Home » cable television » Recent Articles:

Independent Cable Companies Unify Against Cable TV Programmer Rate Increases

big 7Subscribers of more than 900 independent cable companies may face an unwelcome surprise this summer in the form of a mid-year rate increase.

For years, members of the National Cable Television Cooperative (NCTC) have joined forces to negotiate for the kinds of volume discounts only the largest cable and satellite companies like Comcast, Time Warner Cable, DirecTV, Dish Networks, Charter, and Cablevision have traditionally received. NCTC members range from family owned cable operators, rural co-ops, community-owned providers, independent telephone companies, and small multi-system operators servicing multiple communities. With group-buying power, NCTC-member cable companies used to be able to negotiate volume discounts that could keep their rates competitive with larger providers.

But as consolidation among major network media, cable, satellite, and phone companies marches on, only the largest operators — some directly affiliated with the cable programming networks — are getting the best deals at contract renewal time. All NCTC members combined serve just five million cable TV subscribers. Comcast has 21 million, DirecTV: 20 million, Dish Networks: 14 million, and Time Warner Cable: 11 million.

When NCTC’s contract with Viacom was up for renewal, the owner of networks like MTV and Comedy Central raised the renewal price more than 40 times the rate of inflation. In fact, Viacom’s asking price was so high, operators like Cable ONE pulled the plug on 15 Viacom networks for good and replaced them with other programming. NCTC members eventually compromised on a deal to renew Viacom-owned networks, but customers of companies like Massillon, Ohio-based MCTV are paying the price in the form of a mid-year rate hike Bob Gessner, MCTV’s president, did not want to have to pass on to customers.

MCTV“I don’t like to do this because it puts me in a difficult position of raising prices, which no one likes, or reducing the product, which no one likes, or cutting back on the quality of our customer service, which no one likes,” said Gessner. “Large media companies control all the TV programming and they are raising the price.  The cost of TV programming is rising very rapidly and it is causing this rise in retail prices.”

Some facts about cable TV programming:

  • Nine media companies control 95% of the paid video content consumed in the U.S.;
  • The average household watches only 16 channels, yet networks package their channels to force you to buy those you don’t want to get those that you do want;
  • tvonmysideProgramming network fees account for the bulk of your monthly cable bill;
  • The cost of basic cable has risen 3½ times the rate of inflation over the last 15 years because of demands from networks for higher programming fees;
  • One media company honcho recently stated that, “…content is such a fundamental part of daily life that people will give up food and a roof over their heads before they give up TV.” This shows that they have lost their perspective and the demands for huge increases will continue.
Gessner

Gessner

Gessner has broken ranks with many cable operators that say little more at rate hike time than “increased programming costs.”

Gessner has produced a 20-minute video that carefully explains to his customers what is going on in the cable programming industry and why providers like MCTV are forced to shovel networks onto cable lineups few customers want or watch and how the biggest cable and satellite companies are now negotiating volume-discounted renewal pricing at the expense of smaller providers.

While the largest cable companies in the country secure lower rates through those volume discounts, programmers have found a way to make up the difference: demanding even higher rates for smaller cable companies to cover what they lose from Comcast and other big players.

Gessner, as well as other NCTC member companies, confront huge programmers like Comcast-NBCUniversal, Viacom, Time Warner (Entertainment), Discovery and Disney that first demand 3-7 year renewal contracts with built-in, automatic annual rate increases averaging 5-10 percent, regardless of the ratings of their networks. Most also demand that all of their cable networks be carried on their systems, whether customers are interested in them or not. If these companies dream up new cable networks, like ESPN’s SEC Network and the Longhorn Network, MCTV is committed to carry those channels as well, even though they are of little interest to residents of northeastern Ohio where MCTV operates.

These dream contracts (for cable programmers) are the single biggest reason cable-TV rates are skyrocketing. But Gessner says it gets even worse when those contracts expire. When renewal negotiations begin, programmers these days inevitably demand a “rate reset” which starts rate negotiations at a price 10, 30, even 60 percent higher than under the expiring contract.

local cleveland tv

Those dollar amounts cover local station retransmission consent agreements nationwide.

