Nearly All Tech Hardware And Services Get Cheaper Over Time — Except For Cable TV

from the televised-revolution dept

With a few exceptions (hearing aids, collectibles) as technology evolves, prices for these services drop. Unless you’re the cable and broadband industries, cozily ensconced in a bubble of regulatory capture. The US Bureau of Labor Statistics tracks prices for broad categories of goods and services over time, and as Business Insider notes, a quick look at the eighteen year trend of technology goods and service pricing shows cable relatively alone when it comes to product pricing rising steadily over time:

The problem is that chart doesn’t really work, since comparing cable TV to the cost of, say, audio gear isn’t really an apples to apples comparison. Unfortunately for cable, things don’t look much better even if you’re comparing cable TV prices to other, marginally-similar services (streaming TV, satellite radio) or, say, inflation. Last year, the FCC released a study (pdf) that showed that cable rates have risen at around four times the rate of inflation. Over an 18-year period from 1995 to 2013, cable rates increased 6.1%, while the Consumer Price Index?s compound average annual rate of growth during the same period was just 2.4%.

So yes, cable prices are rising faster than pretty much any other technology. And note most comparison data doesn’t even include all of the sneaky fees and set top or modem rental fees cable industry likes to bury below the line to artificially keep advertised rates lower, so things are actually worse than 90% of analysis you’ll read. Data from SNL Kagan suggests that cable companies’ average revenue per user grew from $119.24 in 2010 to $161.12 this year – an increase of more than 35 percent. Should you ask a cable exec why this is, they’ll tell you it’s because of the exceptional value cable TV offers, ignoring that cable has some of the worst customer service in any U.S. industry.

Of course the real reason for this smorgasbord of rate hikes is what I affectionately like to refer to as “wink wink, nod nod” competition, where an entire business ecosystem agrees to keep prices artificially high for the benefit of everyone, but are never held accountable for price fixing or antitrust issues thanks to the magic of regulatory capture and campaign contribution. The FCC’s study actually found that even when there’s so-called TV sector “competition,” the downward pricing pressure was negligible:

“Over the 12 months ending January 1, 2013, the average price of expanded basic service increased by 4.6 percent, to $63.03, for those operators serving communities for which no effective competition finding was made as of January 1, 2013. For the effective competition communities, the average price of expanded basic increased by 5.8 percent, to $66.14.”

And again, that’s because these companies aren’t competing — they’re blowing sweet kisses at one another and paying politicians to look the other way. Some folks might recall that this was all supposed to change when the phone companies entered the TV industry back around 2006 or so. AT&T (U-Verse TV) and Verizon (FiOS TV) promised dozens of states that, in exchange for passing new statewide franchise laws written by the phone companies, we’d see an amazing flurry of new TV competition. Of course what actually happened is these franchise “reform” laws were little more than phone company wishlists that gutted regulatory authority and all remaining consumer protections. The end result was higher rates than ever.

And yes, the absurdly high price of programming (especially sports programming) plays a huge role in soaring, often bi-annual rate hikes. But it can’t be understated that everybody in the delivery chain (from broadcaster to cable operator to local regulators) happily abuses the dying cash cow that is cable TV, whether it’s programming rates, set top box rental costs, local franchise charges, or bizarre new fees. There are no innocent parties when it comes to your bloated cable TV bill, and all of the parties currently feeding at the trough behave like it’s a party that’s simply never going to end.

Of course there’s another good reason that cable rates continue to skyrocket: people keep paying for it. In fact statistically, about 80% of the people reading this sentence throw $100 or more at their cable company every month for a massive bundle of horribly uninteresting channels they never watch. For many people, especially once they’re getting three or four (wireless, TV, fixed-line broadband, voice) billed services from one provider, it basically comes down to being too lazy to deal with paperwork and phone calls. Other times users just realize the hassle of switching won’t be worth it since the company they’d switch to would be just as bad as the company they’re leaving.

On the bright side, there’s a twenty-three-mile-wide asteroid headed right for Jurassic-era legacy cable executives. Unfortunately, while the traditional cable TV cash cow will be killed amidst a cacophony of legacy wailing during the upcoming cord cutting revolution, the regulatory dysfunction, campaign finance corruption and duopoly power that built the cable TV monstrosity will remain. And these companies are simply going to switch their attention from price gouging you for an ocean of horrible channel bundles, to price gouging you for what’s increasingly a necessary utility: broadband (a market that sees even less competition than television). And they’re going to do it in one singular, spectacularly obnoxious way: broadband usage caps.

