Will the Fiscal Cliff Drive Cord Cutting?

December 30, 2012
By
Falling off the Fiscal Cliff

Will cable TV be a victim of the fiscal cliff?

As Washington prepares to drive us over the fiscal cliff, the impending tax hikes have pushed me to find ways to cut household costs (here’s a fiscal cliff calculator to see how much your taxes could go up). Looking at the family budget, cable TV is an obvious candidate to be cut. While cable TV is a luxury, the family’s Internet connection is now a necessity. The entire family uses it for both professional and personal needs. Therefore, while we would cut the cable TV package, we won’t cut the physical cord from our cable provider, Verizon FIOS. Despite being a misnomer, I’ll continue to call it cord cutting in this post.

If we go off the fiscal cliff, it could trigger an avalanche of cord cutters. Maybe the cable TV lobby could bring the needed pressure for a deal. Ironically, a significant drop in cable TV subscribers might have the unintended consequence of bringing cable companies and studios back to the table with Apple. Who would have thought the fiscal cliff could be the impetus Apple needs to launch its much rumored HDTV?

Cord cutting first entered my mind when our initial two-year contract with FIOS recently ended. In other words, the promotional rate was gone. Out of contract, going month-to-month costs just over $140 for our Triple Play package: 25/25 Internet, Extreme HD cable and the telephone land line. By renewing the contract and dropping down to the Prime HD package (and going to 50/25 Internet as 25/25 is no longer an option), I would save almost $20 a month. The downside here is the two-year lock-in in a marketplace that’s rapidly changing.

Switching to only Verizon FIOS’s 50/25 Internet package would lower my bill to about $80 per month without a contract (plus taxes). On the surface, eliminating both cable TV and the land line would yield about $45 in savings per month or $540 per year  ($720 versus the current month to month pricing). Yes, there are a few shows I want to keep up on, including Mad Men, Sons of Anarchy, the Walking Dead and Doctor Who. A quick back of the envelope tells me it will cost roughy $120 per year to purchase the shows through Amazon Instant Video. Alternatively, I could just wait a year for the shows to come to Netflix.

Other shows I like–including Downton Abbey–can be watched by hooking up an over-the-air antenna (OTA) to my TiVo Premiere. Right now, the only technical barrier to killing cable is figuring out a good way to run coax from the antenna to the living room (I need an antenna on the roof or attic to get a good enough signal). On the positive side, OTA offers great audio and video quality (1080i and Dolby Digital).

The land line can be ported to Google Voice for about $45 to $60. While Google doesn’t directly support porting your land line number, folks get around it by temporarily porting their number to a pay-as-you-go mobile provider.

So will killing cable TV really save that much? In my calculation above, I’m lumping in the cost of the land line. If you take that out of the equation (let’s assume it costs $10 per month) and the cost of purchasing the TV shows I like, the savings drop to $300 a year (committing to a 2-year deal on the Internet-only connection would save another $120/yr). There are other downsides too, such as losing the ability to subscribe to HBO for a couple of months to watch Game of Thrones Season 3. While I am paying for a lot of content I don’t watch, the folks at FIOS (and other cable companies) have structured their pricing so that cable TV becomes an incremental cost. At that point are the incremental savings really worth the hassle? For the moment, the decision is making me restless. Maybe watching some cable TV will help me get back to sleep…

Note: Story was revised after trying to sleeping on it for a night

Tags: Apple TV, cable, FIOS, Netflix, streaming, TiVo, Verizon

3 Responses to Will the Fiscal Cliff Drive Cord Cutting?

  1. JohnOCFII on December 31, 2012 at 7:40 pm

    Comcast just announced their yearly rate increase. Sigh. Here in Minnesota, unlike in many areas, the technical and customer service from Comcast is quite good, but, my goodness, the expense!

    All in, the January 2013 bill will be about $220 for telephone; Internet (roughly 20 down/3 up); and a pretty broad cable package including HBO. Here’s what I would like to pay:

    Internet: $70 (This would be more than Comcast suggests Internet is worth, but to me it is the most important component.)

    Voice: $20

    TV: $50 + 15 for HBO, or $65.

    I’m a reasonable guy. I’m willing to pay about $160 for these services. Paying $220 is a bit much. Maybe time to go back to Satellite, but I’d really, really miss my TiVo. No FIOS options here.

    • Gabe Gagliano on January 1, 2013 at 9:20 pm

      When I see those numbers, it makes me realize that my bill isn’t that high. My bet is that competition keeps the pricing down in my market. At my address I have the option of going with Verizon FIOS or Comcast. Comcast does offer good triple play pricing for new customers. But from what I can see the Internet speeds don’t compare w/ FIOS.

  2. Alana on January 27, 2013 at 5:50 am

    Looks like the fiscal cliff debacle was averted…I haven’t seen any changes in pricing as far as my service provider’s concerned, but then again, it could be too early to speak. What I can live without is cable ; as long as you don’t hike my internet prices by more than 50 percent, I’m good. This could give other service providers that much-needed motivation to come up with budget packages if prices DO go up in the next few months.

    Alana

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