Gessner says he doesn’t know how much longer MCTV can afford to carry expensive networks like sports channels. If he drops them, angry subscribers could cancel cable service and switch to a provider willing to pay the asking price. Unless all of his competitors stand together, programmers will maintain the upper hand.

Some cable companies, like Cable ONE, are starting to risk the wrath of their customers by refusing to negotiate for terms they consider unreasonable. When subscribers learned the reasons why Cable ONE dropped more than dozen Viacom channels, many were supportive because the company replaced the networks with other channels and promised to keep rate increases down because they won’t have to pass on Viacom’s higher prices. Viacom retaliated by locking out Cable ONE’s Internet customers from accessing any of Viacom’s free-to-view online programming.

“Viacom lets web surfers from Albania watch Spongebob but Viacom blocks people who live in Alabama, and if you are an advocate of this thing called Net Neutrality, you should be very concerned,” Gessner said. “Viacom is blatantly violating the spirit of Net Neutrality by discriminating against certain Internet users in order to extract higher fees from TV viewers. That’s the sort of vicious bullying behavior many of the content companies use to maintain their stranglehold on the U.S. television industry.”

Gessner and other independent cable operators hope cable operators’ willingness to drop cable networks over their price is the start of something big — a pushback that could eventually force programmers to charge rational rates.

“Hopefully this will serve as a wakeup call to the rest of the industry to stop paying these ridiculous prices for TV rights,” said Gessner. “I have no illusion that sanity will come to the industry overnight — it will take time — but this is a step in the right direction.”

http://www.phillipdampier.com/video/MCTV Rate Increase 2014.flv

MCTV president Bob Gessner hosted this thoughtful presentation to carefully explain why his customers are facing a $1-3 mid-year rate increase for cable television. Gessner breaks with tradition by explaining the cable television business model is effectively broken and needs serious reform, including more choices for customers seeking fewer channels and a lower bill. It’s well worth 20 minutes of your time. (20:11)

Share

Wall Street: Telecom Mergers Are Supercalifragilisticexpialidocious! Consumers: More Pocket-Picking

price-gouging-cake“Comcast Corp.’s bid to buy Time Warner Cable Inc. may be the opening act for a yearlong festival of telecommunications deals that would alter Internet, phone and TV service for tens of millions of Americans.” — Bloomberg News, May 14, 2014

Wall Street analysts remain certain Comcast and Time Warner Cable won’t be the only merger on the table this year as the $45 billion dollar deal is expected to spark a new wave of consolidation, further reducing competitive choice in telecom services for most Americans.

While the industry continues to insist that the current foundation of deregulation is key to investment and competition, the reality on the ground is less certain.

Let’s review history:

For several decades, the cable industry has avoided head-on competition with other cable operators. They argue the costs of “overbuilding” cable systems into territories already serviced by another company is financially impractical and reckless. But that did not stop telephone companies like AT&T and Verizon from overhauling portions of their networks to compete, and in at least some communities another provider has emerged to offer some competition. Some wonder if AT&T was willing to spend billions to upgrade their urban landline network to provide U-verse, why won’t cable companies spend some money and compete directly with one another?

The answer is simple: They can earn a lot more by limiting competition.

When only a few firms account for most of the sales of a product, those firms can sometimes exercise market power by either explicitly or implicitly coordinating their actions. Coordinated interaction is especially suspect where all firms seem to charge very similar prices and few, if any, are willing to challenge the status quo.

Since the 1980s, the telecommunications industry has been deregulated off and on to a degree not seen since the pioneer days of telephone service. That was the era when waves of mergers created near-monopolies in the oil, railroad, energy, tobacco, steel and sugar industries. By the late 1890s, evidence piled up that proved reducing the number of providers in a market leads to higher prices and poor service. The abuses eventually led to the passage of the Sherman Antitrust Act of 1890 and later the Clayton Antitrust Act of 1914.

Here is what happened when the cable industry was reined in during the early 1990s, only to be deregulated again.

Here is what happened when the cable industry was reined in during the early 1990s, only to be deregulated again.

The generation of political leaders that dominated Washington during the 1980s developed selective amnesia about economic history and dismantled many of the regulatory protections established to protect consumers, arguing competition would keep markets in check. In the broadband and cable business, that has not proved as successful as the industry represents.

