A Philosopher's Blog

How Comcast & Century Link Lost My Business

Posted in Business by Michael LaBossiere on May 10, 2013
English: Comcast service van, Ypsilanti Townsh...

(Photo credit: Wikipedia)

Like many places, Tallahassee has one cable provider. This is, of course, the often reviled Comcast. For quite some time people had the choice of Comcast or nothing, but the rise of DISH TV provided some competition in the TV area. Century Link also recently entered the battle with PRISM and they have offered DSL for a while.

When I moved to my current house I was married and my wife had a deep and abiding love of TV, so we got Comcast cable. We also got a land line phone, since this was well before the days of the mobile phone. When broadband internet became available, I added that that via the only option in town: Comcast. My phone service went through various providers as this company bought or merged with that company, finally resulting in Century Link being the one sending me bills.

As the years passed, I noticed that the bills always went up, although the service provided was the same. Then I noticed that the bills started going up far more frequently, despite the fact that what I was paying for was the same. When my land line bill hit $45 for the basic service, that was that-I went with a mobile phone that provides unlimited data for $35 a month and set up Google Voice with a VOIP adapter (the OBI 100) so I could still have a home phone that worked (more or less) as a home phone.

For Comcast, the final brick that broke the camel’s back was when they started billing me $1.99/month for the digital adapters that had been “free” for the past three years. While I do understand charging for premium equipment, charging extra for what is needed to even use the service pushed me over the edge and that was it for cable TV. While I will miss a few shows that I cannot find (legally) online, most of what I used to watch is readily available online. For free. Most networks now have their own streaming shows, plus there is Hulu. I already had Amazon Prime and Netflix, so I don’t really miss the TV. I sort of miss CNN, but not really.

My situation got me thinking about more general matters, such as how companies can hurt themselves. In the case of Comcast and Century link, they face many problems, some of which are self-inflicted.

One obvious problem is that they increase the cost of their services relentlessly while not offering customers any greater value in return. While I get the need to deal with inflation, the increase in the bills seems to be rather out of proportion to inflation. For people like me who do not get regular cost-of-living pay increases, these increases are especially bad-the increasing bills are push towards a non-increasing salary. Not surprisingly, people do elect to cancel services.

It might be replied that these companies are only raising prices because they must-they have no choice in order to keep up with inflation and other cost increases. However, as my friend Ron always notes, when people cancel a service like cable, they are often offered  better deals to stay. As Ron says, if they had offered him that deal before, he would not have cancelled. This sort of thing indicates that they can actually offer the services without such relentless increases but chose not to do so.

One point worth considering is that perhaps companies are following not a stupid strategy, but a clever one. Some years ago, I needed repairs done on my house and got some estimates. One contractor’s estimate was three times that of the others. Naturally, I went with a lower estimate. While the contractor’s approach might seem like a bad idea, it could actually be a good approach. After all, suppose that the contractor charges three times what other contractors do and only gets one third of the jobs they do. He actually comes out ahead, since he does a third of the work (in hours) for the same income. Perhaps Comcast and Century Link have the same approach: when they raise their prices, they lose customers. But, perhaps this is offset by the decrease in their operating costs. So, if Comcast loses X dollars because customers cancel due to bill increases, but the money they get from the increase paid by remaining customers and the lowered expenses from having fewer customers results in them making that X back (or better), then that was a smart move. Of course, they have to be careful to avoid losing too many customers and they probably have to worry a tiny bit about people saying bad things about them.

Another obvious problem is that companies like Comcast and Century Link that increase the cost of TV and phone service run the risk of losing out to alternatives. As I noted above, when my phone bill hit $45 a month, it made more sense for me to abandon Century Link and go with Google and Virgin Mobile. In the case of Comcast, I am still stuck with them as my ISP, but I can do without TV thanks to the internet. It was not so much that I just wanted to not pay anything-I was willing to pay a reasonable amount for cable TV and a land line. But, the relentless price increases convinced me to scrape off the leeches.  If I am not unusual in having such a breaking point (at which doing without or finding alternatives beats paying a company), then companies like Comcast and Century Link will need to approach the future cautiously-they might price themselves right out of profits.

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15 Responses

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  1. FRE said, on May 10, 2013 at 12:32 pm

    In areas where there is competition for cable TV and for ISPs, the prices charged are lower.

    I dumped Comcast about four years ago when the service became unreliable. I was getting TV cable, Internet, and telephone service from them. All three would go down multiple times per day. Every time they sent a technician to the house, the problem was found to be a noisy signal, yet every time I ‘phoned to report a problem, they insisted that they had to send a technician to the house and that I had to be a prisoner in my house until the technician arrived. Even ‘phoning them was a time-consuming ordeal because I had to endure answering the same time-consuming questions each time after holding the line to talk to a person. I dropped them. For TV, I am now using a roof-top antenna which provides excellent reception of many channels.

