Flex-price markets in everything, cable TV edition

by on March 28, 2014 at 1:27 pm in Uncategorized | Permalink

 Time Warner Cable customers looking to lower their bills would be able to hire “professional negotiators,” to squeeze discounts out of the cable provider under a trial service being offered by Yipit, a New York-based daily deals startup.

Yipit sent out an email on Thursday to a small group of people on its distribution list directing them to a link to submit their Time Warner Cable account information. Then Yipit said it would have employees who are “professional negotiators” try to haggle for better rates with the cable company.

The service is being tested as consumers are being hit with cable bills rising faster than the rate of inflation and as cable companies find it harder to hold onto customers who are defecting to newer entrants such as Verizon FiOS.

Yipit was founded in 2009 and offers an email newsletter roundup of top daily deals from websites such as Groupon and Gilt Groupe.

A representative from Yipit verified the authenticity of the offer but declined to comment further. A Time Warner Cable spokeswoman said “there’s no need for our customers to pay someone to call us on their behalf.”

The website cites potential savings of $564 per year. Yipit will not charge customers if it is unable to extract better rates but customers do have to pay a 20 percent cut of savings if it succeeds, according to the offer on its website.

There is more here, via the excellent Daniel Lippman.

Alex Godofsky March 28, 2014 at 2:06 pm

This is what happens when you try to ignore the law of one price.

Dick King March 28, 2014 at 2:37 pm

The law of one price only applies for effortlessly transferable goods and good information. http://en.wikipedia.org/wiki/Law_of_one_price . Since I can’t transfer my cable service to you, they can charge you more than they charge me.

Yipit may provide the service of gathering a monopsony. They may at some point ask if you’re willing to walk away from the table. Or, they may just collect discounts available to everyone.

-dk

Albigensian March 28, 2014 at 3:30 pm

I’ve always been surprised at how well the simple query, “Can you do better?” works after a vendor quotes a price. Even in situations in which, rationally, I really have no negotiating power at all.

Although I’d expect that if the use of services like this becomes at all widespread, Time-Warner will develop counter-measures. Who knows- perhaps they’ll start charging everyone the same price for the same service.

Age Of Doubt March 28, 2014 at 7:28 pm

They’re not doing you a favor by overcharging to begin with. The invisible hand of capitalism is failing us when Time Warner responds to competition by raising prices.

Vernunft March 29, 2014 at 12:58 am

What capitalism is there in the insanely-regulated cable market?

Hei Lun Chan March 28, 2014 at 7:15 pm

Time-Warner should start providing this service themselves and pocket the 20%.

Ray Lopez March 28, 2014 at 9:38 pm

This is the consequence of people being too busy to negotiate, one reason DC plumbers have gotten rich over the years, besides the fact Washingtonians lack hands-on skills. On a more cynical note, it’s anecdotal evidence of the USA becoming more like the Philippines, where you need “fixers” to do stuff.

charlie March 29, 2014 at 9:07 am

Comcast serves the DC market, not Time Warner.

Marie March 29, 2014 at 8:53 am

There are services to negotiate your medical bills for you. Those bills can be so high and so incredibly variable, and there’s a learning curve for figuring out how the system works.

Max Factor March 29, 2014 at 11:17 am

There are also services that will fight your traffic tickets

mulp March 29, 2014 at 11:33 am

What we have here is a sign of the demise of free market capitalism and a sign of the rise of monopoly rent seeking, complementing the pillage and plunder destruction of capital.

In this case, TW is seeking to restrict services to create scarcity so it can operate inefficiently from an economic if not business stand point to create economic profits.

And every economist knew when I was much younger that profits indicated economic inefficiency, probably caused by restraint of trade by one of several means.

Where TW or Comcast were competing with FiOS, they offered bait and switch deals – $79 for triple play (in small print it expires and the price goes to $150) countered by Verizon offering similar deals, so both cable and Verizon experienced a lot of churn, both spent a lot on door to door marketing, all money spent on things no customer wanted.

I know something about this having vacationed in an area where Comcast and Verizon were “competing” and answering the door for my sister several times per month to two door to door sales people from one or the other. This was after she had signed up for FiOS for telephone and Internet.

Verizon has decided that the cost of sales and marketing is too high and is no longer replacing copper with fiber.

Capitalism has lost out. Free markets are not working. And it has been proved again that economists in the old days were correct on natural monopolies and the need for regulation by PUCs.

The three decades of free lunch economics in eliminating regulation has failed to deliver the promised increased economic efficiency.

triclops41 March 29, 2014 at 12:56 pm

How can you blame the problems of one of the most regulated and historically corrupt industries on the free market? France and Germany have more market oriented situations than we do for this, and have better functioning markets in this industry.

triclops41 March 29, 2014 at 12:58 pm

I especially strongly question you calling this a NATURAL monopoly.

Eric Yu March 30, 2014 at 6:27 pm

It’s not surprising to see this new business offered since there is always demand need to be fulfilled.
If people believe the negotiating will offer them a better deal with cable company, then this is what going to happen.
This is a consequence of how consumers reacting to the high rising price rate.
Although there are many companies offer this kind or similar business, this is still a rational idea for the market.
I will expect the extension of this.

Comments on this entry are closed.

Previous post:

Next post: