Adjust Text Size

Why cutting the cord might not work

Written by William Cowie - 3 Comments

Time was when you had a home phone and you watched TV with a rabbit-ear antenna. Life was cheap then. Well, almost: I remember paying $3.95 a minute to make a phone call from Orange County to New York. Life may have been cheaper then, but not easier: When you and your significant other got separated in a grocery store, you had to find each other the old-fashioned way.

Then cable television and cell phones were invented. Both were expensive at first, making them the status symbols of the era. Remember how cool that squiggly little antenna was on a car’s rear window? Going to the car wash, you had to unscrew it, and the haves kept them visible on their laps while they waited for their cars. (“Yeah, Sparky, eat your heart out, I have one and you don’t!”)

Gradually, prices came down and it became unthinkable not to have both cable TV and a cell phone. Then old-fashioned capitalism set in: The administration which ordered Standard Oil and AT&T to break up (so we could pay less) was replaced with one allowing those big companies to merge back together again, so we could pay more. How were they going to get re-elected if those big companies couldn’t afford their mega-million-dollar lobbyists and campaign contributions?

Now you have two bloating bills each month (cable and cell) and the smaller bill for your plain, old telephone system line (or POTS line, to use some serious technical jargon).

The recently announced merger between Time Warner Cable and Comcast is the inevitable next step, guaranteed to increase the cost of your communications and entertainment even further. With two recent Supreme Court decisions blessing unlimited corporate campaign contributions, Big Money corporations need more money to pay those increasingly expensive lobbyists to keep politicians happy … and re-elected.

Bad? Its about to get worse.

The head of the Federal Communications Commission (FCC) recently announced planned modifications to “Internet neutrality” which will increase your Internet access cost in one way or another. Net neutrality comes from the legacy POTS system. When you place a call, it doesn’t distinguish who the caller and recipients are. You’re treated the same way as Bill Gates or the homeless person calling from a pay phone. That’s because POTS is considered a common carrier, with strict rules requiring equal access for all.

The Internet is not considered a common carrier, but its providers have been required to abide by net neutrality rules. However, that offers Big Money corporations and their lobbyists no benefit.

They put their heads together (as in Hamilton, Jackson, Washington and Franklin) and set out to fix that. Tom Wheeler is the only person in the world who’s a member of both the wireless and cable industries’ halls of fame for his effective and lucrative lobbying efforts for both industries. Why not get him to head up the FCC? President Obama agreed in November last year.

It took Mr. Wheeler less than three months to serve notice that net neutrality is about to go the way of those squiggly car phone antennas: Big Money Internet providers are about to get some good payback for all those lobbying dollars.

And we all know who pays for that.

WHAT DO YOU DO?

Some have responded to the growing cost of information, communication and entertainment (or “incomen”) by cutting the cord: cutting out cable or satellite television because you can get your entertainment on the Internet.

But … from whom do you get your Internet? For most, it’s the very cable company you want to cut out. They know what you’re doing, so they’re simply changing their plans in a way that your savings from cutting the cord amount to not much more than $10 to $20 a month. Add your payments to Netflix and Hulu, and you’re back where you started, only with fewer channels.

Your best answer comes from looking at the entire bundle of “incomen” you buy and how you pay for it.

Landline

It’s the cheapest of your three channels. Incoming calls are free (imagine that) and there are numerous long-distance plans outside of your carrier to make your landline by far the cheapest means of communication. Yet, many are advocating ditching it.

Instead, look for ways to move as much of your communication to this channel. By making a few small changes in how and when you call, you can cut your cell minutes and go to a lower pricing tier.

Cell phones

Most plans have two components: paying for the phone and paying for the service. The major carriers (AT&T, Verizon, etc.) have gotten everyone used to paying for the phone as part of the monthly bill. A $600 iPhone (that’s right, it costs more than a cheap laptop nowadays) “disappears” as $25 per month in your cell phone bill, so you think the phone is free.

