Americans can look forward to additional rate increases in their monthly cable bills on top of the usual annual rate increases already underway as broadcast stations demand, and get, cash in return for cable carriage.

Just a few days after Time Warner Cable and Bright House Networks concluded their precedent-setting agreement in principle with News Corporation’s Fox network, other networks and television stations owners are lining up to get their piece of the action.

The cable operators’ agreement to pay an estimated 50-60 cents per month per subscriber for the right to put Fox-owned local broadcast stations on the cable dial will likely be used as the starting point for negotiations between other cable operators like Comcast, Cox, Cablevision, and Charter when their agreements with stations and broadcast networks come up for renewal.  If every major broadcast network and station owner gets the same 50-60 cents per month, or more, those costs will certainly be passed on to subscribers.  That’s just the beginning says David Joyce, media analyst for Miller Tabak , a Wall Street trading firm.  Joyce believes annual increases demanded by networks could easily be in the 7-8 percent range.  Bloomberg News predicts that could add up to more than $5 billion dollars a year.

[flv width=”640″ height=”500″]http://www.phillipdampier.com/video/Bloomberg Retransmission Consent Will Force Cable Bills Higher 1-4-10.flv[/flv]

Bloomberg News interviews David Joyce, a media analyst who predicts annual 7-8% increases for retransmission consent. (3 minutes)

Sinclair owns stations in these communities

There is nothing new about these kinds of disputes — just the sums involved.

Sinclair Broadcast Group owns television stations serving nearly 22% of the United States (mostly Fox affiliates), and has contentious negotiations for retransmission consent agreements with Mediacom, a cable operator serving mostly smaller cities in the midwest and south.

The two companies just agreed to an eight day extension of their negotiations over a new agreement to replace the one that expired December 31st.

“We just decided we wanted to avoid, with such important events coming up, the disruption that it would cause customers,” Sinclair General Counsel Barry Faber said. “I don’t expect there will be a further extension. We recognize we’re giving up, perhaps, a small amount of (negotiating) leverage, but we don’t think it’s very much. Our channels are worth so much more than we are asking for.”

Sinclair has been willing to force its stations off Mediacom cable systems in the past to prove its point.  But another experience with angry sports fans upset over the interruption of Fox programming was apparently sufficient to give negotiations another week.

[flv width=”640″ height=”500″]http://www.phillipdampier.com/video/Bloomberg Murdoch Bullies His Way to Agreement 1-4-10.flv[/flv]

Bloomberg News explains how Rupert Murdoch bullied his way into an agreement with Time Warner Cable and Bright House Networks that could change the landscape of broadcast television forever.  (4 minutes)

[flv width=”640″ height=”500″]http://www.phillipdampier.com/video/Bloomberg Sports a Major Factor of Cable Dispute 1-4-10.flv[/flv]

The ‘Holy Grail’ of cable programming essentially boils down to silly ball games.  Sports programming is one of cable’s biggest expenses, yet few would dare to alienate sports fans, as this Bloomberg report explores.  (2 minutes)

After much sound and fury, and plenty of media attention, Fox programming remained on Time Warner Cable and Bright House Networks systems through the New Year’s festivities, as the three companies reached “an agreement in principle” to make cable customers ultimately pay more for the right to watch Fox broadcast stations and cable networks.

The wide-ranging agreement covers all of Time Warner Cable’s more than 12 million subscribers as well as 2.4 million Bright House customers.  The deal encompasses Fox-owned, Fox-affiliated television stations covering nearly four million Americans and Fox’s sports and entertainment cable networks seen nationwide.

The major point of contention between Fox and the two cable companies was the fee for carriage rights to Fox television stations.  Known as “retransmission consent,” cable operators must obtain permission from television station owners before they are allowed to put them on cable lineups.  For years, broadcasters were happy just getting clear pictures to cable’s extended reach into suburban and rural communities.  But over the years, broadcast interests have sought cash payments from cable operators in return for that consent.

Leveraging their popularity, station owners feel they have plenty to room to negotiate higher payments, and the cable industry has tried to avoid setting any precedent for cash payments, fearing a new benchmark set with one station owner will soon become the asking price for every other major station in a community.  Cable operators have traditionally signed agreements that launch station or network-owned cable channels instead of large direct cash payments, but Fox’s game of hardball suggests those days are over.

