All service providers receive services from large-scale service providers and they deliver the same to customers who make use of such services. In the same way, cable companies receive network channels from TV channel companies and then deliver them to the consumers’ end. Along with cable TV services, cable companies also offer other services like internet and phone. For instance, Xfinity internet packages are offered by Xfinity for internet services, and there are also phone and cable TV services provided by Xfinity as well.
How do cable companies charge customers?
Since cable TV services are run by cable companies, but besides providing access to TV channels, cable TV companies charge consumers for other services as well.
- Installation Fee. After applying for cable TV services, cable companies send a technician to the subscriber’s house for the installation of cable TV equipment. This includes a fee, which subscribers don’t have to pay if they decide to self-install.
- Activation Fee. One would think that as soon as the equipment is installed, cable TV service would be ready to use. But that is not how it goes. An activation fee is completely different and separate from an installation fee.
- Rental fee for a TV box. There is also a separate monthly fee for a TV box that cable companies offer to their subscribers to navigate TV channels through. TV box gives the option to view digital channels, channel listings, program information, search tools, and more.
- Fee for Recording Shows. That’s right, there are separate charges for using the DVR service. Being able to use a DVR or digital video recorder is a great way to make sure that episodes are not missed, but this service is not devoid of any fee.
- Extra TV channels. Cable TV service comes with hundreds of channels, but one cannot watch all of them. According to Nielsen, an average American only watches around 17 channels. Most cable companies offer channels that consumers do want with the ones they don’t, so consumers pay more for the full package. A large number of TV channels might be a good selling point, but most of the time consumers are getting more channels they don’t want than the ones they do, and they are paying for all of it.
- Service Fee. Consumers who call the cable company for any customer service are also charged a fee.
- Extra Fee. For broadcasting public, educational and governmental channels (or PEG channels) through their network, cable companies also charge their subscribers for that. A permit fee is usually charged by FCC to cable companies for using public property, and cable companies will pass this fee onto the subscribers.
- Cancellation Fee. finally, there is also a fee for termination of services. Subscribers do get charged for trying to get out of the plan before the contract is up.
This is how cable companies make money by charging subscribers to make use of their cable TV services.
The rise of online streaming services has deemed cable TV obsolete. This is why, to compensate for their dropping revenue due to cord-cutting (people unsubscribing themselves from cable TV services), cable companies also offer internet services for subscribers to access online streaming services.
Another major source of income for cable companies is through advertisement. Cable TV advertising is done through geographic targeting on a micro-scale. It is old in geographic areas called the zones. Having zoned cable TV will allow advertisers to geographically target individuals that are in their target geographic market. For instance, if there was a local dentist who serves everyone within a 5-mile radius, it would be imperative for him to consider cable TV advertising that covers the same distance.
What did we learn so far?
In conclusion, cable companies charge the subscribers for the services they provide to them like TV boxes to access TV channels, activation charges to activate the cable TV service, DVR to record TV programs, etc. The online streaming services and cord-cutting might have affected the revenue for cable companies but they are able to still compensate for that loss by providing advertisements, internet-connected TV, and phone services.