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Comments on “Nearly All Tech Hardware And Services Get Cheaper Over Time — Except For Cable TV”

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49 Comments
MDT (profile) says:

Re: 80%

Probably more than we’d like to admit. 🙁

I have Dish, and I spend more than $100 a month on it. It’s annoying, but I’ve tried to cut it down, but I have a wife and mother who happen to like radically different channels than I do. And, the ones we like, aren’t cord cuttable yet, unfortunately. 🙁 Science Channel (Me), SyFy (Me), NASCAR (Mom), MLB (Wife), SOAP (Wife), as examples.

At the very least, I’ve always had good customer service from Dish (I quit Comcast over horrible customer service a decade ago).

Klaus says:

Re: Chart entry is BS

Like you, I pay a little more each year for ISP, however, unlike you, 10 years ago I had ~5Mbs (Europe). Then my service automatically jumped to 10Mbs, then 20Mbs, then 50Mbs, now I’m enjoying 60Mbs on fibre (free upgrade).

I’m just surprised that your 1.5Mbs service has remained static for 10 years. But then, I can choose from 5 major providers, and countless smaller operators.

Anonymous Coward says:

Re: Re: Chart entry is BS

Actually if it is like in my county. You pay for 1.5 and get .25. I actually had a tech tell me that their ISP is won’t upgrade they equipment. The DLS users aren’t worth the money to keep online. They over sell the line and they are the only option so you can pay for 1.5 which is actually .25 speed or no internet at all. Thankfully I have much higher speeds but when I get a call to someone’s house it is pretty much the same thing everywhere.

Klaus says:

Re: Re: Re: Chart entry is BS

I think it might be worse than that – I’m currently in the UK; we have contention on consumer connections of 1:50 (i.e. up to 50 connections are ganged onto 1 internet link. It’s much lower for commercial connections, something like 5:1. But then they cost more.

So like you, although I have 60Mbs, I rarely see anything faster than 12Mbs. In practical terms though I’m not too bothered because my VPN maxes out at 10Mbs…

Anonymous Coward says:

Re: Chart entry is BS

Per Mbps it most definitely is. 10 years ago nearly all services were below 10 Mbps. Cable companies are constantly boosting speeds every few years to the point now where we are in the gigabit range. Telcos are a little further behind in some areas but others have VDSL2 and fiber, both of which are significantly faster than service 10 years ago.

Your decision to only subscribe to 1.5 Mbps service appears to be of your own making if you have cable available. It’s not too surprising the rate for 1.5 Mbps service has gone up considering the cost of maintaining that line has gone up in 10 years.

nasch (profile) says:

Re: Re: Re: Chart entry is BS

was is the same TV you bought in both years? doubtful. bigger, better, wi-fi ready, etc…

I believe you have missed my point. The person I was responding two claimed that the chart is incorrect because it doesn’t match his experience. I was sarcastically exclaiming that the electronics one was also not correct because I paid more for a TV in 2008 than in 2000. This single data point invalidates the data chart just as much as any other single data point.

Anonymous Coward says:

Hearing aids don’t get cheaper for similar reasons. Hearing aids must be approved by a regulating body and that regulating body has a lot of back door dealings with certain corporations to limit what gets approved with the intent of limiting competition and keeping prices high. The same is true for things like generic drugs and many things that require approval from a regulating body.

Not saying there is anything wrong with a regulating body ensuring the safety and quality of health related products. Just that these bodies tend to have an ulterior motive, to limit competition, and there are often back door dealings involved with those that benefit from the limited competition.

That One Guy (profile) says:

Re: Re: Re:3 Re:

Only by accident. One of the main indicators of a corrupt government I’d say is that is puts it’s own need ahead of the needs of the public, and if you assume that the purpose of the government is first and foremost to serve the public a corrupt government is going to be an incompetent government, as they are failing at their primary duty.

That One Guy (profile) says:

Re: Re: Re:3 Re:

Actually after my previous post I began to wonder, would it be incompetence if they do have the skills and ability needed, but are choosing not to apply them properly?

Incompetence is not being able to do your job right, which isn’t quite the case here; they could, they just chose not to.

Suppose the question of terminology comes down to, ‘Does it still count as incompetence if it’s willful?’