While none of the companies involved would disclose the terms of the final agreement, industry analysts suggest the parties met somewhere near the middle of their respective asking price.  Fox had demanded $1.00 a month per subscriber for each of its affiliated television stations, while Time Warner Cable suggested a quarter per month per subscriber was a fair offer.  Most agree the final deal is in the 50-60 cent range, not including any extras Time Warner Cable threw in on the cable network side.

Chase Carey

All of the parties represented at the negotiating table were pleased with the outcome.

“We’re pleased that, after months of negotiations, we were able to reach a fair agreement with Time Warner Cable — one that recognizes the value of our programming,” News Corp. president and COO Chase Carey said in a press release. Time Warner Cable president and CEO Glenn Britt adds that his company is “happy to have reached a reasonable deal with no disruption in programming.”

Amusingly, Bright House Networks’ own press release is a mirror copy of Time Warner Cable’s — only the names have been changed:

“We’re pleased that an agreement has been reached with no disruption in programming for our customers,” said Steve Miron, Chief Executive Officer, Bright House Networks.

Who wasn’t represented at the negotiating table?  Customers.  Ultimately, whatever amount agreed to, it will be added to customers’ bills in future rate increases.

If other networks seek similar terms, cable operators may have to fork out as much as $5 billion a year — and would likely pass the cost on to subscribers, Craig Moffett, an analyst at Sanford C. Bernstein in New York told Bloomberg News.

“The broadcast networks are really struggling to find a viable business model,” Moffett said. “They’re looking at the cable networks that make money both on advertising and the money that the cable operators pay them and saying, ‘We need a dual revenue stream to survive too.’”

[flv]http://www.phillipdampier.com/video/CNBC TWC Fox Reach Agreement 1-4-10.flv[/flv]

CNBC reports on the deal reached just in time to prevents sports fans from missing out on their New Year’s football games on Fox. (2 minutes)

Nothing beats an overcharging scheme like cell phone text messaging.  What originally was envisioned as a small text paging add-on has become a massively lucrative service from America’s cell phone companies who rake in millions from one line messages.  In 2008, 2.5 trillion messages were sent from cell phones worldwide, up 32 percent from the year before, according to the Gartner Group.

Woe to those who send or receive text messages without a special texting plan.  Although the actual cost to send and deliver dozens of text messages is literally a fraction of a penny, almost every carrier charges a uniform 20 cents per message sent or received.  A text-happy teen can rapidly skyrocket your cell phone bill, as one Massachusetts father discovered.

[flv width=”480″ height=”380″]http://www.phillipdampier.com/video/WWLP Springfield Cell Phone Bill Shocker 12-26-09.flv[/flv]

WWLP-TV in Springfield reports on a Massachusetts dad confronted with a $500 text message cell phone bill last year.  (1 minute)

Texting plans typically add a few dollars to your cell phone bill, although unlimited texting can cost you a ten spot every month per phone from some providers.  For those customers receiving unwanted text message spam, most simply pay the bill, which only adds to provider profits.  Carriers promise they will credit customers receiving unwanted text messages, and several will block them altogether for no additional charge.  Carriers claim the popular text messaging service adds value to subscribers, and frankly utilizes less of their network resources than customers making quick voice calls back and forth.

Yet prices for cell phone text messaging keep increasing.  Some carriers originally charged just five cents per message.  Yet since the number of wireless phone companies have shrunk from six to just four today, prices have increased: first to 10 cents per message, then 15 cents, and today a near-uniform 20 cents per message. That generates profits credit card companies can only drool over.  In fact, doing the math, sending 140 bytes of data in a typical text message costs you one cent for every seven bytes of data.  That’s $1,497.97 per megabyte.

Senator Herb Kohl (D-Wisconsin) has had his share of constituent complaints from those who’ve received surprise enormous bills.  Kohl is chairman of the Senate Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights.  He began investigating why text messaging costs so much.

“Text messaging files are very small,” Kohl says, “as the size of text messages are generally limited to 160 characters per message, and therefore cost carriers very little to transmit.”

Perhaps even less than Kohl suspects.  Text messages are limited to 160 characters because they ride across barely-utilized control data circuits cell phone companies use to manage calls.  Because these circuits are idle or underutilized, yet still occupy part of the spectrum, riding text messages across these channels costs carriers next to nothing, and don’t bog down wireless networks.  But that staggering bill can sure bog down your budget.

