The Cable Con; Prices are Unjust and Unreasonable on All Services: Full Rate Cases and Investigations Need to Start Now.
This is the 4th story in a series to supply an alternative 5-year broadband plan for America based on actual facts — and a roadmap for solving the Digital Divide.
This is Part IV and we will consider:
- Is a 90+% profit margin on the Digital Voice and Broadband-Internet Service Excessive?
- Made up Fees are actually considered ‘revenues’ and therefore are taxed and fee’d and paid by the customers.
The Big Question: How can the average ‘triple play’, (cable, phone, and internet-broadband) be about $35 a month overseas, according to the EU Commission, while the average price in the US is around $220 a month?
The Big Cable Con Has been Redacted.
At the core, if we were to ask for the data and financials via a FOIL request, for the years 2022 or over the last decade, it would look something like this.
This picks up on the discussion of how the cable companies in NY have been redacting critical information: EXPOSED: For 14 Years, Verizon NY & NY State have Hidden and Fully Redacted Verizon NY’s FIOS Cable TV Annual Financial Reports, and the other Cable Companies’ Books.
Ironically, the reasons why America’s communications customers are being gouged compared to overseas is:
- Cable companies charge retail rates for services provided by their subsidiaries that are using the cable wired networks, and these subsidiaries only pay a fraction of the expenses, and prices should have been based on ‘incremental’; i.e; if the cable side is paying the majority of expenses, the new services should have been priced based on the costs, and not a made up fiction.
- Conversely, according to these unredacted Comcast NY Cable TV service reports, the other lines of business, Voice service and Data service, can have a 90% operating profit margin.
- In the US, we have had a pile on of 10–20 additional fees, taxes, tax on taxes, made up fees with no required cost requirements or justification, etc — most of which are charged to the company but allowed to be passed on to you.
- Continually raising rates claiming, “effective competition” or “harvesting”, to force customers onto wireless services.
- The Providers can hide and remove basic information since they have gotten the FCC and the state regulatory agencies to redact all of the financial information.
- They have done this over the past 2 decades with no ‘institutional memory’ to hold anyone accountable or to even have the new Digital Divide and Equity players understand how the Divide occurred in their state or who is responsible.
But it is the Unredacted Comcast NY Financial report that should be the reason we need these financial cover-ups uncovered.
This chart was derived from the Comcast NY financial cable reports for the years 2011 and 2012 and given to the NY Department of Public Service. As we discussed, these are the last unredacted financial reports from the major cable providers in NY State. By 2023, all of the large cable companies were able to redact virtually all of the current annual reports, which we discuss in a moment.
But, these basic facts from the Comcast Financial Reports, show that the “Voice” offered services as well the Comcast basic “Data” services, such as Xfinity, had a 90% profit margin for ‘operational revenues and expenses’ — with no audits or investigations — and the documents are now redacted so that this basic information has been hidden from view. This lack of financial information must be dealt with in 2024, so that independent analysts can see the details of this massive financial shell game — which we will now discuss.
Let’s Backtrack to discuss the Communications Price and Affordability Break Down.
This is PART IV. This is what we have covered so far.
We filed comments in 4 states explaining that their 5-year broadband plans lacked essential material facts, such as even mentioning the name of the largest state telecommunications public utility that had obligations to upgrade the state multiple times since customers were charged for the networks, and unfortunately, what was being built has been diverted, not to their home but to build out the cell network , it appears.
We used an AI program to ask the plans specific questions and then compare the answers with what we filed over the last two decades.
We uncovered that the cable companies in NY State are required to do an annual report, which supplies not only financial information but also the number of subscribers and miles of fiber installed in the franchised areas.
Verizon NY has a separate subsidiary for FiOS Cable TV Service, but it appears it is somewhere as part of the state telecom utility — a fact that is never discussed. The redacting of these reports of Verizon cable has been going on for over 14 years in a phantom proceeding where there are no comments filed or even a party list of who has filed comments, even though there have been 1,185 filings since 2009.
3) COMING: PART III: Examining the Verizon Communications Annual Report and the harms from Verizon’s focus on the wireless network instead of the East Coast fiber wireline network and the state telecommunications utilities the company controls — from Massachusetts to Virginia.
Previously, we focused on Verizon and their FiOS fiber optic networks, which were supposed to be upgrading the copper wire to the home, and then how the new FWA wireless is a bait and switch — and the redacted reports of Verizon cable TV service would prove — or disprove whether there have been violations of the laws for the last 2 decades.