At the heart of the problem is the 1996 Telecommunications Act, signed into law by President Bill Clinton. The sweeping law is littered with lobbyist landmines for consumers and their interests. Under the guise of increasing competition, the 1996 law actually helped reduce competition by removing regulatory oversight and, perhaps unintentionally, sparking an enormous rampage of industry consolidation followed by price increases. The Bush Administration kept the war on consumers going with the appointment of Michael Powell (now the CEO of the cable industry’s lobbying group) to chair the Federal Communications Commission. Under Powell, non-discriminatory access to networks by competitors was curtailed, and Powell’s FCC gave carte blanche to the cable industry’s plan to cluster its territories into large regional monopolies and a tight national oligopoly. The FCC’s own researchers quietly admitted in the early 2000s “clustering raised prices.”

Cable prices

By January 2001, cable operators had settled on rate increases that averaged three times the rate of inflation. While the national inflation rate hovered around 1%, cable companies routinely raised basic cable rates an average of 7% annually. Powell declared rising cable rates were not a consumer problem and adopted the industry’s classic talking point that rate increases reflect the “value of the programming” found on cable. In fact, even as cable customers grew increasingly angry about rate increases, Powell told three different reporters he wanted to further relax the FCC’s involvement in cable pricing. (McClintock, Pamela, “Powell: No Cable Coin Crisis” Variety, April 30, 2001; Hearn, Ted. “Powell: Value Matters in Cable Rates,” Multichannel News, March 13, 2002; Powell Press Conference, February 8, 2001; Dreazen, Yochi. “FCC Chairman Signals Change, Plans to Limit Intervention,” Wall Street Journal, February 7, 2001.)

cost_broadband_around_the_world_v2Economists reviewing data found in publicly available corporate balance sheets soon found evidence that the “increased programming costs”-excuse for rate increases did not hold water. The less competition or number of choices available to consumers in the market unambiguously lead to higher prices. It has remained true since Consumers’ Union revealed the financial trickery in 2003:

The cable industry will claim that programming costs are driving prices up. While programming costs have certainly risen, a close look at the numbers shows that rising program costs account for only a small part of the rising rates.

If costs were really the cause of rising prices, then the cable industries’ operating margins – the difference between its revenues and costs — would not be rising. The facts are just the opposite. Operating margins have been increasing dramatically since 1997. The operating margin for the industry as a whole will reach $18.8 billion per year in 2002, $7 billion more than it was in 1997. Operating revenues per subscriber have increased dramatically over that period, from $208 per year to $273. That is, after taking out all the operating costs, including programming costs, cable operators have increased their take per subscriber by over 30 percent.

[...] The ability of cable operators to raise rates and increase revenues, even with rising programming costs, stems from the market power they have at the point of sale. They would not be able to raise prices and pass program price increases through if they did not have monopoly power.

Consumers’ Union also foreshadows what will happen if another wave of industry consolidation takes hold the way it did over a decade earlier:

While the cable industry has certainly increased capital expenditures to upgrade its plants, it has actually sunk a lot more capital into another activity – mergers and acquisitions.

It is the outrageous prices that have been paid to buy each other out and consolidate the industry that is helping to drive the rate increases. Between 1998, when the first mega merger between cable operators was announced, and 2001, when the last big merger was announced, cable companies spent over a quarter of a trillion dollars buying each other out. In those four years, they spent almost six times as much on mergers and acquisitions as they did on capital expenditures to upgrade their systems. At the same time, the average price paid per subscriber more than doubled.

countries_with_high_speed_broadbandWhen a cable operator pays such an outrageous price, the previous owner is reaping the financial rewards of his monopoly power. The acquiring company can only pay such a high price by assuming that his monopoly power will allow him to continue to increase prices. Monopoly power is being bought and sold and borrowed against. The new cable operator, who has paid for market power, may insist that the debt he has incurred to obtain it is a real cost on his books. That may be correct in the literal sense (he owes someone that money) but that does not make it right, or the abuse of market power legal.

Fast-forwarding to 2014, economist and Temple professor Joel Maxcy said the same basic economic truths still exist today with Comcast’s merger with Time Warner Cable.

