Uncle Sam's Latest Gift to Consumers: a Higher Cable Bill

By Markets Fool.com

One of the last free services offered to cable subscribers is going away for good.

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Since the introduction of cable, most customers were required to rent their cable box for a fee. That, however, did not limit them to watching cable on just one TV.

In most cases, they could plug a coaxial wire split off from their main connection into any "cable ready" television. Those TVs may not get certain premium channels like HBO, which had a special signal that the box unscrambled, but you could watch basic cable on as many sets as you wanted without paying a dime more to the cable company.

In 2012, however, the FCC passed a rule allowing cable companies to encrypt theirdigitalsignals, which forces people to have a separate cable box on every TV. That's bad news for consumers, who either have to pay to rent multiple boxes or go without cable on certain TVs.

The mini-box is one type of digital adapter that meets the requirement. Source: Author

A gift from Washington
For the cable companies -- including Comcast and Time Warner Cable as they await FCC approval on a $45 billion merger -- this is an annuity straight from Uncle Sam.

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Though the FCC requires cable companies to offer customers a year or two of free use of the mini-boxes and the digital adapters now required, some people will need more right away. For everyone else, the free periods will eventually expire, and ultimately, we all have to pay (for how many and how long depends upon your level of service and other factors).

You get continued access to programming that you always got for free, and the cable companies get to charge you a few dollars extra every month per device. In most cases, you can't just buy the equipment, and the "rental" will likely pay for itself many times over before the cable company needs to replace it.

Better yet, the rental charges qualify as fees, so the cable companies don't have to advertise higher prices. As you might imagine, companies are racing to roll out the new boxes, so they can start charging for them.

Why did the FCC do this?
Essentially, the cable companies convinced the FCC that unencrypted digital signals were easy to steal. That might be true, and technically adept people might be able to hijack unencrypted cable signals, but customers were unlikely to be doing this in large numbers.

The FCC explained its decision here:

Encryption of all-digital cable service will allow cable operators to activate and deactivate cable service remotely, thus relieving many consumers of the need to wait at home to receive a cable technician when they sign up for or cancel cable service, or expand service to an existing cable connection in their home. In addition, encryption will reduce service theft, which could reduce cable rates and often degrades the quality of cable service received by paying subscribers. Encryption also will reduce the number of service calls necessary for manual installations and disconnections, which can relieve traffic in urban areas and reduce carbon emissions.

Though the FCC bought signal theft as a major problem, it failed to explain on its Web page why it thinks so. The agency did, however, attempt to sell the benefit to consumers of being able to have your service turned on or off remotely without having a technician visit.

That, of course, is false. Customers still need an appointment to install new service, and the only benefit to being able to turn off service remotely goes to the cable company. If you want to disconnect, you still need to return your equipment, but a visit from the technician was generally not required. If the company wants to turn your service off -- perhaps because of a billing dispute -- now the cable providers can do so that much more easily.

This is great for cable companies
The FCC has passed a rule in which the benefits are greatly tilted toward the cable companies. I'm not sure most consumers will consider having a higher cable bill -- roughly two or three dollars per additional TV each month -- a fair trade for the alleged reduced traffic and lower carbon emissions.

Yet again, customers find themselves paying more for the exact same service they were getting previously. The proliferation of fees and charges outside the listed price have caused consumers to consider alternative entertainment offerings. Making people pay to rent extra boxes should only encourage more subscribers to cut the cord and leave cable permanently.

The article Uncle Sam's Latest Gift to Consumers: a Higher Cable Bill originally appeared on Fool.com.

Daniel Kline has no position in any stocks mentioned. His attempt to steal cable in the mid-'90s led him to spend $90 for a box that did nothing.The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.