Let’s start again.
The Non-Redacted Pages for the Subsidiaries Operating Revenues and Expenses
The cable TV books for Comcast were not redacted in 2011–2012 — and the opening chart reveals very serious cross-subsidy issues, anti-competitive issues — and unjust and unreasonable rates.
(This is the same opening chart which we scanned from the originals, but with the chart we rounded some of the numbers for ease of reading and explanation.)
This is the presentation in the Comcast Reports.
Some basic points:
- This is in a separate section of the Comcast NY annual report and the cable revenue and expenses are not intermingled with these data financials, and these other “operating revenues” for “other services.”
- The profit margins — revenues minus expenses, are obscene. First, these are still essentially franchised utility services, (cable was previously rate regulated) and here we see that the subsidiaries — the voice service and the broadband internet service, have profit margins of 90%,
- (We have no idea why there are wild fluctuations between the years for the expenses.)
- The standard profits historically of the utility services ranged from 10–15%, not 90%, though due to deregulation some items, such as ‘calling features’, like ‘call waiting’, cost less than a cent to offer but can now fetch $4–9 a month on the telecom side.
The Foundation of the Con Game — The Affordability Gap.
There are a few primary reasons why America is being hosed.
First, in the EU , the regulators actually did their job and did not let the corporations just add charges to the bills such as — made-up fees or let parts of the regulated service become ‘deregulated’ — a euphemism for ‘they let them raise rates continuously’.
So, the chart below shows the pain by 1000 cuts each year as the companies keep adding made-up fees, or are able to ‘deregulate’ the equipment, or charged customers per device, or etc., etc.…
“No Gimmicks” Overseas Prices. As one senior couple living in France wrote — “There are no gimmicks, ever”. The VAT tax is included in the advertised price and there are no other charges. There are no equipment charges as you can’t use the service without the proper set top box with some viable systems. And in this case, after a year the price went from 29.99 Euros to 39.99, all clearly laid out in the advertisement.
How did we get to this point that tens of millions of people can’t afford broadband for their family?
Basics: Prices for Double and Triple Play and 5G wireless overseas and in the US.
We wrote these articles previously to cover the research and findings and highlighted pricing for the double and triple play as well as 5G wireless and used reputable sources, from the original web sites and customer bills to other research from the EU and Rewheel Research, who has been collecting wireless service information for over a decade.
America’s Egregious Broadband Rates vs Overseas Prices. Why?
- The triple play is about $30-$40 a month overseas — focusing on the EU.
- In the US the triple play averaged $220.00 (according to Consumer Reports) and our research
We also examined Wireless services.
Verizon’s Wireless Overcharging per GB, 7,400%-to-65,000% vs Overseas Prices.
- Wireless can be under 20 bucks for over 1000 GB — unlimited.
- Spectrum is selling a service for $14 per GB, and the average can be (2–10?) a month per GB, though ( it caries?) by sales and promotions.
The French Free Service: No Gimmicks.
In the French Free Service, which was based on an actual service, in use — it is a 5 Gbps fiber to the home service, with the triple play — phone, internet, broadband and cable service for 29.99 Euros, then up to 39.99 Euros a month. The US dollar is $1.10 for 1 Euro as of February 2024.
That means that the reason we’re being gouged not once, not twice, but 10–20 times a month through made-up fees, rate deregulated products, like the set to box, that used to come free with the service, and also every possible tax and service charge has been dumped onto the customer.
The Big Con Game: Charge Retail Rates for Services Provided by Subsidiaries that only Pay a Fraction of the Expenses.
But that is only part of the Con. This chart has at the top a summary of the basic, basic, plan fees for the triple platy — which is not easily found on US bills. It is $44 dollars vs $157 dollars — That is an additional $113 a month for the basic package.
Now for the Kicker — and you’re not going to like it.
Cable TV is the basic service that the entire wired networks were to be used to deliver clear reception — it was because the older, over-the-top rabbit ears models did not have great reception since it was delivered over the air and thus subject to interference — or could not deliver more channels.
And cable service uses a ‘coax wire’, more powerful than copper but not as powerful as fiber optics. — but it also was designed to deliver multiple channels of cable programs and broadcast channels, not voice over internet voice calling or broadband access, internet streaming, and definitely not 2-way services, though it still can handle lots of data, etc., and every few years they announce a breakthrough for bi-directional speed.
The cable and telephone companies were restricted from entering each others’ service markets because of their monopoly abilities — but by the 1990’s, the doors opened with the passage of the 1996 Telecom Act.
The secret is, even if they were using the wires and all of the facilities and did not have to build anything — they got to charge a separate retail price — even though it was a monopoly wire and therefore a monopoly product.
And the Internet and all other services have been allowed to charge a ‘retail price’, and ‘retail expenses’, and retail added taxes — when it should never have been allowed to happen — period.
In 2015, 9 years ago, we filed a Petition for investigation and what we found, which was a 97% profit margin for these services.
Time Warner Cable’s 97 Percent Profit Margin on High-Speed Internet Service Exposed
In our Petition for Investigation of Time Warner Cable (TWC) and Comcast, we point out that TWC’s High-Speed Internet service had a 97 percent profit margin and a number of people asked how that statistic was derived. Simple. Time Warner Cable provides the information, (with some caveats).
These numbers are crazy as they show that high-speed had revenues of about $40 but cost less than $1.50 to offer — a profit margin of over 95%.
Time Warner removed these financial breakouts the next year but…
Pause. The opening chart of the Revenues and Expenses for Comcast NY, for 2011 and 2012 mimics these findings directly.
This chart of Time Warner takes the argument directly to the core costs of the triple play overseas vs what America is actually paying and substantiates our call for the need of a rate case and investigations to lower prices and remove all of the made-up fees.
But it also must examine this massive markup of the price and hold the subsidiaries accountable to pay for their use of the networks — like any other competitor would have to do.
Thus, the charge for the core triple play in the Spectrum NY market costs $157, while the entire package, which includes the triple play, and fiber optic speeds for $44 in our Free model indicates that the services are based on incremental costs — i.e., that the voice service in the package is not based on a separate ridiculous retail price, and this applies to the broadband-internet service.
But, then we have the difference left — of all of the additional charges — this added almost $70 dollars to the price of the triple play, from the $27.90 for the ‘Broadcast and Sports fee’, or the lesser ‘cost recovery fee’ or pass through charges, not to mention the charge for the set top box.
This is a cautionary model as it requires the full audit and investigations to get to the actual costs and the actual revenues, and which financial buckets are helped or harmed..
Conclusion Part IV:
- The difference in the price of services overseas and America is ludicrous and on its face, it needs immediate investigation and rate cases.
- The price differential between an EU triple play, with an average of $35 dollars to the average of $220 in the US a month is outrageous.
- America is paying over $150–200 dollars extra a month for the triple play, and there is an enormous overcharge on every service compared to the EU prices.
REASON ONE: We been Taxed, Fee’ed and Surcharged, since everything got ‘deregulated’
- There are over 10–16 different charges on the US triple play bill including made-up fees, pass throughs, taxes, fees and surcharges, which are then applied to the other fees, as well franchise fee and other city and state charges.
- America’s regulators, politicians and the various media and nonprofits have been corporately captured and they have thus been allowed over the last 2 decades to slowly add charges for items they should be paying for as a business expense. Moreover, the deregulation of the set-top box, modem and charging for every device and added service, then have all of the taxes applied and therefore have made a mockery of the terms ‘just and reasonable.
- On top of this we have the creation of the ‘Social Contract…. On America’, which was a charge adding up to 5 dollars that was supposed to be temporary and end in the year 2000; but the problem is, it was never taken off the bill.
REASON TWO: RETAIL PRICES FOR SERVICES: THE SUBSIDIARIES NEVER PAY MARKET PRICES TO USE THE NETWORKS — 90%+ PROFIT MARGINS
The prices are ludicrous, the profit margins of the other services using the cable networks makes it all unjust and unreasonable.
- It appears that for the last decade, at least, the ‘subsidiaries’ offering voice service, internet-broadband access service, and even wireless, (among other services) did not pay market prices to use the networks and therefore had obscene profit margins.
- The redaction of basic financial information hid these excess profits of these other services, as well as other critically important data on subscribers and coverage.
- In the previous articles we highlighted Verizon and its FiOS cable TV and the telecommunications networks, which we will address separately.
PART V: Connecting the dots to ACP, Net Neutrality, BEAD funding, regulatory capture and next steps.
