While the cable industry has been losing video customers steadily, Comcast (NASDAQ: CMCSA) has been able to avoid that trend. Now the company, which has been waging a war to fix its customer service and change how it's viewed by the public, has decided to raise prices.
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What is Comcast doing?
The cable and internet giant has been sending letters to customers all over the country notifying them of a price increase. DSLReports posted that letter, which talks mostly about how the company has lowered installation and in-home visit charges, and a detailed breakdown of how various charges will go up.
Prices will vary based on what package you have, where you live, and how many services you choose to bundle. Overall, the price of nearly every video and internet service the company offers will be going up roughly between 2% and 4%.
"We continue to make investments in our network and technology to give customers more for their money -- like faster Internet service and more WiFi hotspots, more video across viewing screens, better technology like X1 and a better customer experience," Comcast said in a statement to TVPredictions.com. "Unfortunately, the costs we are charged to carry popular networks continue to increase significantly, especially broadcast television and sports programming, which are the largest drivers of increases in price adjustments."
In addition to raising its basic rates, Comcast is also raising two fees that people cannot opt out of by higher percentages. The company has raised its broadcast fee, a charge associated with receiving local network affiliates, from $5 to $7 and its regional sports fee (which pays for regional sports networks) from $3 to $5. Add those two together and consumers are now paying $12 in dubious fees per month, up from $8, a 50% increase.
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Comcast is raising its prices. Image source: The Motley Fool.
Why is this a risk?
Over the past year, Comcast has invested heavily in improving its relationship with customers. This has included revamping its customer service operation and hiring 5,500 new customer service workers. Those efforts have at least been somewhat successful as the company made big gains on the annual American Customer Satisfaction Index (ACSI) report (registration required) that was released in June.
On the latest ACSI survey, Comcast saw its score improve by 15% from a 54 to a 62 in pay television. That beat the overall average increase of 3.2% and was the second-biggest increase by percentage. As an internet provider Comcast did not do quite as well, but it still posted a 5% year-over-year improvement beating the 1.6% industry average.
Comcast's big gains as a pay-television provider have paid off. While the overall cable industry has been losing customers, it has been gaining them. Overall, according to numbers compiled by Leichtman Research Group (LRG), the pay-television industry has lost just over 900,000 paying customers in the first three quarters of 2016. During that same period Comcast has added 81,000 cable subscribers.
Raising prices is a risk
An annual price increase has become the norm across the cable and internet industries, but in doing so in 2017 Comcast risks undermining its customer relationships. Now more than ever people have options when it comes to cable and in some cases internet.
People have been cutting the cord in growing numbers and raising prices -- especially increasing fees many already consider questionable because they are mandatory but not part of the base price -- may be all it takes to push people to make that leap. People no longer need Comcast nearly as much as they once did since even in markets where it has a monopoly people can opt for streaming services like Netflix or live-cable alternative like DISH Network's Sling TV.
Many people won't have the same easy options when it comes to broadband service, but many markets have at least two providers. Raising prices when your customer base could leave you or at least lessen their relationship with you represents a risk. It's easy to see why Comcast has done it -- because it always has -- but that may not be enough of a reason any more.
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Daniel Kline has no position in any stocks mentioned. He thinks extra fees should be included in advertised prices. The Motley Fool owns shares of and recommends Netflix. 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.