“My concern is the merger and the consolidation of the cable and internet delivery system for consumers and what will happen to internet and cable rates and choices,” Maxcy said, voicing his hesitancy about a deal that merges the nation’s two largest cable providers. “As that industry has gotten more consolidated over time, we have seen rates go up. The answer from them is that we’ve got more choices. Are we better off or not better off? I don’t know, but certainly rates have gone up at a much faster rate than the inflation rate. The result of more monopoly power is always higher prices and less choices and it seems that this merger moves in that direction.”

“The threat from non-network content providers is a concern for the cable industry,” Maxcy added.

“We’re moving to a situation where we don’t need cable, but we still need the internet and the cable companies are the ones that have control of that,” he said. “Consolidating them together makes them more competitive against the outside forces, but the other argument makes the whole thing less competitive so they’ll have more ability to control the access to Netflix, YouTube and the like. People that may develop other similar sorts of services will have a hard time getting the access they would like to purchase those.”

Chris Stigall spoke with economist and Temple professor Joel Maxcy on Talk Radio 1210 WPHT in Philadelphia about Comcast’s attempt to purchase Time Warner Cable and what that means for consumers. Feb. 18, 2014 (12:10)
You must remain on this page to hear the clip, or you can download the clip and listen later.

Share

TDS Acquires BendBroadband of Oregon in $261 Million Deal; Nothing Changes for Now

tds_hp_logoCentral Oregon’s independent cable television and broadband company — BendBroadband — has been sold to Telephone and Data Systems (TDS), a Chicago-based telephone company in a deal worth $261 million.

TDS, which also owns southwestern U.S. Baja Broadband and 84 percent of US Cellular, promises nothing will change for the company’s 36,000 cable TV, 41,000 Internet, and 22,000 phone customers “for the foreseeable future.” The company also said it plans to keep BendBroadband’s name and 280 employees.

BendBroadband has provided cable television service in Bend, Redmond, Sunriver, Prineville, Madras, and Sisters as far back as 1955, when it imported long distance KOIN (the CBS affiliate out of Portland), KLOR (Portland’s ABC affiliate), and KVAL-TV (Eugene’s NBC affiliate) for the benefit of viewers that could not receive broadcast television station signals from western Oregon blocked by the Cascade Range — high mountains that separated cities like Portland from Bend.

bendbroadband“While BendBroadband has made many smart investments, it is clear that we will need to join forces with a like-minded company to gain the scale necessary to provide the cutting-edge technology and personalized customer experiences that consumers expect,” BendBroadband’s website says.

The company also felt the cable industry was entering a new era of consolidation, necessitating a sale to improve negotiating power with television networks over programming costs.

Share

Cable Industry Mulls Its Options: Usage-Based Billing or Content Provider-Pays Pricing Models

cable showCable industry executives on hand at this year’s Cable Show in Los Angeles are debating whether Netflix has taught the cable industry some important lessons about how to treat its online video competition.

Phil Lind, executive vice president of regulatory affairs at Rogers Communications called Comcast’s peering deal with Netflix a groundbreaking breakthrough on how the Internet will be treated in the future.

Netflix has been forced to compensate the cable and telephone companies for its reliance on their broadband pipes to reach customers.

Mike Fries, president and CEO of Liberty Global said the issue of Net Neutrality relates primarily to online video and the discussion will inevitably come down to choosing between providing a broadband fast lane for content producers willing to pay or adopting usage-based billing that compensates the industry for the growth of streaming video.

Several on the panel disagreed with the contention that Netflix has outmaneuvered the cable industry with a superior on-screen interface and better on-demand content. But Fries said Netflix has achieved more success than the industry’s own TV Everywhere initiative, which unlocks online content for authenticated, paying cable TV subscribers. In addition to unwieldy authentication systems that pester subscribers with frequent log-in demands, content rights issues still dramatically limit the amount of streamed video available from TV Everywhere platforms.

Share

Cable Industry Lobbies to Get Rid of CableCARDs: The Return of the Mandatory Set-Top Box?

Phillip Dampier April 22, 2014 Competition, Consumer News, Public Policy & Gov't No Comments

The House Energy and Commerce Subcommittee on Communications and Technology has approved a draft bill that could effectively render current CableCARD technology obsolete  by allowing cable operators to encrypt channels and introduce new security measures that only work with the cable company’s set-top box.