Anonymous Coward says:

Re: Re: Re:4 Re:

Corrupt is when the government acts in the private interests of private entities (and publicly traded companies still count as private entities in this context) due to corporate spending on campaign contributions or due to back door dealings (such as revolving door favors). The government should make decisions neutrally based on the public interest and their decisions should not be affected by conflicts of interest that politicians and regulators face that business interests provide.

That’s not to say business interests, like anyone else, can’t provide their opinions on what they would like to see changed and why. Perhaps they can provide good logic behind why they would like to see a particular change and decision makers can base their decisions solely based on said logic. Just that the decision decision makers make should have absolutely nothing to do with who funds what campaigns or revolving door favors or back door dealings and kickbacks or any way that decision makers personally gain from those decisions due to the businesses that gain providing them with something in return for their decisions. The problem is that there are way way way too many conflicts of interests involved in decision making and the legal system. That’s corruption. When decision makers base their decisions on how they personally gain (or how their campaign benefits) instead of choosing to exercise their decision making position in the public interest.

pinakidion says:

Hearing Aids

Tangent Warning! As a parent of a hard of hearing child, I can assure you that the technology for hearing aids makes tiny hardware changes at best. The software makes some neat changes, but those changes are mostly to benefit audiologists.

Hearing aids follow an interesting cycle. They cost about 4K for pair with a three year warranty. New models come out every two years or so. When the warranty expires, I can pay $80 – $100 a month for an extended warranty or buy a new set. Essentially, no matter what option I choose, my son or I will be paying an average of $1200 a year for the rest of his life.

AARP has an interesting article about the cost:http://www.aarp.org/health/conditions-treatments/info-05-2011/hearing-aids-cost.html

From the article:
Cost to manufacturer is $1760 (including a $1320 cost for research)
Additional cost to retailer is $2640

A hearing aid manufacturer has different figures:
https://audicus.com/why-does-a-hearing-aid-cost-six-times-more-than-an-ipad/

Both estimates make some assumptions are off. With a lack of competition, though, I expect very little to change.

pinakidion says:

Re: Re: DIY Hearing Aids

Some have tried:

http://hackaday.com/2013/12/15/diy-hearing-aid/

Martin Ling had a team in Edinburgh working on it, but that was three years ago and I heard nothing from them.

I’m sure that some team could come up with something. The issue that I am uncertain can be overcome, is that there is not huge demand (in sheer numbers) for aids. In other words, there is not a way to gain cost benefits by mass-producing them.

pinakidion says:

Re: Re: Wait til they break

Yes, I could, but getting a new set and getting them programmed is a two to three week process. I have to order the set, get them sent to the audiologist, and then have them configured and tested. New aids, new software (sometimes), new tweaking to get them to work optimally.

I don’t want my son to be without aids for two to three weeks. A day or two, even a week is not a big deal. Longer than that, and there are noticeable effects.

Andrew D. Todd (user link) says:

Re: Medical Pricing (to pinakidion, #16)

Nearly twenty years ago, I stepped in a pothole one dark night while carrying my laundry home from the laundromat, went down hard, and broke my wrist in two places Well, I had to have an operation to put it back together, and they installed a device called a Wrist-Jack.

http://www.oobject.com/12-extreme-examples-of-medical-scaffolding/wristjack/6612/

It’s a simple strut, basically, with three or four worm gears. No more complicated than something you could get in the hardware store for ten dollars. However, it cost $2000 in 1997, and I daresay it would be more like $4000-$6000 now. Well, I lived with the damn thing for ten weeks, and when it finally came out, the Orthopedics resident asked if I wanted to keep it as a souvenir. I shuddered slightly, and replied: “Give it to the deserving poor!” He didn’t catch the P. G. Wodehouse reference, but he said that there was an arrangement to ship used medical equipment to hospitals in the third world. That seemed an excellent idea, and that was what we did with the Wrist-Jack.

Medical pricing is like that.

DigDug says:

Where's the Cellphone Data charge rates?

They’ve been raping and pillaging their customer by a significantly higher margin than the cable industry.

You see, in the past, data was free and voice calls were exorbitant.

In the past, text messages were considered to be “pages”, and unlimited paging was built into the costs of the cell plan.

I could page to my heart’s content with no additional costs.

Why is that you say? Because pages/texts used less than 1 to 2 seconds of voice data. It basically didn’t cost the cell companies anything to carry them from sender to receiver.

Then “texting” became the rage and my cell company tried to re-label what I’d had grandfathered into my plan until I complained to my state’s AG, who put them in their place at the time.

