Monday, October 21, 2013

Cutting the Cord

Thankfully the current government shutdown has come to an end and people who are reliant on a functioning government for their paycheck are now getting paid once again.  Unfortunately many republican senators have expressed their desire to repeat this idiotic crap again in January.  Many people I know started running around wondering how they would pay their bills and keep the lights on.  Others were scrambling to trim back services to their bare minimum level to keep expenses down.  These same people are shocked at what little I pay monthly yet I keep up with all of my shows and carry around a smart phone.  Despite all of this my monthly expenditure is half if not a quarter than what others spend for the same services.  The trick is to use some pre-planning and a very old fiscally conservative trick.  Spending a little more up front for long term savings.


First off I'm not an accountant.  I'm not going to run through how you can make a household budget.  I'm assuming you know how to take your monthly income and subtract off your bare necessities of food, shelter, clothing, and utilities (Heat, electricity, water, etc) to determine what you have to work with.  If you can't quite frankly stop reading this article and Google how to create a budget.  

Now I'm going to cover four main areas where you can massively cut your monthly "Communications" bills.  These would be Internet, Television, Cellular, and your Plain Old Telephone Service (aka POTS).  I've found over the years people are massively over paying for all of these services because they are not aware of alternatives.  Some of these alternatives are new and different than what we are used to, but once you do get to know them you probably find you enjoy them more than the older alternative.


The backbone of everything we are going to discuss here today is all reliant on you having a solid Internet connection.  For the remainder of this article I will assume you live in a community where you have either Cable, DSL, or are a really lucky person and you have fiber to your door.  If you're someone who has chosen to live out in an extremely rural without these options I wish you luck here.  I intend to do an article in the future on how your community can install and maintain their own infrastructure in the near future. 

The first thing you will need for this process is a high speed Internet connection.  These are not all created equally.  I suggest looking into them in the following order.  Fiber, then Cable, the phone company's DSL, finally a cellular data connection.  Fiber is your best possible connection, but unfortunately it is not everywhere.  Google and Verizon are the only two major carriers for it in the US.  If you live in one of the limited number of areas that have these as options look here first!  Google has Internet only package that has an installation cost and then is free after that.  Cable is your second best choice.  While it is a shared connection, there is plenty of bandwidth on a cable loop to keep everyone in your neighborhood purring along on the Internet quite nicely.  Finally if neither Fiber or Cable is available to you then consider DSL.  DSL is considered a high speed Internet link, but truthfully it does not hold a candle to the other two.  While the phone company has tried to retool their infrastructure to help speed this up, they still do not offer the bandwidth of even cable.  Truthfully only use a phone company's high speed Internet service as a negotiating block to get a better price from your local Cable company.  A cellular data connection is great if you're a road warrior and travel constantly, but the monthly costs are quite high for unlimited data.  That and if you want to stream to more than one device at a time would limit your experience.

Now lets talk price.  Honestly $30 - $50 a month is a good range for a high speed Internet connection.  You want something that has at least 15Mbps.  More is always better, but balance this out with the price.  Also ask if there are any deals in your area for recently moving, or switching from another service.  I've been at $30 a month for a cable internet service who's list price is $60.  I keep it that low because I keep calling up and negotiating a 6 month deal.  I only negotiate a price on my Internet service and I make a point to NEVER BUNDLE!  While bundling sounds like a great deal you usually get stuck with a typical "triple bundle" package of your home phone, Internet, and television.  This price usually comes in around $100 - $250+.  As you add basic features to your home phone and television packages that make them usable (like caller ID, or DVR functionality) you quickly increase the price of your monthly bill.  For now stick to your guns and stay with only an Internet connection.  The rest will come later.

Finally don't let your provider give you a modem or router for your connection.  The rental cost per month is usually $10 and it's completely avoidable.  A modem will usually run you about $80, and a router can run anywhere from $10 - $150.  A good home router is usually about $30 and can be cheaper if you catch a sale.  In about a year the savings on your monthly bill pays for your equipment.  Maintaining this is also quite easy.  Setup is a one time thing, then in the future you may have to do minor things like restart the equipment by turning it off then on again.  Don't let anyone talk you out of this for fear of future compatibility.  The stuff your cable company rents out is anywhere from 1 to 10 years old.  What you buy today will be more future proof than what they hand to you.


Maybe you've heard about this major movement that is freaking out the cable and phone companies called "Cutting the cord".  Basically this means you pay for only an Internet connection and using a variety of devices you get all of your programming over streaming services.  I know this sounds like a huge expense but really it isn't.  In fact you may already have everything you need to cut the cord and may not even realize it.

Now if you have a video game system such as the Wii, WiiU, Xbox 360, Xbox One, Playstation 3 or 4 you already have a device that can handle streaming.  Also included would be any TV with built in Internet apps, blueray players with Internet apps, Roku, an Apple TV, or any number of other devices.  Another option is if you had a spare PC lying around you could re-purpose it as a home theater PC.  

If you don't have any of the above devices first off I'm somewhat shocked.  It's rather difficult to dodge buying equipment without built in streaming apps.  I usually recommend people buy what they are familiar with.  If you have an iphone, ipod, ipad, Macintosh, or another apple device I would suggest Apple TV's at each TV in your home.  If you're a gamer pick up a game console.  If you're not all that technical, you're not a Apple product owner, and you don't like to game I would suggest a Roku.  Finally if you know your way around a PC, and have a few of them in your garage I suggest building a HTPC.  Now if you're someone who is starting off needing a new television I suggest buying one with Internet applications built in.   