    Even now, I am paying too much. For land-line, cell, and Internet service, I am paying about $144 per month.

    Compare the cost of cell phone service here in the U.S. with what people in third-world countries are paying. When the garment factory in Bangledash collapsed, it turned out that many of the very low paid factory workers had cell phones. With the low wages they made, they could not possibly have afforded cell phones if they had to pay what we pay. There is something very wrong.

    • WTP said, on May 10, 2013 at 10:20 pm

      Maybe, and I know I’m going out on a limb here, the US cell phone company workers have first world quality health care, are taxed to support a much more robust infrastructure, etc. These costs get passed along to the consumer. I would also be very surprised if those people in Bangladesh have phone systems anywhere near as reliable, nor have the data bandwidth that you are paying for. And there’s much more where that comes from, including taxes and associated bureaucracy. The consumer pays for these things, both the good and the bad.

      • FRE said, on May 11, 2013 at 4:47 pm

        That’s certainly possible. It is very difficult to get such information.

  2. ajmacdonaldjr said, on May 10, 2013 at 1:08 pm

    Internet television is the way to go. Cable is on the way out. I never have paid for television, because I never had cable. I refused to pay for television, I never have and I never will. Who would have guessed peoples would ever pay for commercials? Wasn’t the selling point of early cable that it was commercial free? since peoples were paying for it? and commercials weren’t necessary? Yet look at peoples today: they pay for television with commercials. The cable television producers must be laughing all the way to their banks.

  3. FRE said, on May 10, 2013 at 1:18 pm

    One thing that reduces the time I spend watching TV is the aggravating and insulting commercials. It seems that they cannot advertise anything without having annoying noises in the background such as beating, clanging, or thumping. The message sounds like someone cheering on a 10 year old soccer team, or worse. The ads seemed to be aimed at 10 year olds; apparently the advertisers don’t understand that 10 year olds don’t buy cars.

    In addition to advertising products, news programs advertise their own station over and over and over again. Presumably we watch news programs to get information, not to listen over and over to what is coming next or listen to how popular the program is, or to jokes.

    I know many people who no longer even have a TV set, not because they cannot afford one, but because of the low quality of the programming. If TV loses out to the Internet, it will be because TV has become a huge waste of time. I’d guess that the time required for a news program could be cut to one third of the length and still convey the same information.

  4. larryjben said, on May 10, 2013 at 3:09 pm

    Interesting post. I personally continue to operate on the old premise “the customer is always right” . Some would be surprised at what you can get from these corporations if you just speak up and stand your ground. As for raising prices to the point of controlling costs at a profitable level, this brings in to mind the economic law of diminishing returns. There are cases where companies increased profits by lowering prices for their services.

    • FRE said, on May 10, 2013 at 3:33 pm

      It all depends on the elasticity of demand. Increasing prices of a product or service will reduce the quantity demanded. Decreasing prices will increase the quantity demanded. That’s economics 101.

      If increasing prices increases revenue, the demand is said to be inelastic.

      If increasing prices decreases revenue, the demand is said to be elastic.

      For maximizing revenue, there is an optimum price dependent on the demand curve. Companies seek to find the optimum price. The matter becomes more complicated if there is competition because then, increasing prices will cause customers to turn to other sources. So, unless there is collusion, competition tends to keep prices lower. Also, if different providers provide similar but not identical products or services, comparisons may be difficult.

      • larryjben said, on May 10, 2013 at 3:38 pm

        Well to give a simple example of what I was talking about ; a bus line increased profit by reducing prices.

        • FRE said, on May 10, 2013 at 3:43 pm

          That’s a good example of elastic demand.

    • Michael LaBossiere said, on May 10, 2013 at 4:43 pm

      True-someone who is willing to call in with a threat of cancellation can negotiate some good deals. But, I usually prefer to cancel-since those good deals will fade with time and they’ll be back to their old ways. It is rather like a bad relationship: when a person says “I’ll be better from now on”, they often mean it…for a while.

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  7. Sparky said, on June 2, 2014 at 11:46 am

    HELP. My Mom never has a working phone or internet. We’ve been through Century Stink and now Comcast. Shes in Tallahassee. Im trying to figure alternatives for her. Any successful bundles out there? Thanks for any suggestions.

    • Michael LaBossiere said, on June 2, 2014 at 6:25 pm

      Perhaps AT&T, although Comcast and Century Link seem to be the main two options. Which all seem to hate.

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