Time passes and now voice, which still uses far and above more data than typical web browsing is “unlimited and free” with the overpriced “Data plans”.

If someone were to call somebody, and keep the call going for an entire month, the amount of “data” transferred during this “voice” call would exceed the amount of typical data plan usage by a significant margin.

Let’s do some math.
An average audio codec uses approximately 45Kbps (kilobit per second). Now, since we know from our early modem days that “kilobit per second” is actually measured as kilobit – 1000 bits per second and not the exabinary 1024 bits per second, that gives us 45,000 bits per second. Divide this by 8, and we get around 5625 bytes per second. Now take that 5625 bytes per second and multiply that by 60, 60 again, 24, 365.25 (have to account for leap-years) (5625 * 60 * 60 * 24 * 365.25) gives us 177511500000 bytes. 177,511,500,000 or roughly 177 gigabytes of data per year, or 14,792,625,000 or just under 15 gigabytes per month.

Let’s think about this. If “cellular data bandwidth” was so costly, would they give away up to 15 gigabytes of this precious commodity per month for free?

Hell No! Which is exactly why they don’t do that at all.
They mask the cost of the voice data by embedding that cost into the data charges for your data plan.

That’s why an unlimited everything plan that should cost about 5 bucks a month costs 50 or more. (I’m not counting discounted data rates where after xx it gets throttled plans because that just limits the total amount of data that could be used and the math gets even trickier).

Since the cellular voice, text, data is all just pure digital data that is only carried by the cell towers at two locations – the transmitter and receiver towers, everything between them is standard Internet connectivity.

That basically means they are charging 50 bucks a month for what amounts to a wireless Internet plan for both customers, unless the destination of the call is a land line, where it’s even less expensive for the wireless company(ies) involved.

In other words America, our cell companies are raping us more than our cable companies are, except for where the cable companies are the cell companies. (Hello AT&T)

DigDug says:

Re: Where's the Cellphone Data charge rates?

By the way, here’s the source of my voice data rates.

http://www.cisco.com/c/en/us/support/docs/voice/voice-quality/7934-bwidth-consume.html

I took an average of them all, as I was not certain which was used by the different cell companies.
So the data rates could actually be damned close to double what my calculation showed. I’m doubting they’d be less or our voice quality would really really suck (more than it sucks already).

Andrew D. Todd (user link) says:

Cable Television Is Not a Tech Service.

I think you are mistaken in viewing cable television as a “tech service.” Essentially, it is a Geographical Right-of-Way service like public utilities and public roads, railroads, etc. A plastic duct, buried in the ground, costs at least ten times as much as the copper or optical cable which goes into the duct. Much the same observations probably apply to cabinets and to switch-rooms. You can go on Amazon or E-Bay and buy an inexpensive reel of cable, if your circumstances are such that this would solve your communication problems. Unfortunately, one’s circumstances do not usually admit of so easy a solution.

Cable television behaves very much like other Geographical Right-of-Way services. Specifically, if they are run as substantially unregulated business, disaster usually ensues. I don’t think you can understand ComCast unless you first understand the Freedom Industries/West Virginia American Water poisoning case, in Charleston, WV, and the Lac Megantic train explosion in Quebec, in which 43 people were killed by a runaway oil train.

In the long run, to have these kinds of services run in the public interest, they have to be run by the government. In most places, the water _is_ provided by a government agency, which takes pride in moving its water intakes upstream in search of cleaner water, to the extent reasonably feasible. Railroads are a bit more complicated. When there is a commitment to providing passenger service, public agencies are usually set up, eg. Amtrack and a bunch of municipal commuter agencies. The big freight railroads, notably the BNSF and the Norfolk Southern, tend to develop an esprit de corps, rather like the military, and to hire a lot of military veterans. However, the Lac Megantic accident occurred on the Montreal, Maine, and Atlantic, a spun-off short line, where cost-cutting was the order of the day.

Mark Wing (user link) says:

Comcast told my step-daughter that it was basically her fault that prices were so high. All these consumers demanded ala carte pricing and poor Comcast had to comply, and sorry, they couldn’t keep prices low anymore. They wanted to keep prices low, but they couldn’t do that and still give all the customers the flexibility they were demanding. What a load.

I pay about 6 bucks a month for a VPN now. I’m sure as more people cut the cord, they will keep raising prices and blame it on the cord cutters, thus fueling their own eventual demise.

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