Consumer Reports magazine and its advocacy affiliate Consumers Union are ganging up this month on cable fees and bundling.

They've launched a "What's the Fee" (WTF) online assault on system operators, with Comcast as its first target. Meanwhile, the 12-page cover story, "Take Control of Cable TV," in Consumer Reports's August issue, lays out an eight-step plan for cord-cutting, or at least cord-shaving. The section includes advice on "cable replacement services," including streaming media.

The core element in the magazine report is a section on "Cable TV's Sneaky Fees," which is step one in Consumers Union's attack on extra fees that "inflate the costs" for purchases across industries ranging from utilities and airlines to entertainment and banks. The non-profit organization said a couple of weeks ago that it delivered "more than 110,000 petition signatures to Comcast ... calling on the company to address the issue" of extra fees.

In its tally of fees -- most of which CR contended should be included in the core bill -- the magazine totaled up to $71 in monthly fees, including sports surcharges, digital video recorder service, set-top boxes and "High Definition Technology" charges. In addition, cable bills include broadcast retransmission fees which, CR said, should be "baked into the advertised price."

“It’s time for Comcast and the cable industry as a whole to ditch these fees, and advertise the full price of their service so that consumers aren’t left asking ‘WTF?’ when they get their bill,” according to published reports of the comments by John Schwantes, senior policy counsel for Consumers Union.

Comcast responded, in a corporate statement to the Philadelphia Inquirer, that its "Xfinity bill was designed ... to make it simple to understand.” It insisted that “broadcast television and regional sports network fees are itemized" so that subscribers can "clearly see those costs." A company spokesman also told the local newspaper that consumers receive "a complete list of charges and fees ... as part of our sales process.”

Consumer Reports said it started its WTF campaign because complaints about cable fees are so frequent. It said that more than 25,000 of the petition signers identified Comcast as their biggest problem -- approximately reflecting the company's share of the total U.S. Multichannel Video Programming Distributor subscriber base.

The campaign and the August cover story continue a decades-long look at cable by Consumers Union and Consumer Reports. As long ago as 1987 the magazine ran a "Cable TV" cover story, focused on questions such as, "Are the service and the programming worth the money?" In 2004, Consumers Union presented to policymakers the results of a nationwide survey that found two-third of cable subscribers wanted an à la carte "option to select the channels in their plan" and 30% "would pick fewer channels even without proportionate savings." When the Senate was deliberating cable legislation in 2009, CU pushed for unbundling channels so that decisions about what to buy "would be best left to consumers themselves."

Related: Roku Hits Back at ‘Consumer Reports’

Consumer Reports, which has about six million members/subscribers, has been the name of the parent membership organization since 2012, when it reorganized and made Consumers Union its political advocacy subsidiary. Prior to then, CU was the parent non-profit, with CR the monthly magazine and buyer's guide.

The August CR articles encourage viewers to consider a move to "free" over-the-air broadcasting, and includes a list of 10 recommended TV antennas to receive that service. It lays out packages of skinny bundles and over-the-top services (e.g., Netflix, Hulu, SlingTV and DirecTV Now) that separately or collectively could shave $100 or more from a monthly cable bill. 

It also recommends that customers who want to move to a lower tier of cable TV service should "bypass regular customer service and ask to speak to a customer retention specialist" when they contact their local provider.

Another sidebar in the long report recommends "The Best Streaming Media Players." The report acknowledges that customers would still need to buy a broadband access service (probably from the cable carrier) and could be subjected to future price or packaging revisions.

Cable MSOs sit in one of the more disrupted spots in the communications industry. By disrupted, we mean the easily changeable nature of customer loyalty, as consumers react to a less-than-perfect experience and the growing influence of other communications entities trying to acquire those customers. 

Consumers these days are increasingly willing to cut the cord and migrate to less-expensive streaming alternatives such as Roku, Google Chromecast and Apple TV. Leichtman Research Group data shows the clear reason why. An annual survey of TV households shows the average cable bill rose about 39% from 2011 to 2015, which is almost eight times the rate of inflation. The most recent cable bill average is now over $103 per month, with zero chance of that price remaining flat going into the next year.

