One Easy Move Will Save You Hundreds of Dollars on Your Internet Bill
If you answered "no" or "I don't know," there's a good chance that your Internet bill is far higher than it needs to be. By purchasing their modem outright, rather than paying monthly rental charges, consumers who get their Internet service from their cable company could save themselves hundreds of dollars over time.
And even if you do own your own modem, there's still a chance you're getting overcharged.
You've Been Set Up
Let's start at the beginning: getting onto the Internet. To do that, you can't simply attach your computer to a cable outlet. Instead, you need some equipment to transform the signal -- a cable modem, and if you have multiple computers or want wireless access, a router.
When you first call your cable company and ask them to set up service, they'll generally install their own equipment -- and you pay for that privilege in the form of a monthly equipment fee.
The fee varies depending on your Internet provider and what devices you happen to be renting from them. Comcast (CMCSA) charges $7 a month for a modem, while Time Warner Cable (TWC) bills its subscribers $6 a month. Cox will add $7 to $10 to your monthly bill to use one of their modem/router two-in-one combo devices.
%VIRTUAL-article-sponsoredlinks%Over time, those fees really add up. If you're paying an extra $7 per month, that's $168 after two years. After five years, it's $420 -- and that's assuming no fee increases.
Last year, Time Warner Cable was only charging its subscribers $4 a month to rent its modem, but bumped that fee up to $6 earlier this year (in the process, adding an estimated $150 million to its annual revenue). Another $1 or $2 increase at some point in the near future doesn't seem unlikely.
Even if you own your modem, take a close look at your bill anyway. So few subscribers own their own equipment that cable companies will often just assume that you're renting one of their devices (and charge you for it). I've been overcharged this way in the past myself, and I don't appear to be alone.
Don't Be Boxed In
No one is forcing you to pay these equipment fees -- in most instances, you can get out of them by buying your own hardware. It will require a little up-front investment, but you'll quickly make your money back.
(Unfortunately, this trick doesn't apply to everyone -- it will depend on your individual Internet provider. For example, if you happen to be a subscriber to AT&T (T) U-verse, you're simply out of luck, since AT&T's system requires you to use their proprietary modem.)
To start, you'll need to figure out which modems are compatible with your service -- most cable companies provide a list of compatible devices on their website.
Don't worry -- it's not as complex as it sounds. This Motorola SB6121 works with nearly every major cable provider. You can order it from Amazon (AMZN) for about $68, or pick up a similar one at your local Best Buy (BBY) for $100. Even if you pay the full $100 for it, a Comcast subscriber would make their money back after just 15 months -- or just 10 months if you get it from Amazon.
If you happen to be using one of those two-in-one modem/router combo devices, then you'll also need to purchase a separate router. Those can be had for as little as $20, or as much as $200. Ultimately, you get what you pay for -- cheaper routers will generally provide slower Internet speeds at a shorter range; more expensive ones can handle faster Internet speeds and are better suited for larger homes.
At any rate, choosing your own equipment gives you the flexibility to suit your needs -- the cable company-provided router probably won't work as well as Apple's (AAPL) top-of-line AirPort Extreme.
When You Shouldn't Buy
Of course, buying the equipment outright might not be for everyone. If you're thinking about switching Internet providers in the near future, particularly to one (like AT&T) that doesn't let you bring your own equipment, you might want to wait. Or, if you rent a home with multiple roommates, it might make more sense to split a monthly fee rather than have one person buy all the gear.
But for the majority of consumers, buying the hardware that connects them to the online universe often makes the best sense financially. Those rental fees really start to add up over time, compared to an initial investment that can be recouped in just a few short months.
Motley Fool contributor Sam Mattera owns shares of Best Buy. The Motley Fool recommends and owns shares of Amazon.com and Apple. Try any of our Foolish newsletter services free for 30 days.