Last week’s shocking development that Cablevision, a major cable operator in greater New York City, New Jersey and Connecticut is not going to raise rates in 2012 is bad news for other cable operators itching to raise rates once again this year.

Cablevision’s decision was made as the company continues to battle Verizon FiOS, the phone company’s fiber-to-home-service across its service area.  Verizon has been playing hardball with Time Warner Cable, Comcast, and Cablevision in its metro New York service area, offering up to $500 in rebates to sign new customers.  That level of vicious competition has been great for consumers, but lousy for Wall Street.

Investors were not pleased with Cablevision’s pass on rate hikes and its intention to invest a lot more in system upgrades than originally planned.  Wall Street loves increased revenue and hates it when companies spend it on their customers.

With all of this competition breaking out, Comcast and Time Warner Cable may be more than a little uncomfortable sitting down at an antitrust hearing later this month to discuss their new agreement with Verizon to cross-market cable and mobile service.  In return for the cable industry signaling they will never compete with Verizon’s mobile phone offering, Verizon has generously purchased the cable industry’s leftover spectrum and agreed to pitch cable TV subscriptions to Verizon Wireless customers.  With this new “non-aggression treaty,” will there still be a need to offer $500 gift cards and cut-rate prices to attract new customers?  Consumer groups think not.

A greater percentage of Cablevision’s service area is served by Verizon’s fiber network than either Time Warner Cable or Comcast.  Competition is forcing Cablevision to rethink the usual cable industry plan for financial success — force channels customers don’t want and raise rates up to 5% a year to pay for the “increased costs of doing business.”  Consumers are fed up with $150 monthly cable bills and will take Verizon up on an offer than cuts rates $50 a month and hands over up to $500 just for saying “yes” to FiOS.