How Much Does a Cable Box Really Cost? The Industry Would Prefer You Don't Ask (latimes.com)

The FCC chairman insists that he is driven by a market-based approach to regulation. In a story, published Tuesday, an LA Times columnist uses the simple example of set-top boxes to argue the agency has, instead, been captured by the industry it regulates. From the story: Spectrum TV and internet customers will see their rates go up again in November. Among other increases, the broadcast TV surcharge will rise to $9.95 from $8.85 a month, and the monthly fee for a set-top box will jump to $7.50 from $6.99. It was that last charge that got my attention -- and got me thinking about the economics involved. How much do cable boxes actually cost? Why do their monthly fees keep going up when the cost of similar technology, such as TVs and computers, goes down over time? Not surprisingly, my attempts to answer these questions were met with stonewalling from industry players.

Spectrum, owned by Charter Communications, the dominant pay-TV company in Southern California, clammed up real fast when I asked how much they pay for the boxes they lease to subscribers. Nor would it comment on how much cash flow the boxes generate, or why fees keep rising even as the number of residential TV subscribers dwindles (down 66,000 more in the third quarter). Dennis Johnson, a company spokesman, said only that the 7.3% higher box charge in November -- more than three times the inflation rate -- represents a "modest increase" that is "comparable or even lower than our major competitors."

Comments

This is why cord-cutting has become common

[SuperKendall]

That was one reason I stopped using Cable TV services, I could not take the recurring cost of a cheap ill-made box with a terrible UI.

I would way rather spend more one time on my own box, as I do with cable modems - at least then I haves some control over quality and will not be paying a huge amount over the lifetime of use.

I have to think that a lot of people do not like TV services gated through a crappy cable company box and that is doing a lot to increase the number of people unsubscribing from cable TV content.

Re:This is why cord-cutting has become common

[Anonymous Coward]

I too used to do that. But now I would barely break even on the price of the modem by the time my service got upgraded and I needed a new modem. So I could keep buying new modems every 4-5 years, and have to worry about replacing it out of pocket if it ever craps out, or I can get one from the ISP and let them worry about replacing it if it craps out and they'll give me a new modem if I get upgraded service that the older modem cant handle.

My current ISP also doesnt charge for modem rental, so theres that too.

Re: This is why cord-cutting has become common

[Anonymous Coward]

That's a big thing. Out here they charge $10 a month for the box, when a quality modem is $90. They use bundled modem + router boxes, and the routers are awful, they're missing standard features, they can't cope with more than one Xbox running at once, for instance.

Luckily we've got fiber now, and despite having specialty hardware and no competition they don't pull these games with "rental fees" and shit.

We all know the truth

[bobbied]

They are making scads of cash on these things and the price goes up because they need more and more revenue because the cord cutters are killing the top line.

Personally, I use only a cable card, which runs $4/month and get up to 3 channels of TV at a time. Still this is highway robbery, Cable Cards only cost a few hundred dollars and I know they have a pile of them just sitting there and they charge enough just for service to more than pay for this.

Just cut the . . .satellite. . . or cord

[bob4u2c]

I just canceled my account with DirectTv

I had a HD Tivo branded box, which about 5 years ago would have cost me about $300 (I can now buy one for $200). However, owning the device wouldn't stop their monthly tax of $15 ($10 for the DVR, $5 for Tivo service). On August 2nd they merged my account with AT&T's RC1 system and turned off the DVR and Tivo capabilities (all prior recorded content was also no longer watchable). After calling them about 7 times they told me their was nothing they could do and to stop calling.

So I did.

Instead I spent my time looking at streaming services, what we watched as a family, and what the costs were. I also ended up canceling my DSL with AT&T as well (they couldn't offer me speeds fast enough to stream tv).

My final solution was to go with Comcast for internet which is about $30 a month (40x faster than DSL for about 75% the cost). I bought a new modem for $75 shipped which supports downloads 10x faster than my current package (still way cheaper than paying their $11 rental fee on a modem). I already had a good wireless router and a 10GB switch which all worked with the modem.
I went with Sling for typical tv channels we watched at about $35 a month ($25 for the package, + $5 for kids channels, + $5 for DVR). I also bought a $90 Roku box (Roku 4, wired ethernet, 4K output, bluetooth remote).

So the breakdown of costs:
DirectTv + DSL ~ $132 per month.
Sling + Comcast ~ $65 per month (plus $165 one time equipment cost).

So in 2 1/2 months I will be in the black. I also now have way faster internet; and with streaming I can watch what I want when I want it. Roku also has a ton of old free shows and movies which I'm still binging on. I now no longer have any rental fee and I can cancel anytime I want with no penalty fees.

Still the best bit was calling DirectTv and canceling the whole thing. Then asking to be transfered to the DSL department so I could cancel that too.

Re:They need more and more revenue

[postbigbang]

Although CEO pay is certainly astronomical, there used to be public policy after the AT&T breakup to encourage customer premises equipment (CPE). Your own landline phone. The cable or set top box was an exception to owning your own stuff until sufficient commotion was made to let people have their own stuff.

If you have cable, you can very likely get your own stuff. Your local big box electronics retailer knows which one works with which provider in your area. It's fine to rob that provider of their insane rental monthly charges for cheapo routers, which is the point of the post.

And yes, they will nickel and dime their clientele because it beefs up the bottom line and pleases Wall Street and stockholders. This is not about consumers anymore, this is about a bought-off FCC and elected government in the USA. Ask questions, then: Vote.