Cablecard_SciAtl_3-4_view

If you look closely inside your cable set-top box, chances are good a CableCARD similar to this is installed inside. But perhaps not for long.

With strong support from the cable industry, the House Subcommittee approved the reauthorization of the Satellite Television Extension and Localism Act (STELA) with language that would end the Federal Communications Commission’s ban on built-in descrambler set-top box equipment unavailable to competitors.

Section 629 of the 1996 Telecommunications Act requires that consumers have adequate access to alternative equipment to view multichannel video programming. In 2003, the FCC adopted the cable industry-developed CableCARD standard that would let customers view encrypted channels without leasing a traditional set-top cable box.

In fact, if you own a cable set-top box manufactured after 2007, chances are you already have a CableCARD without realizing it. It is built-in to your set-top box and decrypts and authorizes your cable television lineup. The cable industry never saw any need to incorporate CableCARDs into set-top equipment because it was designed to handle those functions without needing the extra card. But the FCC’s “integration ban” has insisted cable companies use the CableCARD with hopes it would stimulate universal support of the technology and help facilitate a breakup of the leased set-top box monopoly.

The cable industry has itself largely to blame for the FCC’s actions. Prior to 1992, some cable operators were notorious for saddling customers with expensive set-top boxes that were large and unwieldy. Cable companies regularly raised the rental price of the mandatory equipment in rate increase maneuvers and charged huge penalties when boxes were lost, stolen, or damaged.

Many cable customers never wanted the boxes, preferring “cable-ready” service, which let the television sort out the television lineup without any extra equipment.

But “Cable-ready” televisions were an impediment to the revenue-enhancing possibilities offered by digital cable television that became common in the 1990s. Existing television sets could not receive the digital channels without a set-top box and many customers avoided upgrading service because of the extra costs and equipment requirements. In other areas, signal theft pushed the industry towards encrypting more than just a few premium movie channels. In high theft areas like New York City, cable operators won permission to scramble most, if not all the cable television lineup. Customers needed boxes to receive those encrypted channels.

As early as January 2005, the National Cable & Telecommunications Association told the FCC that independent alternatives like the CableCARD were in direct “conflict with cable’s own market imperatives,” adding there was no economic incentive to support third-party equipment and adopting it would result in increased cable bills.

Powell

Powell

Now that CableCARD technology is with us, most cable companies rarely mention it unless customers directly ask. Even CableLabs, the industry engineering group that develops and markets a variety of cable industry technology, has also avoided the subject.

Without any significant backing from the cable industry, most customers never realized they had another option when the cable technician arrived with a leased set-top box in hand. Television manufacturers dropped support for the little-known technology as well.

Cable industry advancements like on-demand viewing don’t work with the standalone CableCARD, creating a disadvantage that further hurt the technology’s chances.

The cable industry argues times have changed and consumers don’t generally want CableCARDs.

NCTA president Michael Powell told Congress that more than 45 million CableCARD-enabled set-top devices are now sitting in customer homes, but only 600,000 of them were requested by cable customers for use in third-party devices. Powell argues supporting CableCARD technology means customers with a leased box are paying for redundant technology. One large cable operator claimed the average set-top box now costs an extra $40-50 to support CableCARD technology.

“Additionally, based on EPA figures, cable subscribers collectively foot the bill for roughly 500 million kilowatt hours consumed by CableCARDs each year,” said Powell. “By all measures, the costs of this misguided rule clearly outweigh its benefits.”

In the end the subcommittee agreed to a compromise by eliminating the “integration ban” that effectively keeps cable companies from switching on new security technology that might not work with CableCARDs but also gives the FCC the authority to create or authorize new independent set-top box technology ‘when needed.’

This means either the cable industry could develop a next generation of CableCARDs that work with advanced security measures or more likely the ongoing advancement of IP-delivery of television programming could make the matter moot. As the cable industry moves towards online streaming of cable channels, various third-party devices like Roku could be used to access much of the cable lineup without worrying about a CableCARD. Recording such programming for later viewing will likely require agreements with copyright-obsessed programmers, the cable industry, and manufacturers, however.

Share

Nobody Raises Rates Like Comcast: Since 2009 Up 68% for Basic, 21% for Expanded Basic Cable

comcast twcDespite arguing its merger with Time Warner Cable would result in greater discounts for cable programming, America’s largest cable company Comcast is already receiving the best volume discounts available but is not passing the savings on to customers.

