For more than a year now, phone giant Verizon has been convincing state and local officials to let it sell cable television services in their communities using the argument that the new competition will improve service and drive down prices.
So imagine our surprise when we learned that Verizon is planning to raise the rates on its FiOS television service in all those newly-competitive communities at the beginning of the year.
Verizon says the higher rates will only apply to new customers – at least for the time being.
The monthly price of Verizon’s FiOS Premier service, its most popular subscriber package, will go from $39.95 to $42.99. That is a 7.6 percent jump. The monthly rates for add-ons such as HBO and sports channels will also rise by $1 or $2 each. For a complete breakdown of Verizon's planned rate hikes, click here.
The company launched its FiOS TV in September 2006 and currently offers it in parts of California, Florida, Maryland, Massachusetts, New York, Texas and Virginia. The company says it holds video franchises covering approximately 3 million households in nine states and more than 100 franchise areas.
One expert we talked to says consumers shouldn’t get too excited about Verizon coming to their communities with promises of better service and lower prices for all.
“The pattern is already clear – and it isn’t a very good one,” says Mark Cooper of the Consumer Federation of America. “There might be a period of jostling where the existing local cable company might drop its prices slightly or improve its service a little. But it is very short term.”
Cooper says the biggest problem is Verizon is merely creating a duopoly with the existing cable company in the markets it is entering.
“In a duopoly, both of the competitors typically decide fairly quickly it is best not to compete aggressively with each other,” says Cooper. “A duopoly is not true competition.”
It should be noted that Verizon is no different from traditional cable companies such as Comcast, who regularly raise their rates. Cooper estimates that cable rates have risen more than 110 percent since Congress passed the Telecommunications Act of 1996.
Still, we find it a bit insincere for Verizon – which has gone out of its way to tout itself as the champion of competition in cable and the friend of the cable consumer to regulators – to jack its rates so dramatically so soon.
My sister-in-law, whose family switched over to Verizon a couple of months ago from Cox Cable to save a few bucks, put it more succinctly at the dinner table on Thanksgiving Day.
“It really stinks,” she said.
