CABLE MSOs SAY PROGRAMMING COSTS ARE FORCING RATES UPWARD
As millions of cable subscribers ring in New Year, they probably won’t be celebrating expected rate increases for 2003, in most cases about 5%, according to our informal survey of top MSOs. Consumers Union and other groups have complained vociferously about cable rates (CD Nov 29 p4), and Sen. John McCain (R-Ariz.) also has called rates into question, leaving many in industry fearing he will raise thorny issue when he takes over as chmn. of Commerce Committee when Congress returns from its holiday break.
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Cable industry insists it’s not to blame, pointing finger at programmers. In 2002, issue of expensive programming, and specifically sports programming, probably was no better exemplified than by dispute between Cablevision and Yankees Entertainment & Sports (YES) Network, with Cablevision refusing to carry YES on basic tier, instead saying it was willing to put it on premium tier for customers who wanted to pay extra for it. Companies still haven’t reached agreement.
Comcast hasn’t formally announced nationwide increases, preferring to allow them to be made locally since rates and increases will differ by community, spokesman said. However, company said rates would increase average of about 5.7% nationwide. Comcast, which recently bought AT&T Broadband, bringing its total to about 21 million subscribers, said increases were due primarily to programming costs, but also to customer service improvements and system rebuilds. Company has said it will have to do major rebuilding of many AT&T Broadband systems.
Time Warner Cable (TWC) spokesman said it would be misleading to calculate average rate increase because “some of our divisions, in fact, actually have rate decreases on certain tiers and the base on which the percentages are tabulated vary widely.” While mathematical average for majority of TWC’s customers subscribing to standard package is about 6%, some divisions have smaller increases, he said. He also said TWC subscribers on average pay $38-$39 for package that included 70-75 channels. Meanwhile, basic-only subscribers will see average increase of about 1.3%, although those in L.A., N.Y.C., Cincinnati and San Diego will see their basic-only rates decline, he said. TWC is nation’s No. 2 operator with 10.8 million basic subscribers.
Charter, with 6.3 million subscribers, said it still was in process of finalizing its 2003 budget. “As a result,” spokesman said, “we've not made any public announcements regarding price adjustments. Our objective is to be moderate.” Company recently said it was re-auditing its books for 2000 and 2001 and auditing its 2002 results. It’s being investigated by grand jury for its accounting practices.
Cox spokeswoman said increase of about 5% was expected in 2003, although that would differ from community to community. She said average for 2002 was also about 5%, although programming costs had increased 15%. She said company could pass only certain amount through to customers, and either must “eat it or mitigate it with other products,” such as cable modem or phone service. Cox has 6.2 million subscribers. Cablevision, which has 3 million customers, announced it was raising rates average of 5.26%, citing 10% rise in programming costs. Spokeswoman for Insight Communications -- with 1.4 million subscribers -- said figures weren’t available. Insight CEO Michael Willner has called rate increases “a festering wound” but has said he doesn’t believe federal regulators should become involved (CD Dec 6 p5). Adelphia, with 5.5 million subscribers, didn’t return telephone message seeking comment. Mediacom, with 1.6 million basic subscribers, said figures weren’t available. Mediacom CEO Rocco Commisso has complained bitterly that programmers are hurting business (CD Dec 6 p5).