You're Wired! Make a wish: Cable TV, phone and Internet are combining, creating one big pipeline into your home--and causing one big scramble for your money. Here's how to save 25% while becoming a truly plugged-in household.
(MONEY Magazine) – Dave Wisland, 53, runs a consultancy from his home in suburban St. Louis. He thought he needed SBC's high-speed Internet connection and two phone lines the way fire needs oxygen. But after his local cable-TV company introduced a cheaper high-speed Internet offering in his area, the eureka moment struck: Dave called SBC and threatened to switch. That persuaded the Baby Bell to immediately cut his monthly Internet-access bill by 30%, to $35 from $50. "I was prepared to walk," he says. "And they knew that."
Ahhh, clout. Even a year ago, your neighborhood communications conglomerate might've hung up if you made such a request. You had as much power to choose a phone or cable-TV or high-speed Internet provider as you did selecting a water company. Cable TV came from one local monopoly like Comcast; landline phone service came from another, a Baby Bell like SBC or Verizon; and high-speed Internet, if you could get it, usually came from, well, one of the above. Since there was no competition to keep them from boosting rates, they did. That's why today more and more households with phones, premium cable TV and top-speed Internet are approaching a distinctly dubious milestone--the $200 monthly tab.
But as Dave's experience shows, this is your moment. Cable companies are now undercutting one another by offering the so-called triple play (cable TV, high-speed Internet and Internet-based phone service) in one attractively discounted bundle. Awesome example: New York City's Cablevision in June announced a promotional price of $90 a month for television, broadband and Internet phone--30% less than the industry average for a package of like offerings. (All prices quoted in this story are before fees and taxes.)
And next year the Baby Bells, starting with Verizon, will begin selling TV services over their high-speed Internet lines. That's right: television over a phone company line. So listen to Dave. If you haven't sniffed around for phone deals lately, you haven't comparison shopped cable TV with satellite and upstart competitors, or don't know much about the wonders (and savings) of Internet phones, now's the chance to learn how to save 25% or more as companies duke it out for your dollars. Here's an overview of who's peddling what--and for how much--in video, voice and broadband, with a glossary to help you sort out the jargon and acronyms, and pointers on how to cut your bills.
SUPERSIZE THEE Take a look in the multimedia mirror and ask yourself: Do I really need TV, phone and high-speed Internet? This is the first step to lowering your costs. If the answer is yes, then it pays to go with a single company that packages all three. Mark Cooper, research director at the Consumer Federation of America, notes that if you piece together video, voice and broadband services using different companies, the bill adds up to $170 a month on average. But a typical package of those three services from one company would run $130 a month--a savings of $480 a year, or enough to download more than 100 pay-per-view movies. "The high-end subscriber," says Cooper, "is getting all the price breaks." And with one shop handling everything, there's only one call to make when things go wrong.
But there's a downside to bundles: paying for features that you might not really need or even want if you had your druthers. Many primo packages, for example, include video on demand (VOD), a nifty feature that lets you call up movies or shows at the push of a button. If you find you don't use VOD all that often, or you don't need, say, a premium sports or movie channel--another alleged "freebie" packed into bundles--ask about lower-tier bundles. Think bronze or silver rather than gold. Dave, for instance, recently cut his monthly cable TV bill by 35%, from $102 to $66, after his fresh-out-of-college son studied the family's viewing patterns and saw that they could live without HBO and other premium channels.
One more price trap: Bundles often include promotions that expire after a limited time, so always ask for the undiscounted tally for accurate comparisons.
It pays to shop, even when bundling. In most areas you already have a choice between a cable giant, like Time Warner Cable (a division of MONEY's corporate parent, Time Warner) and a Baby Bell that has teamed up with a satellite-TV service, like Dish or DirecTV. In some places you'll have upstarts that have built their own cable networks and are known in the industry as overbuilders. Each has advantages and disadvantages (see the table below).
Finally, it's okay to skip the triple play, but expect fewer discounts. Packages with just two services aren't always cheaper than going à la carte. Read on to wring the best deals for each service.
VID-E-DOH! If you want to blame someone for your monthly communications tab, point that finger at cable operators. Average cable rates have soared in the past decade--up 53% from 1993 to 2003, according to the Federal Communications Commission, or twice the rate of inflation. Yes, you're getting twice as many channels as a decade ago and cool features such as video on demand, but you're paying for every bell and whistle.
If you haven't already considered an alternative, you should. One cheaper option is satellite. DirecTV, for instance, offers a three-room setup with 115 channels, three receivers and a dish with no installation charge when you subscribe for one year for $40 a month. A similar cable package would cost $68 a month with Comcast in Boston and $79 with Cox in San Diego. Another plus: superior service, according to independent surveys of customers.
So what are satellite's drawbacks? You can't get video on demand. There's no high-definition television (HDTV) for local channels. And forget about broadband (although satellite outfits are teaming with Baby Bells to sublet this service so that they too can deliver the triple-play bundle).
If you want cable features and live in a market with an upstart cable company like RCN, Grande, SureWest or Knology, drop the established cable player, skip satellite and go with the newer operator. They offer the same stuff cable does, and their bundles and individual services are cheaper than both cable's and satellite's. In the Philadelphia suburb of Lansdowne, RCN delivers digital cable, a receiver and a remote for $52 a month. Local cable giant Comcast sells a similar package for $70.
Remember, these upstarts have the extra TV features that satellite doesn't, and they trounce cable in customer-satisfaction scores. Still, they're not yet big league material, as RCN's recent Chapter 11 bankruptcy filing suggests. Indeed, their services are available to just 5% of U.S. households (including New York City; Chicago; Washington, D.C.; Boston; San Francisco; and Austin). To find one in your area, call your local chamber of commerce.
VOICE CHOICE Phones are where the consumer has already benefited most from competition. Since the industry was deregulated in 1996, the average price of local phone service has dropped 14%, from $44.25 a month in 1997 to $38.22 in 2003. Long-distance bills have been halved to $13.33 a month, reports Sanford C. Bernstein.
More recent regulations have made it easier to transfer phone numbers to other carriers (what's called number portability), but rates are so low (and likely going lower still) that many people may be better off staying put. Still, if you're not home all day to use a landline phone or have the discipline to stay within your allotted minutes, consider going wireless. For about $40, the typical mobile-phone contract gets you 400 daytime minutes, free long distance and unlimited weekends and nights.
What about Internet phone service? See the box on page 108.
BROADBAND ON THE RUN In the race to offer high-speed Internet service, the cable guys jumped out of the gate faster than their telephone archrivals. The latter were plagued by installation nightmares and connection interruptions. But now phone broadband (known as DSL) is giving cable broadband a run for its money. DSL rates are quite competitive these days--$29 a month for the most economical version vs. $44 for cable broadband. If you already subscribe to one of the two, and the other comes to town, play them off each other. In some respects, DSL is superior to cable. Unlike cable, it uses connections that aren't shared, so download speeds are not affected by how many of your neighbors are online. Yet the farther away from town centers, the slower the speed. That $29 DSL service is too slack for downloading entire movies, but if you're just browsing the Web, DSL is a deal. And now that everyone is gunning for your business, deals are what it's all about.