No major cable operator raised cable television rates more than Comcast, according to a new study from Free Press. Since 2009, Comcast jacked up prices on its broadcast basic television tier by 68 percent. Its more popular expanded basic cable service saw rate hikes amounting to 21 percent over the same time.

In contrast, Time Warner Cable actually cut rates for broadcast basic cable by 2.5% and raised expanded basic prices by 17 percent.

Comcast’s top lobbyist David Cohen has made clear the company’s prices are going to keep rising even if the merger is approved. That is likely to give Time Warner Cable customers sticker shock if Comcast takes over. Comcast is likely to pass whatever cost savings it realizes from the merger back to shareholders, not to customers.

free_press_comcast_twc_video_price_hikes

Share

Cogeco Won’t Lower Your Bill; Warns Customers Not to Be “Victims” of Landline Cutting

Phillip Dampier April 14, 2014 Canada, Cogeco, Competition, Consumer News No Comments

cogecoDespite growing competition from Bell’s fiber-to-the-neighborhood service Fibe, now expanding into many of Cogeco’s outer suburban service areas, Cogeco will not negotiate a better deal for customers, preferring to emphasize its customer service and “right-sizing” bundles of services to best meet customer needs.

As a result of higher prices, Cogeco’s earnings and profits are up for the second quarter of 2014. In the quarter profits rose to $58.5 million — up from $48.9 million during the same quarter a year ago. Revenue rose to $518.4 million from $458.5 million.

“We don’t like competing on price,” said Cogeco CEO Louis Audet said. “I’m not saying it’s zero, but we really don’t like competing on price.”

Audet

Audet

Customers have been offered sign up discounts from Cogeco’s most aggressive competitor on pricing – Bell. But when customers in parts of Ontario and Quebec call Cogeco to negotiate for a lower price, they are largely being turned down.

Audet said Cogeco instead emphasizes that customers will receive better customer service from the cable company, and customer retention specialists are trained to adjust packages to emphasize the services customers want without cutting their cost.

“It’s a right-sizing exercise,” Audet said. “Maybe the person wants a little less video, but they want higher Internet speeds.”

Cogeco isn’t winning the battle to keep its price-sensitive customers, however. The company lost 10,305 subscribers in the second quarter, nearly double the amount lost in the same quarter a year ago. Cogeco now serves 1.96 million Canadian cable television customers.

Customers are also dropping their Cogeco phone service, a decision Audet said makes them “victims” of cell phones. Cogeco permanently disconnected 6,000 landlines in the quarter, up from 5,550 a year ago. It still serves 473,000 phone customers.

The company lost almost 6,000 telephone customers in the quarter compared with additions of 5,550 in the same quarter last year. It had more than 473,000 residential phone customers left.

Despite the customer losses, rate increases more than made up for lost revenue, giving the company a nearly $10 million boost in profits during the second quarter alone.

Share

Comcast Awarded Golden Poo as Consumerist’s Worst Company in America for 2014

Comcast is 2014's Golden Poo award winner. (Image: Knight725)

Comcast is 2014′s Golden Poo award winner. (Image: Knight725)

Comcast eked out a narrow victory against Monsanto — the litigious-happy, genetically modified-seed company — to win top honors in the 2014 Consumerist “Worst Company in America” contest.

Comcast is a past recipient of the pro-consumer website’s Golden Poo award given to the company that most alienates its customers, winning first place in 2010 after implementing usage caps on its broadband customers, as well as runner-up status in 2008 and 2009 and third place in 2011 and 2013.

“Comcast’s win makes it only the second company to claim multiple Poos. Last year, video game biggie EA was both the first two-time winner and its first repeat champ,” reports Consumerist.

The nation’s largest cable company, Comcast managed to irritate more than any other with an arbitrary usage cap it now wants to call a “data threshold,” shoddy service, service calls that never happen, incompetent technicians that set customer homes on fire, billing errors, and inventing new profit-padding fees for almost everything.