Apparently the “fight back” component of Time Warner Cable’s campaign against the high cost of cable has not been a stunning success because the nation’s second largest cable operator continues to roll over its subscribers with some striking rate hikes, this time across upstate New York.

The usual promotional brochure began appearing in mailboxes across the state, filled with glowing words about all of the wonderful things Time Warner Cable did for you since your last rate increase, and promises for more wonderful things to come… along with fine print language at the bottom subtly labeled “2010 Rates.”  They don’t even call it a rate increase anymore, although it will cost most video and broadband subscribers in Rochester an additional $7.70 a month — $92.40 a year, effective February 1st.

After the company complained back in April it “needed” to engage in Internet Overcharging experiments to use that revenue to upgrade networks, the additional $3 a month/$36 a year they will get from millions of Road Runner subscribers in New York alone should be more than enough to do just that.  Those on lower speed economy tiers are also facing rate hikes: $3 a month for Road Runner Lite and $4 a month for Road Runner Basic, reaching $22.95 and $29.95 a month in Rochester, respectively.

As a concession to Rochester, one of the last remaining cities in New York still stuck with 384kbps upload speeds, the company will increase the upload speed for the division’s Standard Road Runner service customers to 1Mbps sometime in 2010.  Those with Road Runner Turbo will probably see upload speed increasing to 2Mbps, accordingly.  But Rochester still isn’t on the upgrade list for DOCSIS 3, bypassed because of the very limited competition Frontier offers the cable company locally.  Verizon FiOS fiber to the home service is being provided in most other large New York cities.

You probably didn’t ask for it, but you’re going to get it anyway: NBA TV HD and the Sundance Channel was added today to the Rochester-area’s digital cable tier.

Time Warner Cable's new rates for the Rochester/Finger Lakes region of western New York become effective February 1st.

Meanwhile in the state capital Albany, news of the rate increase was particularly unwelcome in the hard hit upstate economy.  The Albany Times-Union called the rate increase “an insult” on hard-hit New Yorkers:

Your neighbor lost his job, the housing market is in the tank, and the economic recovery is nowhere in sight.

And now to add insult to injury, as other household costs rise, your cable TV bill is going up next year too — in some cases by nearly 10 percent.

Time Warner Cable sent a flier to local customers this month with the new prices. Except for the most basic package, all the rates are going up. The “basic with standard” TV package, which includes dozens of mainstay cable channels such as CNN, ESPN and Comedy Central in addition to local broadcast channels, will rise 9.7 percent to $61.95 a month from $56.45 currently.

The company’s “All the Best” package that combines TV with Internet and phone service will go from $139.95 a month to $146.95 a month, an increase of 7 percent.

[flv]http://www.phillipdampier.com/video/WTEN Albany Time Warner Bill Increase 12-31-09.flv[/flv]

WTEN-TV Albany reports that Time Warner Cable’s latest rate increase will cause many upstate New York residents to drop premium channels in even greater numbers to economize. (2 minutes)

Verizon FiOS, for now anyway, will be cheaper than most of Time Warner Cable’s packages in Syracuse.  The Salt City faces rate increases averaging six to eight percent.  Time Warner Cable spokesman Jim Gordon blamed the rate hikes on the same things cable always blames rate hikes on — increased programming costs.  From the Syracuse Post-Standard:

Time Warner spokesman Jim Gordon said there are two major reasons for the increase: higher prices charges by the providers of programs and the rising cost of doing business. Customers are using more services more often, Gordon said, and cable is becoming more important in people’s lives.

In 2009, the number of channels on which the “start over” feature is available rose from 45 to 90, and customers used the feature 10 million times, he said. Customers also watched 85 million videos on demand, he said. “People are staying home more, and they’re hunkering down and they’re utilizing these services,” he said.

Cable operators are free to raise rates on everything except the basic service of broadcast and educational channels, for which operators need permission of regulators.

Below is a list of popular packages and corresponding rate increases:
• Talk ‘n’ View package, of telephone and cable television service, will rise from $100.50 to $108.95 – an increase of about 8 percent.
• Surf ‘n’ View, a combination of Internet and cable television, will increase from $105.50 to $111.95, an increase of 6 percent.
• All the Best, which combines cable, internet and phone, will rise from $135.50 to $144.95, or 7 percent.

