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Cable Companies Refuse To Reveal How Much They Make Off Of Set-Top Boxes

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Sen. Ed Markey of Massachussetts and Sen. Dick Blumenthal of Connecticut recently posed a handful of questions to the nation’s cable and satellite providers about their set-top boxes — Are they required? How many customers have them? Is there an option for customers to purchase their own? etc. While some providers were more transparent in their responses than others, but one thing they all agreed on: We’re not telling you how much we make from leasing these devices.

For example, even though Comcast [PDF] says that virtually all 22 million pay-TV customers have set-top boxes, with a total of 59 million devices currently being used, and that the monthly lease per box ranges from $1-$2.50/month, it balks — citing “competitive sensitivity” — at providing the senators either the average per-customer revenue from these leases or the total revenue.

AT&T, which filed the response [PDF] before its merger with DirecTV was approved, likewise acknowledged that its entire U-Verse install base has a set-top box. While the company says the first device is provided at no charge, AT&T didn’t provide any information about the average number of devices per household or the total number of devices currently in use, so we don’t know how many U-Verse subscribers are paying $8/month for their additional set-top boxes. AT&T claimed it can’t share any more detailed information because it’s “commercially sensitive.”

Speaking of DirecTV, the country’s largest satellite service (and second-largest pay-TV provider) provides so little information it’s bordering on the deceptive. The only useful data in DirecTV’s response [PDF] is that customers lease “roughly 2.5 boxes per household” and that it charges $6/box, but it glosses over the all the related fees it charges for things like Whole-Home DVR service.

Verizon [PDF] is much more willing to break down the pricing of its boxes, DVR services, and number of TV sets involved, showing how FiOS can run you anywhere from $11.99/month for a single TV up to $85.99 for eight TVs with “Quantum Premium Service.” But once again, in spite of this info dump on Verizon’s part, the company joins the chorus of cablers refusing to say the average per-customer revenue or total annual revenue from leased devices.

The most amusing response comes from Time Warner Cable [PDF], who justified its refusal to answer virtually every question by stating that “TWC operates in a highly competitive market and does not make this information publicly available in the ordinary course of business.” [bolded for emphasis].

That’s right, Time Warner Cable, whose $45 million merger with Comcast failed because of an obvious lack of competition in the cable marketplace, is apparently hoping that if it repeatedly states that it “operates in a highly competitive market,” it might come true.

After looking at these responses — and others from Cox, Cablevision, Charter, Brighthouse, Cox, and Dish — Sens. Markey and Blumenthal did their best to estimate how much these companies are making based on what little information they provided.

By their math, the average pay-TV customer will spend around $89/year for a single set-top box. And since the average household with pay-TV service has approximately 2.6 boxes, the senators estimate the average yearly cost of having these cable boxes is around $232.

Figuring that, between all these companies there are some 221 million set-top boxes being leased in the U.S. right now, that would put the industry’s annual revenue at nearly $20 billion.

While the senators understand the technological need for having a set-top box, they believe that consumers should not be forced to lease just one or two models made available by their pay-TV provider.

“Consumers should have the same range of choices for their video set-top boxes as they have for their mobile phones,” said Senator Markey in a statement. “When Congress last year regrettably removed the requirement that cable company services be compatible with set-top boxes purchased in the marketplace rather than rented directly from the provider, we doomed consumers to being captive to cable company rental fees forever. We also endangered a competitive set-top box marketplace, replacing consumer choice with cable company control. We need a new, national consumer-friendly standard that will allow consumers to choose their own video box irrespective from their pay-TV provider. Consumers should not be forced to rent video boxes from their pay-TV provider in perpetuity.”

Blumenthal says the $200+ annual expense on set-top box leasing is “unjust and unjustifiable. As the world becomes increasingly connected and technology advances, new innovations must be able to break into the cable marketplace and provide the vigorous competition that drives down prices for consumers. Consumers deserve competitive options in accessing technology and television – not exorbitant prices dictated by monopoly cable companies.”


by Chris Morran via Consumerist

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