Ok, before we go any further I want you do do a little homework.  Grab a pen and pencil and write down every show you're interested in seeing.  Now head to and and start searching.  You may find everything you want to watch is available on these two services.  If not head to amazon and itunes and see if the show is there.  Now lets say the worst case scenario is that you need Hulu, Netflix, and either Amazon or Itunes to watch everything you want to see.  Hulu and Netflix are about $8 a month for the streaming service each.  So that's $16 a month.  Now lets say you're watching a couple of shows that you don't want to wait to hit hulu or netflix such as a Showtime, HBO, or an AMC show.  These are usually around $42 - $60 per season or $3 per episode.  If you wind up buying all of your season passes in one shot this adds up to a high one time bill, but extremely cheap costs the rest of the season.  Where as the cost of cable is constant plus the cost of equipment.  

Ok lets run a comparison.  Lets take a typical home that has 2 televisions and no additional equipment.  In both cases we will need to either purchase or rent equipment.  Also for cable TV we will need a package that includes HBO, Showtime, and DVR's for both rooms.  This is usually $99 a month.  On top of that you need to add equipment and taxes.  For this example I'll ignore tax.  For the other example I'll use a typical price for a streaming box which is about $100, and in month one we'll buy three season passes for $45 each.

Equipment / MonthCut the CordCable / Phone
Equipment Cost$200 One time cost$30 Monthly

Big difference huh? We've only tackled one of the three big bills that haunt most people.  Let me show you what more we can do...

Cellular Phone

There are a lot of options for cell phone service.  Most of these are over priced.  Severely over priced.  This is due to the practice of subsidization the price of the phone usually giving it away for free or a low price and making that cost up over the life of the contract with a healthy margin.  You can cut your bill by combining your plan with family members, but that only goes so far.  If you buy your own phone ahead of time, or hang onto an old phone you can switch to a pay as you go service.  If you're willing to fore-go traditional support you can save even more.

For this  section we will be looking at unlimited talk, text, and data plans.  Also month one will include the initial equipment cost.  I will be comparing three services.  Your typical provider AT&T, MetroPCS, and a relative newbie called Republic Cellular that functions on a combination of the Sprint network and your home wifi.  Republic wireless  cuts costs by offering no phone support line.  Support comes from their website only.  To cut down costs of airtime the company encourages you to use your home wifi for data and it can use any wifi to make calls instead of using the Sprint network.  This savings is passed on to you.  The only thing is you give up MMS messages (aka picture messages).  Instead of sending or receiving picture messages Republic wireless recommends emailing these items.  They may add MMS later.

AT&T (not truly unlimited)MetroPCSRepublic Cellular
Equipment Cost$1.00$399$299

So by giving up a little in terms of services provided you can save half your annual bill, and a hell of a lot monthly.  Also there is no weird addition when you want to add additional lines for a family plan.  It's just $19 a month per line, or if you don't leave home much you can spend $5 a month for a wifi only line.

Plain Old Telephone Service (POTS!)

If you are someone who wants to have a old style phone line for your home because you want to fax, you have poor cell phone reception in the area, or you just like having one this section is for you.  For years a POTS line was our only way of communicating over distance.  You used to pay one provider for local calls and one for long distance.  Local calls were essentially free, but the per minute cost on long distance was expensive.  Now unlimited nation wide calling plans can be hand from AT&T for $44 a month. Now they are overpriced.  Many less expensive options for adding a line to your home exist.  The only advantage a POTS line offers over other methods is that in the case of a power outage your phone line is guaranteed to work.  With these other options if the power goes out, even if you have a battery backup or generator you may not have a home phone, but the cost savings may be worth this.  

For this comparison I'll include four options.  AT&T, Vonage, Ooma, and a more DIY setup with Google Voice and a box called an Obihai 202.  In all cases I will list the equipment costs upfront and include it in the first month cost.  All services include common phone features such as caller id, call waiting, and unlimited local / long distance. Taxes are not included, but in the case of the Ooma the per month cost of service is $0 + local taxes.  As these vary based on your location I will not be including them.  Also Vonage offers a price break for the first three months of your contract if you sign up for 1 year.  I'll use these figures in my pricing. 

AT&TVonageOomaObihai 202 + Google Voice
Total$540$254.40$130 + 12 months tax$70

The pricing of a standard phone line does include the security of tech support and a line that will work in the even of a power outage.  Vonage and Ooma may not work in a power outage (it might if you have a battery backup hooked up to it, your router, and your modem and your provider has power) and still include tech support.  The Obihai with Google Voice does not have tech support.  Again if your ISP has backup power, and you have a battery backup hooked to the Obihai, your router, and your cable modem it may work in the case of a power outage.  The question is would the security of a guaranteed working phone line be worth $540 annually?  Remember that equipment costs are sunk and you will own that equipment for the life of the service.  So 2 years of an AT&T line is $1,080 while the Ooma is still $130 + 24 months of taxes.  The Obihai 202 only costs you the initial $70.  

The Best Case Scenario

Lets say you decide to upend all of your service providers and switch to something far more affordable.  While your first month may be costly as you may need to buy a lot of equipment your monthly costs will be greatly reduced.  Using my numbers above I'll compile a best case scenario.  Remember this isn't a one size fits all as you may have game systems to stream TV with, you may already own an unlocked phone, etc.  I'm including the costs for Internet, Television, Phone, and Cellular service below.

Best Case

With a little creative cord cutting your monthly bill can be less than just the bill for your phone bill.  By investing upfront in your own equipment you reap the savings.

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