Prices are slightly lower with Verizon Communications Inc.’s FiOS, which recently entered the Central New York market and offers a basic package of telephone, Internet and cable television for $109.99 to $129.99.

Further north in Watertown, rates are also increasing by 6 to 8 percent starting February 1st, the second increase in the past 11 months. Time Warner last raised its rates in March.

Time Warner Cable spokesman Jim Gordon said the current increases are due to price increases by programmers and an increase in the company’s cost of doing business. Gordon also cited an increase in the use of the company’s features including “Start Over” and video on demand.

“People are staying home more because of the current economic situation, and customers are finding value in these enhancements,” Gordon said.  The Watertown Daily Times notes Gordon doesn’t think subscribers will mind enough to leave.

“Our goal in doing this is to enhance the customer experience,” Mr. Gordon said.

Mr. Gordon said he doesn’t think the rate increases will prompt many Time Warner Cable customers to switch to another provider, because of the local customer service the company offers.

“We’re more than ready to compete,” Mr. Gordon said.

Customers can expect to see the following increases on their cable bills this year:

• A combination of standard and basic cable service costs will increase from $62.50 to $67.75, an increase of about 8 percent.
• The Surf ‘n’ View package will increase from $105.50 to $111.95, an increase of about 8 percent.
• The Talk ‘n’ View package will increase from $100.50 to $108.95, an increase of about 8 percent.
• The All the Best package, including cable, phone and Internet service, will rise from $135.50 to $144.95, an increase of about 7 percent.

Verizon FiOS, a new cable provider in the area, has a basic package that includes cable, telephone and Internet service for $109.99 to $129.99.

Satellite television provider DirecTV also has announced rate increases of 3 percent to 5 percent, which also will take effect Feb. 1.

Watertown residents noted the irony of the company’s “Roll Over or Get Tough” campaign in light of today’s rate increase.

“Imagine if you went to the supermarket and they told you that you had to buy 100 items you didn’t want and would never use for ever item you actually wanted. This is how Time Warner Cable operates,” one writes.

A Raymondville resident remarks, “Isn’t it strange after Time Warner solicits its customers to support their get tough effort to fight with the Fox networks in negotiations over price increases for programming that they can institute one of their own? Is this the real reason that they lobbied all of their customers? Is this the beginning of setting things up so that we end up paying for every channel that we watch? If enough people push to get rid of the junk they give us, that we never watch, so we get a package we will? It almost sounds like a shell game in which the pea is not under any of the shells, a no win situation for subscribers no matter how it shakes out. New businesses have been created here ones in which someone has figured out how to get money from consumers without really doing anything to get it. The New American Way. Welcome to the new Millennium.”

Cablevision, the nation’s fifth largest cable operator, yanked Food TV and HGTV from suburban New York cable systems early this morning in another fight over programming fees.

The two popular cable channels, owned by Scripps Networks, were “no longer authorized” to be shown to Cablevision customers after the two companies failed to reach an agreement over what the cable operator should pay per month for the two networks.

Perhaps overshadowed by the bigger profile Time Warner Cable-Fox dispute which impacts cable customers across the country, the fight between Cablevision and Scripps has been nasty even by the standards of knockdown, drag-out fights characterizing most of these contract spats.

Cablevision characterized Scripps as “financially troubled” in its own account for the press this morning:

“We are sorry that Scripps’ current financial difficulties are making it impossible for them to continue our relationship on terms that are reasonable for Cablevision and our customers,” the company said in a statement. “We wish Scripps well and have no expectation of carrying their programming again, given the dramatic changes in their approach to working with distributors to reach television viewers.”

That’s about as final as it gets, as the cable operator signals it’s done haggling over prices, at least for now.

Cablevision has a website of its own to explain the decision to drop the two networks

As usual, customers are caught in the middle in an advertising and PR war back and forth.

[flv]http://www.phillipdampier.com/video/Cablevision Message on HGTV Food Channels.flv[/flv]

This morning, Cablevision customers found this message running on the channels formerly occupied by HGTV and Food Network.

