Cable Rate Increases No Surprise, But Consumer Groups Angry
Cable companies are planning to increase rates in 2005 about the same percentage as last year, but many hikes will exceed the annual 3.2% inflation rate, according to our spot check of the largest MSOs. Although companies said they're offering more services and higher quality along with price hikes, consumer groups are disgruntled with the pace of increases and packaging of high-end service.
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“We've seen a lot of 6% raises this year,” said Consumers Union analyst Susanna Montezemolo: “Cable has raised rates with impunity. This is typical of an industry operating as a monopoly, and as a result consumers have little choice.” She said competition from satellite and other multichannel video program distributors (MVPD) has had little effect on cable rates.
Comcast will increase rates 5.9% for a standard analog package of about 70 channels in 2005, a spokeswoman said, noting that prices overall are going up only 3%, factoring in packages of video, broadband and phone. Nearly 1/3 of Comcast’s customers opt for multiple service bundles, which enables the company to hold prices down, she said.
Time Warner Cable is increasing prices 4.1%, slightly less than this year’s increase of 4.9%, for a standard video package, a spokesman said. Like Comcast, Time Warner offers a host of enhanced services bundled into packages. Customers pay about $40-$50 per month for cable service, and usually less if they get high-speed data services or digital phone, he said.
Cablevision’s planned rate increase for 2005 is 2.8% across all levels of service, compared to 3.2% last year, a spokesman said. Cox’s price hike for the year 2003-04 was 2.6%, but the one for 2005 hasn’t been announced, a spokesman said. Not all cable companies are announcing year-end rate increases: Advance Newhouse is postponing its rate increase perhaps well into next year, a spokeswoman said. Other companies, such as Insight and MediaCom declined to comment on pricing plans.
NCTA said it doesn’t maintain composite information on industry rates because they vary so widely by company and market. Companies have invested over $95 billion to upgrade their infrastructure since 1996 to improve transmission of data and $84 billion on a wide variety of programming, officials there said. These investments have meant more employees to service networks, educate consumers, respond to service requests and install new equipment, an NCTA spokesman said. This year, many cable companies have been hit hard by increased fuel costs for service calls, also driving up costs, he said.
The cable rate percentage increases have in the main been declining slightly after the Telecom Act, according to Bureau of Labor Statistics annual data. The percentage rose the first 2 years after the Act then fell back, with the exception of a 6% hike in 2002. Based on the bureau’s data, current through Oct., increases seem headed for about 4% this year. Here are the numbers: 1996, 5.9%; 1997, 7.6%; 1998, 7.2%; 1999, 3.8%; 2000, 4.8%; 2001, 4.3%; 2002, 6%; 2003, 4.9%.
“I've become adamant about this -- the cost of monthly service has doubled since the Telecom Act. The companies say you get double the amount of channels, but people have not increased the time they watch,” said Mark Cooper, dir.-research at the Consumer Federation of America. Cooper’s complaint is that the cable company packaging forces consumers to pay for more channels than they may want or would have time to watch: “While they've more than doubled the offerings, they don’t give me the choice.”
The FCC reported last year cable rates had risen more than twice as fast 1993-2003 as the Consumer Price Index, 53.1% to 25.5% (CD Jan 29 p7). The next report on competition in video markets is being circulated on the 8th floor and is scheduled to be released in a few weeks, a Media Bureau spokeswoman said. The last report said that along with higher costs, consumers have a much wider choice and higher quality of services available due to the significant investments by operators.
Consumer groups are holding out hope for action in Congress next year on a la carte, a plan that the FCC may have quashed when it released a report casting doubt on the amount of money consumers would save with the pay-per- channel scheme (CD Nov 22 p2). “We think a la carte is the way to go -- we're hoping Sen. Stevens (R-Alaska) will look at it,” said Consumers Union’s Montezemolo. “I think there is support at a bipartisan level to do something,” she said, adding that her group is “slowly” starting to plan for next year.
Sen. McCain (R-Ariz.), the outgoing chmn. of the Commerce Committee who is expected to become Communications Subcommittee chmn., has long been a critic of rising cable rates and pushed a la carte pricing mainly because he didn’t believe consumers should be forced to pay for high-priced programming they didn’t want, particularly sports programming. McCain held a hearing last March on a la carte, where he said: “I think it’s really time to call the cable companies’ bluff on this one.”