Why your cable TV bill will never get cheaper

MarketWatchJune 24, 2012 

While the fierce competition between cable companies and online-video services should be good for consumers, experts say it may end up raising both TV and Internet bills.

The Justice Department is conducting a wide-ranging antitrust probe into whether cable companies collude to restrict competition from online-video providers like Netflix, The Wall Street Journal reported. Cable companies want to cap data downloads among heavy users, which would impact those who’ve abandoned pay TV in favor of streaming shows and movies over the Internet.

Though more people have “cut the cord” in recent years, analysts say it hasn’t resulted in the price cuts many expected. “Cable prices won’t go down unless cable investors get hurt and that will only happen when even more customers cancel their cable,” said technology analyst Jeff Kagan.

Nine percent of homes with televisions cut their cable services in 2011, while an additional 11 percent said they planned to do so, a survey released by Deloitte earlier this year found.

Despite this, cable prices doubled over the past decade, Kagan said. Customers have been complaining about price increases for years, he added. “This is backwards compared with other technologies, but cable television pricing continues to go up,” he said. And they may double again in the next decade.

Keith Nissen, research director at NPD Group, predicts bills will hit $200 a month by 2020 – up from the current average of $86.

In light of the Justice Department’s investigation, cable companies may look for other ways to maintain their revenue and market share.

One option: do what cellular networks are doing and move toward usage-based pricing for broadband Internet, said Craig Moffett, senior analyst at Bernstein Research. The shift to usage-based pricing would be good for the cable operators, but bad for consumers who want to watch more on-demand television online, he said. This would also slow the pace of innovation within the industry, he says, and make it more difficult for Apple or Google TVs to get widespread and cost-effective access to cable video feeds.

TV and cable networks also have no interest in lower prices, experts said. “The companies are caught in the middle and have to pay more year-after-year to networks,” Kagan said.

Netflix, Time Warner and Comcast did not respond to requests for comment.

Cable companies have also responded to the competition with their own new tech offerings like apps that allow viewers to watch TV on multiple devices and video-on-demand, said Brian Dietz, a spokesman for the National Cable & Telecommunications Association.

Google and Apple – which both have streaming video offerings – may be in the best position to upset the status quo, he said. “These two companies changed the wireless space,” Kagan said. “Perhaps they can change the television space as well.”

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