The Washington Post Thinks Overpaying For Broadband Bundles Is A Hoot

Say That Again

from the you're-really-not-helping dept

Apparently, you don’t actually hate overpaying for cable, broadband and phone service. At least that’s the takeaway from this bizarre editorial over at the Washington Post by columnist Megan McArdle. In it, McArdle ineffectively argues that while the rise in streaming video competition is great and all, over-paying your regional telecom monopoly is something we all secretly love.

The odd part is there’s nothing in the piece that actually supports that argument, outside of logically-flimsy comparisons between telecom services and the crappy, free shampoo you get at hotels:

“When you book a hotel, you expect ?complimentary? mattresses, sheets and towels, rather than renting each individually. When you go to a restaurant, you don?t pay extra to enjoy the use of a plate. And you get very testy indeed upon discovering that your bargain airline charges you to choose a seat or bring luggage. Bundling, it turns out, is valuable.”

So one, “hotels are really nice to not charge you to rent sheets” isn’t really an argument, it’s just words kind of stapled together. Including some crap shampoo the company pays a pittance for in bulk isn’t a “bundle,” and it’s not remotely comparable to the telecom and TV sectors, where consumers are often punished with higher prices when they try to buy standalone broadband and avoid services they don’t want and may not be able to afford. Yet the Post rushes forward with that comparison undaunted:

“Bundling is especially valuable in businesses where fixed costs account for a disproportionate share of the total price. Once you?ve gone to the monstrous expense of building and staffing a hotel, providing extra amenities generates little additional cost while adding a great deal of value for the customer. And the same is true of cable. Much of the expense comes from laying and maintaining a wire to your house; adding another channel is relatively cheap.”

That’s misleading. In the States, Americans pay more than a long-list of developed nations for broadband and TV service. The cost of deployment was covered by rates and taxpayers decades ago (and covered, and covered) in most areas, and while there’s certainly costs to maintain and support that infrastructure, profit margins on broadband (and phone service in particular) are arguably stellar. Phone service in the IP era in particular costs a pittance to provide, but prices for all three bundled services are artificially high thanks to limited competition in broadband and regulatory capture. Realities all ignored by the Post:

“Right now, cable companies sell you phone, Internet service and entertainment products, all of which share one wire, one maintenance operation and one customer service staff. Without those other services, the Internet division would have to cover all that overhead. So if you pay less for the entertainment, you?re probably going to have to pay more for connectivity.”

Again, that’s simply a bogus argument. TV profit margins are certainly getting squeezed as streaming erodes TV market share (which is why some smaller cable companies are considering only selling broadband), but broadband and phone revenues are as fat as they come. Just because an AT&T or Comcast customer decides to cut the cable cord doesn’t mean the company has to charge you more money for other services. They charge you more money (usually in the form of usage caps and overage fees) because there’s limited competition and they all but own many state and federal lawmakers.

From there, the piece settles into the lazy, trendy media hot take that cord cutting doesn’t save you money anyway:

“Start adding up the cost of the subscriptions you?d need to replicate your current viewing habits, and you?ll quickly see that it looks…surprisingly like a cable bill.”

We’ve noted time and time again how that claim (“when you sign up for every single streaming service you pay a lot of money!”) doesn’t hold water, and if you spend more than twenty seconds with real consumers they’ll consistently tell you that cord cutting saves them plenty each and every month. All told, trying to argue that consumers really secretly love overpaying mammoth telecom and media monopolies is just a bizarre hill to die on, especially with so many other pressing issues of the day worth opining on.

Filed Under: broadband, bundles, megan mcardle, monopolies, monopoly rent