Getting larger with the acquisition of NBC Universal did little to improve matters for customers, and one high executive cynically delayed a planned low-income discount Internet access offer to use as a carrot with the FCC to win approval of its NBC merger deal. To this day, Comcast goes out of its way to impose a number of qualifications for its Internet Essentials program to protect profits potentially harmed by customers switching to cheaper service to save money.

finaldeathmatch2014

Now Comcast wants to buy Time Warner Cable, the country’s second largest operator. Despite the fact there is little love from subscribers for Time Warner, many suspect Comcast will prove much worse. A merger brings the threat of a 300GB usage limit on broadband, an even higher modem rental fee, and cable television packages that are often more expensive than those from Time Warner.

Comcast’s greatest defense for its merger is that it doesn’t compete with Time Warner Cable so there are no antitrust concerns. But since the cable industry has borrowed from New York’s Five Families‘ playbook, they almost never compete anywhere in the country, preferring to divide up territories and avoid head-to-head competition.

“By Comcast’s logic, it would then be perfectly okay for Comcast to be the only cable and Internet provider in the country, since there isn’t really any competition among the players in this marketplace to begin with,” writes the Consumerist.

We say don’t give them any ideas.

Share

JPMorgan Chase Advises Cable Companies to Raise Cable TV Rates; Where Can Customers Go?

Phillip Dampier April 7, 2014 Competition, Consumer News 10 Comments
Comcast Rates (Image: The Oregonian)

JPMorgan Chase reports average cable rates reached $88.67 in 2013. (Image: The Oregonian)

Cable TV rates are too low and need to be hiked to boost revenue and offset rising programming costs, even if rate increases further alienate cable subscribers, according to a new report from JPMorgan Chase.

The Wall Street bank concluded customers have few options, noting that after providers raised prices around 5% last year, they lost only 0.1% of subscribers.

“Cable operators are better off raising video prices than eating higher content costs,” said Philip Cusick, a JPMorgan analyst, in the report. “Our analysis indicates that cable companies are better off raising prices and catching customers with broadband if cord cutting becomes widespread, (rather) than eating the programming increase.”

The bank recommends imposing (or raising) broadcast TV and sports programming surcharges as well as general rate hikes on basic cable service.

JPMorgan notes that increased broadband pricing and cable modem rental fees paid off for the industry during the fourth quarter of 2013, when earnings topped estimates. By doing the same for cable television packages, providers can continue to boost revenue with little risk customers will find a suitable competitor that isn’t also increasing prices.

Even if customers get rid of cable television, a practice known as cord-cutting, cable operators can still keep customers by providing broadband service. Some of the lost revenue can be recovered from the services customers have not canceled.

Cusick says the industry is being challenged by a handful of content companies that increasingly dominate the cable package, among them Walt Disney, Time Warner (Entertainment), CBS, and FOX.

“With the majority of content controlled by only six or seven programmers, aggregate prices for content are rising around 10% annually and forecasts in many media models continue that rise for years,” Cusick said.

Share

Sports Channel Sticker Shock: Your Basic Cable TV Bill Headed to $125/Month

Phillip Dampier March 31, 2014 Consumer News 9 Comments
Your cable bill is going up... a lot.

Your cable bill is going up… a lot.

Within five years, the average cable television subscription will reach $125 a month, primarily because of rapidly rising sports programming costs that are enriching already wealthy sports teams and players.

Professional and college sports are benefiting from the largesse of sports channels and networks all competing for the rights to televise games. Until a decade ago, those rights typically went to the highest paying broadcast television network. But as traditional cable sports networks like ESPN find themselves competing with more than three dozen other cable networks and regional sports channels, bidders need ever-deeper pockets to stay in the running. With cable customers footing the bill, the sky has been the limit.

Cable companies that routinely complain about runaway inflation in sports programming costs suddenly go silent when they get a piece of the action. Take Time Warner Cable, for example. A substantial amount of the company’s recently announced rate hike they blame on “increased programming costs” comes from networks they own and operate. A network dedicated to just one team – the Los Angeles Dodgers, will cost subscribers slightly less than $5 a month. SportsNet LA was created around Time Warner’s 25-year rights deal to show Dodgers games. The cable company is paying $8.3 billion for the privilege. Another network, dedicated to the Los Angeles Lakers, also costs Time Warner Cable customers $4 a month whether they watch or want the channel or not.

sportsnetOut east, the Yankees Channel YES costs subscribers around $3.50 a month — a bargain compared to the Dodgers — with prices expected to increase further in the years ahead. ESPN, by far the largest sports network, insists on more than $5 a month from every customer even if they have never watched the network.