Scripps has set up websites for consumers to get their take on the matter, and has also taken to running some 30-second ads of its own, along with network personalities giving their testimony about why the channels are going to be missed.  I Love HGTV and I Love Food Network largely mirror each other’s content in a blog format.  Scripps argument for Food Network, which basically also applies to HGTV:

1. Food Network is among the most popular brands on television, consistently ranking among the Top 10 networks in cable and satellite. In fact, Food Network attracted record numbers of viewers in 2009.
2. Cablevision does not pay Food Network comparably to what it pays other Top 10 networks; yet it pays some networks that deliver substantially smaller audiences significantly more for their programming.
3. The rates currently paid to Food Network by Cablevision are among the lowest in the industry. In 2009, Food Network is 75^th of the 79 Nielsen-rated cable and satellite networks in terms of average rates received from distributors per subscriber. (Source: Kagan Research)
4. Cable subscribers on the whole, responding to the 2009 Beta Subscriber Study, said Food Network is worth $1.03 per month, which is considerably more than Cablevision is paying for the network’s programming and more than Food Network is asking in the current contract negotiations.
5. Cablevision customers pay an average subscription rate of $83 per month. The monthly fee Cablevision pays for Food Network is a small fraction of that figure.

[flv width=”640″ height=”451″]http://www.phillipdampier.com/video/Scripps Ad for Cablevision Customers.flv[/flv]

Scripps fires back with its own ad alerting Cablevision subscribers to call and ask for HGTV and Food Network back on their lineup.

Judging from the comments left on both of Scripps’ sites, consumers know they are stuck in the middle and many are not thrilled with either party.  Some of the comments:

Each of you blames the other, but it’s probably a lot of both, and we, the viewers, are the real losers.  Thanks a lot to both Cablevision and Scripps. You’re just like the Republicans and Democrats — neither side seems to understand the meaning of or necessity for compromise to benefit the masses. Have a wonderful New Year.

You guys are schmucks. You waited until the very last minute, on New Years Eve, to tell everyone about this before launching your stupid campaign. You are using your customers to fight your battles, and are ultimately punishing all of them at the end of the day. And that’s pathetic.

YOU guys are the scumbags! You’re so greedy, I hope Cablevision snubs you. If Cablevision picks you back up at your hiked rate, we’ll be the ones paying an even higher bill, you idiots.
Thanks loads and happy new year to you, too. Greedy morons.

Whatever the disagreement is on funding, ultimately, it is us as the consumer who are paying the bill. My wife LIVES for the Food Network and would be willing to pay for it as a Premium channel. If that’s the road both sides want to take, both will lose out. Only a few like myself would be willing to pay extra for it……there will be other subscribers that could care less either way.

I turned on my TV this morning to watch the Rose Parade at 11 am and found an obnoxious rotating statement from Cablevision instead of the channel. I then went online to the web address they provided on screen and read their say -nothing statement that put the entire blame on Scripps networks. Instead of telling the customers there was a problem and asking what we would want to pay for these networks, they just yanked them. They are the most customer-unfriendly company I have seen, and it is not just from this action where I form this opinion.

We have enjoyed the FoodNetwork and HGTV but you deserve to be off Cablevision, there is no way your combined networks are worth almost $2 a month, 25 cents is about right. My cable bill is too high now, 2 bucks for what you have? Forget it, I will have to do it the old fashion way. We lived without you before and will live without you again.

To Cablevision, I have had my rates raised countless times over the past 10 years, and have nothing to show but more CRAP channels. I can’t watch NFL channel, I don’t get my hard to find football games because I am a fan of an out of area team, and now, I can’t watch the ONE CHANNEL that I regularly follow, FOOD Network. The fact that companies like you have spurned the “a-la-carte” system that would allow me to choose and pay for the channels I want (which I would gladly do for Food Network and HGTV) and instead want to keep your profit margin as large as possible is a testament to the corporate GREED that you embrace instead of a value based system. You can talk tough and try to put all of the blame on Scripps, but the truth is, you are both to blame.

Somehow, I don’t think this was the kind of reaction either company expected from customers who have wised up to who will ultimately pay to resolve this in the end.

[flv width=”640″ height=”500″]http://www.phillipdampier.com/video/Vern Yip HGTV Cablevision.flv[/flv]

HGTV’s Vern Yip speaks to Cablevision customers about how to get HGTV back on their cable lineup.  (30 seconds)

[flv width=”640″ height=”500″]http://www.phillipdampier.com/video/Guy Fieri on Food Network Being Dropped.flv[/flv]

Food Network’s Guy Fieri is “blown away” with Cablevision’s decision to drop Food Network from the lineup. (30 seconds)