This is how internet companies raise prices by $50 without anyone noticing
By Chris Mills
We hear a lot about deceptive billing practices and bad customer service in the cable industry, but it’s not often we get to see such a carefully masterminded scheme to increase prices without anyone really noticing.
Over the last few months, Cox has pushed a one-terabyte data cap to customers in the majority of states it serves, including Arkansas, Connecticut, Florida, Georgia, Idaho, Iowa, Kansas, Nebraska, Ohio, Arizona, Louisiana, Nevada, and Oklahoma. Now, just a couple months after bumping customers from an unlimited service to one that’s metered, Cox is introducing a “new” unlimited broadband add-on, which costs $50 on top of the basic plan.
Make no mistake about it: Cox has gone sideways to end up at a point where, to get the same plan that you enjoyed a year ago, you have to pay $50 more. That’s the opposite of what’s supposed to happen.
Cox is framing this as a move that’s about fairness, and a spokesperson said that the move will only affect “the very small percentage of broadband customers who exceed 1 terabyte of usage per month.” We’ll come back to that part later, but for now, let’s consider how this move works for Cox.
You might be shocked to hear this, but charging different internet users a different amount of money based on their usage isn’t an entirely ridiculous proposition. A small handful of users may well be using the network more heavily, and a pricing structure that reflects the usage isn’t ridiculous.
But here’s what should happen, if the laws of competition actually applied to home broadband. Low-use customers would get a price cut to reflect the low usage, and everyone else would continue to pay the same amount of money for the unlimited plan that they signed up for. T-Mobile, by the way, does this on its unlimited mobile data plan: anyone who uses less than 2GB of data per month gets a $10 “Kickback”.
Instead, Cox is charging all its customers the same amount of money for a lesser service, and has raised the price of its unlimited data plan by $50. Over the same time period, the cost (to Cox) of every gigabyte of data hasn’t changed. If anything, it’s gone down. The only pricing difference is that now Cox will collect $50 more per month from around two percent of its customers.
Now, there’s a fair chance that you use less than a terabyte of data per month, and this change doesn’t affect your life — yet. The thing is, if the historical trend continues (and every shred of data suggests that it will!), average household data use will continue to skyrocket. Data traffic across the internet increased by a truly staggering 56,277% — yes, you read that right — between 2000 and 2014. Average data use went from 9GB per month in 2009 to an estimated 190 gigabytes per household last year. Depending on what estimate you use, that means that average household consumption should …read more
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