Threats on Multiple Fronts

Bill sticker shock notwithstanding, cable providers must now face the new challenge of the eventual introduction of 5G networks delivering Gigabit performance, new fixed wireless access options and yet another unique ability to create a bundled offering that displaces the cable provider completely. Can you blame a customer with a high bill for looking at other options, especially from companies that can bundle services together just as well?

Cable MSOs have thus been forced to reshape their businesses, with much of that coming in the form of a complete digital transformation of infrastructure, and processes that help meet the expectations of consumers and business customers. Today’s cable networks have brought broadband access to households that now have become accustomed to HD and 4K video services and internet speeds of 100 Megabits per second-plus. Over the next few years, we can expect further digital transformation in the form of hybrid networks that provide higher capacity, less risk of delay or latency, lower power consumption and hopefully the ability to satisfy the end users’ demand for service at a price point that doesn’t increase the rate of cord-cutting.

With demand for internet bandwidth continuing to grow at more than 20% per year thanks to video streaming, enterprise cloud computing, big data, social media and mobile data delivery, meeting these demands must be cost-efficient, energy-efficient and reliable.

As we watch top-tier cable providers invest in fiber-to-the-home deployments, cable’s traditional fiber-coaxial networks will still provide the anchor points for service evolution and transformation, and will still have the capability to roll out new services, as ongoing investment has already been able to deliver more bandwidth.

Ongoing investments in the Converged Cable Access Platform (CCAP) and DOCSIS 3.1 have benefited the customer, with bandwidth performance metrics showing upwards of 10 Gbps downstream and 1 Gbps upstream. The embrace of CCAP has the transformative effect of increasing business agility, forging a smaller footprint, and creating lower power consumption and more IP video capability, giving the user more capabilities and enhanced security — all of which should help reduce total cost of ownership as a whole.

As SDN/NFV (software-defined networking/network functions virtualization) becomes a greater influence on the cable provider, one cannot discount the existing expectations and needs for what will be a hybrid network environment in the short to medium term. Cable providers will thus have physical and virtual functionality evolving in parallel. This, along with investments in remote PHY, which supports both FTTx (fiber to the x) and SDN/NFV initiatives, all contribute to the digital transformation around an IP network between the core and the node. The move to a virtualized, software-based architecture can help deliver network optimization, increase agility and create new opportunities for MSOs. However, any cable operator planning to reap the benefits from NFV and SDN must shift its focus from technology to business, and ensure all business support systems are up to the task. As a wise man once said, if you can’t bill for it, it’s a charity.

Virtualization Hits Home

Network-level virtualization will also transfer to the home, as we already see services move from a physical set-top box environment to an eventual virtual one. The $400-plus set-top box with a hard drive is set to be replaced by a cloud-based DVR that sources not just content, but applications such as program guides and DVR as cloud-based functions.

Cable MSOs will no longer be limited by the functionality of a dedicated set-top box and will make gains from much faster time to market for new products and services offered both from within and outside the cable provider. How about that customer call requiring a $100-plus truck roll to correct an issue that may or may not exist? It can likely be mitigated by a remote software update. What about replacing that $400 set-top box every three years or so? Virtual CPE means a $50 dumb box in the home can extract value from the cloud and be easily updated and configured on the fly and extends the life of home-based equipment. Analytics can also now be embedded in the cloud for easier data management and decision-making.

Can we calculate a long-term price for all of this digital transformation? For the cable provider, it means more innovation, faster delivery of new digital services and a much “stickier” service environment to demonstrate to the customer that all this innovation is actually worth paying for. That translates to retention.

And let’s face it: If cable bills aren’t going down any time soon, creating a product and service advantage will be a paramount requirement for the industry in the coming years.

Paul Hughes is director of strategy at Netcracker Technology.