It isn’t. Subconsciously you know it, which is why you want to upgrade your phone every two years. Why pay for something and not get it?

Wrong question. Better question: Why pay for it at all? In the early days, phone technology advanced rapidly, and by replacing your phone every two years, the technology jump you made was noticeable.

No longer. The iPhone 4 will be four years old next month and it, like most smart (and dumb) phones of that generation, still work perfectly fine. The difference between old and new is getting smaller with each generation. So there’s no need to replace your (expensive) phone every two years anymore.

In the past quarter, T-Mobile gained more subscribers than all carriers combined, by allowing you to buy your phone (unlocked) and only pay for the usage. Keeping your phone longer will reduce your cell phone bill.

It’s the same as buying a car as opposed to leasing one.

Service

Most plans are tiered, i.e. the more minutes you use, the more you pay. By switching more talking to home phones, you can move to a lower pricing tier. If you want to save more, switch to a prepaid plan, where you never waste any minutes.

Data

Are you paying for data on both your home and cell phone bills? I cut my cell data allowance way down by only using it for GPS purposes and the odd emergency. I wait till I get to the office, home or one of the growing number of free WiFi spots.

As for home Internet usage, expect tiered home Internet pricing to become the norm during the Wheeler term as FCC chief. Until then, it makes sense to concentrate your data usage toward the home.

Entertainment

If you’re a sports nut like me, the cable industry (which includes the big satellite providers) have us where they want us. In that case, your biggest potential for savings lies in rethinking your Internet and voice access.

If you’re not that addicted to television, you’re a prime candidate to make cutting the cord stick, but only if your Internet access doesn’t come through the cable.

In summary

Big companies and the government are working to push your cost of access to voice, data and entertainment content ever higher. Rather than just cutting one source, your best bet is to look at the overall picture and and figure out how best to get what you want.

Published on May 14th, 2014 - 3 Comments
Filed under: Consumer, Family & Life, Frugality

About the author: is the founder and editor-in-chief of this site. He's a thirty-something family man who has been writing about personal finance since 2005, and guess what? He's on Twitter!

Related articles...

» Money Moves for 2006, Part 5: Your Family
» Get Focused on Your Finances
» eBay to the Rescue
» Lawn Mowing Poll Results
» Geographic Location: How it Affects Your Wealth
» Cutting Your College Expenses
» Frugal vs. Cheap: Where Do You Draw the Line?
» Why Do You Want To Be Debt Free?

Was this article useful? Please sign up to receive our content via e-mail:

You will receive only the daily updates, and can unsubscribe at anytime.

3 Responses to “Why cutting the cord might not work”

  1. 1
    Tim Says:

    I had Comcast triple pay phone internet and cable. I didn’t watch that much TV anymore and didn’t want the kids to be TV zombies so I got rid of the phone and TV part. I pay ~65 for high speed internet though Comcast, use basic talk for the phone and got a Tivo for DVR duties. Between Netflix and the local OTA channels (I live 16 miles from Chicago) I have more than enough to watch. Cut my cost in half as well.

  2. 2
    Thomas S Says:

    How does one get a free phone landline? This perplexes me b/c I haven’t had one in years, but with 2 young kids i want them to be able to call 911 for emergencies.

  3. 3
    William @ Drop Dead Money Says:

    Thomas, I don’t think you can count on getting a free landline anywhere. However, if you qualify, you can get a discount of $9.25 per month on your monthly phone bill. The details can be found on the FCC website, here:
    http://www.fcc.gov/guides/life.....-consumers

    Also, did you know that any old disconnected cellphone is able to call 911 for free? By law, every cell phone has to be able to dial 911, even if it’s not “live.” Be aware, though, that calling 911 on a cell phone is not nearly as direct and quick as dialing it on a landline.

Leave a Reply

Disclaimer...
Because rates and offers from advertisers shown on this website change frequently, please visit referenced sites for current information. This website may be compensated by companies mentioned through advertising, affiliate programs or otherwise.

FiveCentNickel User Survey