Hidden Fees Adding Up

Consumer Reports recently published a special report titled “What’s the Fee?: How Cable Companies Use Hidden Fees to Raise Prices and Disguise the True Cost of Service”. Cable companies have advertised prices for many years that are significantly lower than the actual bills customers see – but the CR report shows that the size of the fees has grown significantly over the last few years.

The report lists several specific examples. For example, the broadcast fee and the regional sports fees at Comcast increased from $2.50 in 2015 to $18.25 currently. The broadcast fee supposedly covers the cost of buying local network channels – ABC, CBS, FOX, and NBC. The regional sports fee can cover the cost of channels carrying regional college and pro sports. In both cases, the cable companies never disclose the actual fees they pay that are covered by these fees.

The report shows that Charter increased its broadcast fee three times in the last year, starting at $8.85 in October 2019 to reach $13.50 per month in October 2019.

It’s not hard to understand why customers are confused by the many fees. The report points out that some cable bills have more than a dozen line items, which are a mix of rates for products, external taxes and fees, and these various ‘hidden’ fees – meaning they are usually not disclosed when advertising the products.

In addition to the Broadcast TV fee and the Regional sports fees the report lists the following other fees:

  • Settop box rental fee. This is to recover the cost of the settop box hardware. For many years this fee was around $5 monthly for most cable providers, but this is an area that has also seen big price increases in recent years and the highest rate I’ve seen was $12 per month. This is to recover a settop box, which for small ISPs costs a little over $100, and must cost less for the big cable companies.
  • Cable Modem / WiFi Router. This is the fee with perhaps the biggest range of pricing – some ISPs don’t charge for this while others are charging more than $10 per month.
  • HD Technology Fee. This fee used to be charged by almost every cable company back when they started offering HD channels (a decade ago many channels were offered in both an HD and an analog format). Now that the whole industry has largely gone to digital programming, CR reports the only company still charging this fee is Comcast.
  • Internet Service Fees. This is a relatively new fee that gets billed to anybody buying Internet Access. The report highlights the fees charged by RCN and Frontier.
  • Administrative and Other Fees. These are often fees under various names that don’t cover any specific costs. However, some fees are specific – I just read an article describing a $7 fee to business customers by AT&T in California to recover property taxes.

Consumer Reports collected a number of sample bills from customers and reports that the average monthly company-imposed fees for the bills they analyzed averaged to $22.96 for AT&T U-verse, $31.28 for Charter, $39.59 for Comcast, $40.16 for Cox, and $43.79 for Verizon FiOS. They estimate that these fees could total to at least $28 billion per year nationwide.

To be fair to the cable providers, these fees are not all profits. The companies pay out substantial retransmission fees for local content and pay a lot for sports programming. However, some of the fees like settop box and modem rentals are highly profitable, generating revenues far above the cost of the hardware. Some of the fees like administrative fees are 100% margin for the companies.

Consumer Reports advocates for legislation that would force cable companies and ISPs to fully disclose everything on bills, similar to what happened with the airline industry in 2011 with the Full Fare Advertising Rule. CR believes that the FCC has the authority to require such transparency without legislation.

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