, instant viewing of such shows as "House," "The Office," "Heroes," "The Daily Show" and hundreds more popular shows.
Hulu – owed by Fox and NBC -- is just one option, however. (msnbc.com is a joint venture of NBC Universal and Microsoft)
Subscribers to the popular movie rental firm Netflix can now view thousands of TV shows on their computers instantly. The list of networks is impressive, including ABC, NBC, CBS, Fox, The Discovery Channel, and many more.
You might recall that Web TV passed an important milestone last fall, when more consumers watched Tina Fey's impression of Sarah Palin on "Saturday Night Live" online than on TV. Still, the number of people dropping their pay TV service for Web TV is tiny.
There are a long list of caveats about free Web TV: No one wants to watch TV on a computer; it's not as easy to use as a TV; it's hard to find programming; the shows are only available "after" the initial viewing on "real" TV; sports fans have severely limited options; the quality isn't as good; it's really difficult to make Web TV work on multiple TVs around the house; and the kicker: "I don't want to trade in my remote control for a keyboard!"
All these things are true, but are becoming less true over time. Netflix, for example, now sells a $100 set-top box named Roku, which makes its service work just like traditional television, remote control included.
What may be the best recent development is also free: the CancelCable.com Web site, which has a fantastic TV Guide-like service called "Showfinder."
The site makes it easy to find your favorite shows and Web locations (many are available on multiple services). You'll be stunned at the variety of available programming.
The site also has a clever calculator to show you how much you'll save if you stop paying for TV, including a calculation of interest earned on money saved. For example, a consumer who drops a $110-a-month cable bill and instead saves the money while earning a 3 percent return will have built up a kitty of $7,111 in 5 years.
Yes, you can get live TV for free
The main drawback to Web TV is the delay. Understandably, many fans don't want to wait a day to see their favorite programs. But there is another free solution.
Despite all the chaos surrounding the switchover from analog TV to over-the-air digital TV, it's really a boon for consumers. Here's one secret about over the air digital TV that you may not have heard: The picture is amazing. In fact it's so good that many aficionados prefer it to cable or satellite HDTV. Why? There's more bandwidth available to TV broadcasters over the airwaves than to cable or satellite providers trying to squeeze hundreds of channels down their pipes. That means pay HDTV signals are compressed. Many viewers probably won't notice the difference, but even if you are paying for cable (and pay extra for HDTV), you should occasionally switch to free HDTV to get a better picture.
Getting over-the-air HDTV is easy. For about 90 percent of U.S. consumers who own an HD-ready TV, and old-fashioned UHF antenna will provide great reception. If you've never tried it, you should.
Now, combine the free, first-run programming you can get with an antenna with the free programming you can get on the Web and you may very well conclude that you'll lose very little by dropping that $1,000-a-year pay TV luxury. And even if you aren't ready to deal with the hassle of experimentation, knowledge of the alternatives can help you bargain with your current provider. You'll be able to make a compelling argument why their service is only worth $400 or $500 each year to you now. And if you are successful, that's the kind of savings most consumers could really use right now.
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