Many people may wonder why their home Internet services keep getting more expensive even though they aren’t getting much faster and even though carriers are implementing unpopular measures such as data caps. A new book called The Fine Print: How Big Companies Use “Plain English” to Rob You Blind by Pulitzer Prize-winning reporter David Cay Johnston makes the case that phone and cable companies have rigged the game against consumers by colluding with one another to form telecom cartels that don’t really compete with each other for home broadband services.
Yahoo Finance’s Daily Ticker says that one of Johnston’s prime examples of this is Verizon’s (VZ) deal “to sell its services using Comcast (CMCSA) cables” rather than continuing to build out its own FiOS network into more areas where Comcast has offers home broadband services. This past summer, the Federal Communications Commission and the Department of Justice signed off on a spectrum swap between Verizon and several cable companies that lets the companies jointly market each others’ services in markets where they aren’t directly competing with one another for home Internet services.
“The companies essentially have a business model that is antithetical to economic growth,” Johnston told the Ticker. “Profits go up if they can provide slow Internet at super high prices.”
Johnston’s book cites several alarming pricing trends in the telecommunications industry, including the following:
- “Since 1995, average cable prices have been rising 2.6 times faster than the cost of living, reaching an average of almost $53 a month for basic, no frill service in 2009.”
- “According to SNL Kagan, a market research firm, the average cable bill in 2011 was $78, almost double the price of $40 in 2001 and significantly higher than the FCC figure.”
- And finally, Johnston cites the example of a woman who used to pay just $9.51 per month in basic phone services who has seen her monthly bill swell to $38.90 in 2003, a high number even after adjusting for inflation.
Johnston says that this has happened because companies used their lobbying power to gain regulatory capture over the market, meaning that the current regulations have actually been designed to ensure the incumbent carriers’ long-term dominance rather than ensure actual free-market competition.