Consumers are benefiting from competition between phone companies and cable operators when it comes to broadband pricing, but the same can't be said for pricing on TV services.
A report published by market research firm Pike & Fischer earlier this month notes that cable broadband prices have remained steady even though operators have been increasing speeds. The firm attributes this trend to more competition from Verizon's all-fiber network, Fios, which offers superfast broadband at competitive prices.
Average prices for cable modem service have remained steady at about $40 to $45 a month, the firm said. That's even as standard cable modem speeds have climbed from an average of 3 megabits per second in 2004 to between 10 Mbps and 15 Mbps today. Some markets are even able to get 50 Mbps.
"As Verizon has rolled out Fios Internet and TV services in more and more communities, the market has seen an increasing variety of prices and data rates, as cable operators respond to FiOS launches (and to a lesser extent similar services from AT&T and Qwest Communications) on an increasingly market-by-market basis," Mitchell Shapiro, a contributing analyst for Pike & Fischer said in a statement.
Meanwhile, consumers don't appear to be getting the same pricing benefits from competition when it comes to their TV service. Cable TV prices continue to rise. For example, Time Warner plans to increase its Triple Play Starter Pak to $116.95 from $114.95, while its standard service will go from $43.25 to $46.30 in most areas, according to a rate card distributed to customers. Some promotional prices are lower for new customers.
A Time Warner spokeswoman told the Times Herald-Record, a newspaper serving New York's Hudson Valley, that the price hikes were due to rising programming and operating costs. Cablevision will also be raising its cable television prices by an average of 3.5 percent, the Times Herald-Record also reported.
AT&T and Verizon, which offer TV service in some areas to compete with cable, have also been increasing rates and are expected to raise them again in early 2009. In October, AT&T increased the price for three new high-definition channels by $5 a month. And now some customers are receiving e-mails informing them that beginning February 1, 2009, the monthly rates for a few services will be increased, according to Engadget. For example, non-DVR set top boxes will cost $7 per month instead of $5 per month. And the price of the Movie Package will increase from $15 to $20 a month. And the Paquete Espanol package will increase from $10 to $15 a month.
Verizon's plans for rate hikes haven't been announced, but they're likely coming. Last February, Verizon raised the price of its Fios TV Premier tier by 12 percent. And word on the street is that the company will likely raise rates again in early 2009.
The Federal Communications Commission has been looking into the rising price of cable services for some time. But nothing has been done to curb the price hikes.
Of course, consumers could look for alternatives. As more Americans are hit by the economic downturn, some are turning toward the Internet and over-the-air TV as free alternatives. But broadband providers may soon put a kibosh on these free alternatives, as they impose service limitations like bandwidth caps and overage charges.