April 30, 2010 at 8:00 AM ET
Earlier this month, we asked Red Tape readers to post details of their monthly bills, with a special focus on those tack-on fees. The response was overwhelming. There's a lot of money to be saved in making sure you aren't overpaying for cable or satellite TV -- one Red Tape reader described his annual cable bill at $1,995 per year. After the mortgage payment and auto loan payment, television might be your largest annual budget-eater. With an investment like that, it's really worth spending time to get it right. This piece is designed to help by making it easier to see what your neighbors are paying.
While pay TV companies are offering unprecedented levels of service -- hundreds of channels, better HD signals, digital video recorders -- consumers are frustrated about the methods used to charge for them. For many, deciphering the monthly bill is like searching for buried treasure using an old, faded map. In just about every case, the provider charges one price for the service and then a host of other fees for tools needed to use the service -- fees so high they can double the cost. Imagine if a rental car company charged extra for the license plate on the car! (Wait, some do just that.)
On a basic level, these fees are annoying. But the damage they do to the marketplace is much more significant. Hidden or tack-on fees obscure the true price of the service, thereby wrecking an essential tool in a free market. Because it's so hard to determine what your monthly cost will be until that first bill finally comes, it can be nearly impossible to do honest comparison shopping when it comes time to pick a new service. In the end, it's very hard for consumers to decipher which company provides the best service at the best price. That leads to all sorts of market distortions.
There's only one way to attack such a problem -- with information. The more you can learn about the price your neighbors pay for television (the price they really pay, not the monthly rate quoted in an ad), the more intelligent a choice you can make. Pay TV firms, like all modern corporations, devour extensive research about you and your family in an effort to extract the highest price possible. Why shouldn't you do the same -- devour data to help you get the lowest price? So here's a set of market research provided by Red Tape readers all around the country summarizing what they pay for tack-on fees. Compare your bill to these, to make sure you're not overpaying.
Before we get to specific provider prices, displayed alphabetically by provider, here's some general observations.
1) Many consumers are getting killed in fees for second, third, and fourth set-top boxes. Consider paying for service only on the family TV, and use rabbit ears to pick up over-the-air HD channels on the other sets in the house. The savings can easily add up more than $500 per year. If you can't imagine going without cable in the bedroom TV, scale back to basic boxes on your secondary sets and you'll still save a bundle.
2) While we're on the subject of rabbit ears, an increasing number of consumers are cutting pay TV service altogether, and using a combination of over-the-air signals and TV-over-Internet programming -- using Netflix or Hulu.com, for example -- to fill the void. You might still want to pay for service, particularly if you are a sports fan. But you can use the option of over-the-air TV as a bargaining chip to get a lower rate from your provider.
3) When lease rates for set-top boxes go up, many consumers report great success by simply complaining about the increase. Dish Network, for example, is handing out service credits that negate a recent price hike. But watch carefully -- the credits are usually temporary, while the increase is permanent. That's a smart way for firms to ease the blow of price hikes. You'll have to stay on the company to make sure you keep getting the discount as time passes.
4) Different firms charge for different services in different ways. Take DVR service: Some charge a lease-fee for the DVR box; some charge a service fee. Some charge both. That's why, when comparing services, the only price that matters is the bottom-line, what-number-will-I -write-on-my-check-every-month price.
Now, here's a sample of the fees reported by Red Tape readers.
Readers from Wisconsin and Michigan chipped in to share that they pay $10 extra each month for HD signal, and pay $7 for the 2nd, 3rd, and 4th DVR box. Peter Fritz of Franklin, Wis., for example, was paying $21 every month for his four DVRs until recently, when he dumped the service for over-the-air TV.
In Montana, Rachel Hofferman said she pays $6.50 per month for a DVR with a remote, and $11.99 for DVR service. There's also a 25-cent broadcast TV surcharge.
Bright House Networks
From Orlando, Fla., a consumer wrote to say he pays $7.95 per month for his DVR.
Erin F. in Poughkeepsie, N.Y. says she spends $13.50 for two cable boxes ($6.51 for the box and 24 cents for the remote) each month. She also pays $9.95 for DVR service, and a $1.50 "additional outlet" fee.
Sean Ferguson of Wenatchee, Wash., says he pays $10 to rent his DVR box, and pays $29 to upgrade to HD signals. Because he lives in a housing association, he had no choice of provider.
Consumers from all corners of the country wrote in about Comcast rates. They vary slightly.
Pam Hall of Las Vegas said she pays $7.50 per month for an HD converter, and $15.99 for a digital TV gateway box.
In Broken Arrow, Okla., Bruce subscribes to the least expensive level of service he can. He pays $5 to rent a basic digital cable box.
A wide range of consumers wrote in explaining their DirecTV box fees, but they were consistent around the country. The first basic set-top box is free, and each additional box costs $5. The DVR fee is $7, and HD service costs $10 per month.
Dish consumers also reported consistent rates from around the country. The network recently changed its set-top rental fees. The first box is free. Additional boxes cost $7-$17, depending on capabilities. For more, see this piece.
Carl Pahler says he pays $15 monthly for the first HD-DVR box and $15.95 for the second, along with a $7.95 HD service fee. He also laments that he can't get HD service without also paying for a DVR.
Brian in Montgomery, Ala. says he pays $12.95 monthly for his TiVo service.
Jinesh in Queens, NY. says he pays $8.95 per month for his HD converter box.
Customers who wrote in shared a variety of set-top box prices.
Most Verizon customers say they pay the same amount to rent their boxes: $5 per month for a basic box, $10 for an HD box, and $20 for an HD-DVR. But in Rockaway, N.J., Nik said he pays only $5.99 for HD boxes and $14.99 for his DVR.
As mentioned in the recent column on this topic, Congress and the Federal Communications Commission have been trying for more than a decade to change the market dynamics for set-top boxes by encouraging the appearance of third-party alternatives. There's a new push to create a new kind of gadget, called a gateway, that will make it easier for consumers to combine TV and Internet-based video watching.
While that debate drags on, and the high cost of box rental is still on your mind, here's some parting food for thought: An anonymous comment left by a Red Tape reader who claims to work in the set-top box industry.
"I manage the building of set top boxes every day and it's a crime to charge rent for them," the source writes. "The most expensive cost less than $200 in most cases with some even less than $100. In addition the companies that procure them usually will not even (return) them back to manufacturers if they are defective. They will either return to a service center or simply get tossed. You should be able to easily work your way out of these fees especially after 10 - 12 months because anything beyond that and they are making money."