Internet bundles are not as cheap as you think

By December 6, 2015 Blog

The following post was excerpted from Personal Finance For Beginners In 30 Minutes, Vol. 1, by Ian Lamont. All rights reserved.

Home Internet service is a necessity for most people. Internet service providers and cable companies know this. To get you to pay more, they offer “Internet bundles” that combine Internet, phone, and cable TV. If you only want one of these services, the price is steep — at least $50 or $60 (and sometimes more, if there is no local competition).

Let’s do the math on an Internet plan that does not include phone or television:

Monthly rate: $60

Cable modem rental: $8

Total monthly cost: $68

Annual cost: $68 x 12 months = $816

The bundles may seem like a deal — just $99 per month for all three! That’s not much more than paying for one service at a time, right?

Not so fast. There’s a catch with these bundles. Actually, there are several catches:

  • “Equipment, installation, taxes and fees are extra.” These fees are unavoidable, and bump up the price well over $100 per month.
  • The basic bundle seldom includes everything you want, particularly when it comes to cable television channels. Even local broadcast television channels may not be included!
  • Internet speeds may be limited.
  • Phone service may be limited to local lines; out-of-state area codes cost extra.
  • The rate does not include the cost of renting a cable modem
  • Rates increase regularly — sometimes as much as $15 per year

All of a sudden, the $99 bundle costs $140 per month to get to the service levels you want for Internet, phone, and cable TV. Let’s do the math:

Annual cost, first year: $140 x 12 months = $1,680

That’s not all. The price of the monthly bundle usually jumps after 12 months, and sometimes jumps again after 24 months. I saw one $89 per month bundle that includes Internet, cable TV, and a few premium channels rise to more than $200 after 2 years. Here’s how the bill breaks down when the customer starts paying full price:

Monthly cost for cable TV: $90

Monthly cost for high-speed Internet: $70

Monthly cost for premium channel package: $25

Additional monthly taxes, fees, modem rental, and other charges: $20

Total monthly cost: $205

Annual cost: $205 × 12 months = $2,460

But there are ways to save serious money.

  • Get your own cable modem if you are handy with computers. They cost $20 to $30, and you will have to install and configure it yourself. Savings: $60 in the first year, nearly $100 per year thereafter.
  • Don’t get extra cable channels beyond the basic service. You will be able to get premium programming through your Internet connection using Netflix, Hulu, Amazon Prime, and other services.
  • Negotiate with the ISP or cable company. In the past, I’ve asked for and received discounts from telecom providers. The best time to do this is when you have a better offer in hand and the original contract (typically 2 years) is over.

The other item you should consider getting on your own is a wireless router, which will allow you to set up Wi-Fi. These devices are small and connect to the cable modem. Unfortunately, they can be tricky to set up, but at least they are cheap — the one I have cost just $20 from Amazon.

Wireless routers cost

This post was excerpted from Personal Finance For Beginners In 30 Minutes, Volume 1:
How to cut expenses, reduce debt, and better align spending & priorities