Every year, prices are rising for sports programming, and fast. The lucrative billions in revenue are now turning up in players’ salaries, provide piles of money to “non-profit” educational institutions with college sports teams, and are inflating the overall value of the teams for their owners.

The inflation spiral is accompanied by a framework of entitlement, where owners, players, and schools now expect regular increases in payments to secure television rights. Those costs are passed on directly to every subscriber, because few sports networks will allow themselves to be sold “a-la-carte” only to those who actually want to watch.

With even more sports networks launching on the horizon, the average cable bill that now costs about $90 a month will increase by $35 a month to reach $125 a month within a few years, according to the Los Angeles Times:

The dispute over telecasts of Dodgers baseball games exemplifies the problem with the current setup. Time Warner Cable wants to charge Southern California subscribers slightly less than $5 a month to watch the games on a Dodger channel. Area TV distributors (such as DirecTV, Cox Cable and AT&T U-verse), fearing a consumer backlash, are resisting. If Time Warner and the Dodgers win, it’s a lucrative deal — for them. Not so for those who don’t care to watch. Even Dodger fans, blacked out now, aren’t really winners. The system denies all of us meaningful choices. All subscribers end up subsidizing programming we never watch.

In effect, because of the way channels are bundled, all pay-TV subscribers (roughly 100 million households) are subsidizing sports. The subsidy is substantial. The Pac-12 conference estimates it will receive $3 billion in TV revenue over a 12-year period. For ESPN, it’s much more. If roughly 90% of pay-TV households purchase the bundle that includes ESPN, that network alone will receive just short of $6 billion in revenue in a single year.

That’s a major subsidy, and, given a Cox Cable representative’s estimate that only 15% to 20% of viewers regularly watch sports programming, it’s paid mostly by viewers who neither watch nor wish to subsidize ESPN programming. These viewers swallow the bitter inflationary pill in order to watch other channels in the bundle.

Both college and professional sports teams benefit from the subsidy. The winners include UCLA and UC Berkeley, taxpayer-supported institutions, and USC and Stanford, preeminent private, nonprofit institutions that also benefit from federal money. UCLA alone reportedly received $14.5 million in TV revenue over the last year. Americans are accustomed to college athletic programs that make money, but do we really want these revenues to be generated on the backs of angry consumers who must pay a sports subsidy every time they purchase subscription TV?

Share

Search This Site:

Contributions:

Recent Comments:

  • Google: Hey I know this is off topic but I was wondering if you knew of any widgets I could add to my blog that automatically tweet my newest twitter update...
  • mark: It's even more galling that an assemblyman from Rochester would shill for Comcast, when his constituents are deep in TWC country....
  • Aaron: While I think it's great that Greenlight Networks is finally stepping in where some competition is desperately needed, sadly their efforts are not wid...
  • Keith: I'm currently over my Cox "limit" by 150 GB and my answer to their threats is to download and stream as much data as I can/want to. My current best i...
  • no one important: BRAVO!! Excellent reporting Phil! When a large company such as Comcast wants to change the revenue landscape at the expense of consumers and buying ...
  • baceba jones: I know I went through the whole circus of used car salesmen posing as "technicians". I don't know why the Comcast marketers think that if you lie lou...
  • baceba jones: I know I went through the whole circus of used car salesmen posing as "technicians" myself. I don't know why the Comcast marketers think that if you ...
  • Tasha: This is absurd that we have to pay additional for service. I only have Internet at my house & my bill with fees is $70 a month for 10mps. This is...
  • Romy Parker: I live in Joe's district...Time Warner services the Greater Rochester area (and the word "service" is a euphemism). I know I'm not the only one who ha...
  • michele perez: This may be two years late in coming but I think getting charged $20 on $2 and $6 balances (mind you, nobody came to the door - the most I'd get is an...
  • michele perez: And whoever said it's price gouging is absolutely right. One day this will no longer be the case - I can't wait!...
  • michele perez: I am a former Brighthouse customer of something like 12 years. Our last few years were riddled with enormous late fees incurred from every minor rate ...

Your Account: