Cable TV: King of misleading come-ons

Then, quite suddenly, cable prices exploded — rising at three times the rate of inflation in the next five years.  What happened? The sweeping Telecommunications Act of 1996 deregulated cable rates, effectively killing the FCC’s ability to act as a price watchdog.  The deregulation took effect in 1998.  The ARPU race was on.  You lost.

And what are you getting for this pricey service? Cable television consistently ranks near the bottom of most customer satisfaction surveys. In 2002, the American Customer Satisfaction Index found that cable companies "now rank among the worst rated businesses in ... history."   The Ponemon Gotcha sneaky fee survey, conducted for this book by the Ponemon Institute research firm, is no exception. Cable firms were essentially tied for the bottom with credit card companies as purveyors of hidden fees. 

And yet, despite skyrocketing prices and wide dissatisfaction, two-thirds of Americans subscribe to cable, clear evidence that real market forces are not at work in the world of cable television. There is occasional discomfort of competition from satellite television or new fiber-optic TV delivery services, but cable firms still enjoy sizable monopoly power in many places.  And that’s how they get away with so much.  They know most of us would still crowd into Ed Parson’s living room to watch if we had to.

Teaser rates
The single biggest problem facing cable consumers is the fact that cable companies have learned far too much from credit card companies.  Introductory price “teaser” offers, with their fleeting discounts and unpredictable bottom lines, are the bane of cable TV watchers.  Consumers who are enticed by $50 or $100 teaser prices can easily end up writing checks for twice that amount by the time the real rate kicks in and the digital video recorder starts piling up episodes of "Lost."

The only way to avoid bottom-line shock is to ask the right question — repeatedly — when you sign up.  What will my bill be six months from now? One year from now? Never sign on the dotted line until you get a solid answer to that question, preferably in writing.

Some consumers endeavor to play the teaser rate game with cable firms.  If you are the type of person who stays up on your bills, you can try this, too. Some people call this the “Just Ask” strategy, and it’s amazing how few customers actually try it.

Sign up for a low rate, and then call and cancel just as the teaser rate is about to expire. Or if the higher price has already kicked in, call and ask for the low advertised price offered in a newspaper ad or flier.  Ignore the line that says, “for new customers only.” 

Key to the success of this conversation: You’ve got to be willing to drop your cable service.  You must convince the cable firm operator that you are a customer who deserves special “retention” treatment.

Obviously, this strategy works best when you are in an area where there is genuine competition for your business.  If you can call and say, “I’m thinking of going with another cable firm because they are offering this price,” and you are telling the truth, the odds are good you’ll get a better deal. Ditto if you have done your homework and you drop into conversation the possibility that you are going to have a little dish installed on your roof if the cable doesn’t cough up a better price.

Bluffing might work; but it might not.  And remember, you might have a term commitment and face early termination penalties if you do switch. Never sign up without fully understanding the cancellation terms. And of course, if you play this game, you’ve got to keep playing it, because every six months or so, the lower rate will expire, and you’ll have to start over again.

MORE FROM GOTCHA CAPITALISM

Gotcha Capitalism Section Front

Why hidden fees are a big deal Most Americans are in cell phone jail Cable TV: King of misleading come-ons ISPs create tangled Web of sneaky fees What is Gotcha Capitalism? 10 Tips: Beat 'Gotcha Capitalism' Gotcha Capitalism Section Front   Add Gotcha Capitalism headlines to your news reader: