A fiber optic network may be only as good as the marketing that sells it.

If that is true, Fort Wayne residents have made their choice, and they prefer Comcast Cable over Frontier Communications FiOS.

City officials released figures this week showing Comcast has a clear lead in the Indiana city.  Both companies pay the city franchise fees to do business in Fort Wayne, and Comcast paid almost $435,000, almost double Frontier Communications’ $262,556.

Ft. Wayne, Indiana

Frontier assumed control of the fiber optics network when it purchased the local assets of Verizon Communications.  But Frontier quickly found that volume pricing for video programming gave the old owner a decided advantage.  Frontier found programming prices for its comparatively smaller footprint far higher than what Verizon paid, and quickly began encouraging its fiber video customers switch to DirecTV satellite service.  Comcast responded with a billboard campaign that suggested Frontier was getting out of the fiber business, and encouraged customers to come back to cable.

Some did, but Frontier says it remains committed to its inherited fiber network, even though it lost over 10,000 customers last year.

“We’ve completed our evaluation of our business model and pricing,” Frontier’s Matt Kelley told the Journal-Gazette. “We’re offering an attractive bundle price. Customers are recognizing the quality and value, and that it’s a very compelling service.”

Frontier does appear to be serious about maintaining the broadband and phone service attached to its FiOS product, but has been looking for ways to bring down the wholesale cost of cable television programming and so far has shown no interest in expanding it.

“Our focus is not on FiOS video deployment,” Frontier CEO Maggie Wilderotter told investors in 2010. “The costs to install, set up and market new FiOS video customers are very expensive and, in our view, uneconomical.”

That’s less of a problem for Comcast, the nation’s largest cable operator.  It enjoys volume discounts few other providers can negotiate.  Comcast always had a built-in advantage associated with its incumbency.  Getting customers to switch providers isn’t easy.  But despite the presence of an advanced fiber optic network operated by the competition, Comcast has held on to customers.

“Our customers that are staying with us and joining us are enjoying our services, especially since the introduction of our Xfinity home security management system,” said Comcast’s Mary Beth Halprin, not missing an opportunity to pitch the cable company’s latest new product line. “The home security service costs $39.95 a month and provides around-the-clock monitoring and allows customers to watch live-streaming video from wireless cameras using an iPhone or iPad.”

If you thought paying an average of $86 a month for basic pay television and premium movie channels in 2011 was out of line, just wait.  A new report predicts you could pay $123 by the year 2015 and $200 by 2020 — and that only includes the TV portion of your bill.

That is in keeping with typical annual rate increases, typically blamed on “increased programming costs,” which currently run an average of six percent a year.

The NPD Group, who published the findings, predicts consumers may not sit still for that kind of monthly cable television bill, especially as household incomes for the middle class continue to remain stagnant, even as high fuel and health care prices continue to march higher.

The pay television industry isn’t entirely responsible for the annual rate hikes that nearly always outpace the rate of inflation.  The real money is in programming production and distribution, which is why giant companies like Comcast, Bell, Rogers, and Viacom are buying up programming studios, distributors, and networks at a rapid pace.

With new players like Netflix, Amazon, and Redbox joining traditional pay television and broadcast network bidders, auctions for exclusive licensing agreements bring higher and higher bids.  Ultimately, consumers pay the price in the form of higher bills.  Even cable networks, sensing an increase in the value of their programming, are extracting higher monthly fees at contract renewal time.

The last to arrive at the programming money party?  Local over-the-air broadcasters that used to beg cable companies to carry their channels on the local lineup.  Now some are demanding as much as $5 or more per month per subscriber to allow the cable operator to keep carrying the stations.

“As pay-TV costs rise and consumers’ spending power stays flat, the traditional affiliate-fee business model for pay-TV companies appears to be unsustainable in the long term,” said Keith Nissen, research director for The NPD Group. “Much needed structural changes to the pay-TV industry will not happen quickly or easily; however, the emerging competition between video on demand and premium-TV suppliers might be the spark that ignites the necessary business-model transformation of the pay-TV industry.”

In other words, the more consumers cut cable’s cord and go find other ways to watch their favorite shows, the more unsustainable the traditional pay television business model will become.  Some industry watchers believe cord-cutting is not a major issue.  Others believe continued rate increases will drive customers to cancel service, particularly when alternatives are available. But NPD believes economic factors are the biggest reason for cable cord-cutting.  Those ex-customers are switching back to free “over the air” television, which now delivers better picture quality and often includes additional channels that increase the number of viewing options.

NPD Group research shows most consumers don’t want to exert too much effort to hunt down online programming. Most will put up with their current provider as long as they deliver the shows they want at a price they can afford.  What could change that?  Easy-to-access to a-la-carte programming, perhaps available from services that may soon come built-in with the newest television sets.

“Pay-TV providers offer a convenient, one-stop shop for subscribers, and the majority of customers like it that way,” said Russ Crupnick, senior vice president of industry analysis for The NPD Group. “There is an open window for the industry to meet consumer needs and become to television what iTunes is to music; however, there is also a definite risk if pay-TV providers don’t capitalize on the opportunity — and soon.”

In late February, LIN Television, owner of Norfolk’s NBC affiliate WAVY and Hampton Roads’ Fox station WVBT was engaged in a high profile battle with Cox Cable over retransmission consent fees — the price the cable company pays to put over the air broadcast stations on the cable dial.  While neither side would say exactly how much money was involved, Cox Cable customers will foot the bill starting April 2nd, when the Virginia cable operator raises rates up to 18.3% for basic cable — the fourth rate hike since 2009 and the second in 10 months.

A breakdown:

• TV Starter (broadcast basic + a handful of basic cable networks) up 18.3% — was $18, now $21.30
• TV Essential (local stations + 40 popular basic cable networks) up 5.5% — was $59.99, now $63.29
• Digital set top box rental up $1 to $6.99
• Cox Internet Essential (3Mbps) up 16% — was $24.99, now $28.99

LIN Media owns local stations around the country.

Cox officials blamed the rate increases on the cost of programming, notably for local stations.

“Programming costs are rising much faster than the rate of inflation,” Felicia Blow, a Cox spokeswoman, wrote in an email to the Virginian Pilot. “While we absorb much of the increase incurred […] we must pass on a portion of the increases to our customers.”

Local broadcasters across the country are aggressively pursuing retransmission consent fees as the traditional advertising model for free, over the air television, has been challenged by the soft economy and poor ad sales.  Parent companies that own clusters of local stations also see the fees as a lucrative new revenue stream for themselves and their investors.

Over the past decade, Cox generally has raised its prices about once a year, notes the Virginian Pilot. The company began speeding up the timetable in 2010. With the latest change coming in April, Cox will have boosted rates for at least some parts of its service – particularly the cost of its most popular package – four times since November 2009.  Approximately 90 percent of 416,000 Hampton Roads-area Cox customers will be paying more for cable service this spring as a result.

[flv width=”360″ height=”290″]http://www.phillipdampier.com/video/WAVY Norfolk Attention COX Communications Subscribers 2-29-12.mp4[/flv]

WAVY in February reported on its parent company’s battle with Cox Cable in this self-serving story aired on its evening newscast.  (3 minutes)

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/Senate Hearing on Verizon-Comcast Deal 3-21-12.flv[/flv]

This afternoon, the U.S. Senate’s Subcommittee on Antitrust, Competition Policy and Consumer Rights held a hearing on the potential antitrust implications of a deal between Verizon and some of the nation’s largest cable companies that would deliver Verizon warehoused, unused wireless spectrum owned by four of the nation’s largest cable operators and open the door to Verizon Wireless pitching cable television subscriptions.  The hearing: “The Verizon/Cable Deals: Harmless Collaboration or a Threat to Competition and Consumers?” lasts 2 hours, 23 minutes.

Time Warner Cable’s online streaming apps that deliver dozens of national cable networks to authenticated cable TV subscribers have never included local broadband television channels, until now.

The cable operator announced it has added 26 local stations to the lineup, but they are viewable only if you have Time Warner Cable service in the New York City region.

The new channels include primary over the air stations and digital “sub-channels” that include niche, classic, ethnic, and special interest programming:

• WCBS HDTV (CBS)
• WNBC HDTV (NBC)
• NBC NY Nonstop
• WNYW HD (Fox)
• WABC HDTV (ABC)
• Live Well HD
• WABC News Now
• WWOR HD (My9)
• WPIX-HD (PIX11)
• WPXN HD (ION)
• WXTV HD (Univision)
• WFUT HD (Telefutura)
• WNJU HD (Telemundo)
• WFME
• WLIW (PBS)
• World
• WLNY (TV 10/55)
• WMBC
• WNJN HD (or WNJB or NJN1) – PBS
• WNYE (NYC TV Life)
• WRNN
• WNET (Thirteen HD)
• V-ME
• Create
• Kids13
• Rise (Al Jazeera)

Time Warner says they have an interest in expanding local station streaming in other cities sometime this year.  When we know which cities and stations will be included, we will pass them along.