Charter Communications' (CHTR) $55 billion acquisition of Time Warner Cable (TWC) would give the merged company roughly a quarter of the burgeoning broadband market. But removing one more major competitor from the scene may do less for consumers, who have seen their bills for Internet service keep climbing in recent years.
According to a Quartz analysis of public filings from Time Warner Cable, the country's second-largest cable provider, average monthly paid-TV costs have gone up only a dollar to $76.08 over the last two years. By contrast, over the same period the average cost of broadband has shot up 21 percent to $47.30 per month.
Why is Internet service is getting more expensive, especially as cost of transmitting data online continues to plummet? There are five reasons your broadband bid keeps climbing:
Wall Street. Big investors are pushing Internet service providers, such as cable and telecommunications companies, to boost profits. That's not easy in a mature industry like cable. While demand for cable is leveling off, it's rising for broadband services, giving providers room to raise prices.
Cord-cutting. Cable companies are struggling to grow as more people drop paid-TV service in favor of streaming video over the Internet. That leaves broadband as the future money maker, which is one reason why Charter is eager to gobble up Time Warner Cable and a smaller cable provider, Bright House Networks. As the TV industry changes, cable companies are introducing new pricing models to lower dependency on old-fashioned programming.
Monopolies.Major Internet service providers generally work as monopolies in service areas. That often leaves a single broadband provider in a given town or area. There may be other options, such as satellite or telephone company-provided fiber, but they remain limited. Larger cities may have multiple providers, but individual apartment buildings may agree to a deal offering service through one provider.
Industry consolidation curbs consumer choice and reduces competition, which can result in price hikes. It also typically requires merging companies to spend, driving them to raise the price of Internet service.
Video streaming. The growth in video streaming is not only reducing traditional and cable TV revenue -- it's also boosting the traffic burden on telecom networks. Service providers must invest more in infrastructure to handle the increased flow of data. As with consolidation, raising prices generates more cash on hand, helping to underwrite the cost of equipment, new or improved cabling, maintenance, and other infrastructure development.
Upselling. Like other telecom service providers, cable companies commonly try to lure customers to spring for pricier packages.