Cable Companies Raise Rates
PHILADELPHIA – The nation's biggest cable companies are boosting their rates by single-digit percentages, citing rising costs for programming and investment in new services.
Industry leader Comcast Corp. (CMCSA) is raising the rate on its most popular cable package by an average of 6 percent next year in all markets, while No. 2 Time Warner Cable customers are being asked to pay an average 3.1 percent more for its expanded basic package and 1.9 percent more for its limited basic plan.
The cost for Philadelphia-based Comcast's expanded basic package will rise to an average of about $47.70 as early as Jan. 1, the company said Thursday. Nearly all the company's 21.4 million cable subscribers nationwide will see an increase, since the expanded basic plan is the building block upon which digital services are added.
Time Warner Cable, owned by New York-based Time Warner Inc. (TWX), serves nearly 11 million subscribers in 27 states.
Cablevision Systems Inc. (CVC), which serves 3 million customers in the New York metropolitan area, will raise its rates by an average 2.3 percent, or $1.45 a month, in 2006.
Cox Communications Inc., which has 6.2 million customers in 15 states, said while rates are set by local offices, they will most likely go up in several markets in 2006. This year, 80 percent of the Atlanta-based cable operator's markets had a rate hike.
Bruce Leichtman, president of the Leichtman Research Group in Durham, N.H., said cable TV price increases have moderated.
"It's been regular, but it has come down in recent years with more intense competition from satellite and a more saturated market," he said.
A Federal Communications Commission report issued earlier this year said the average monthly rate for basic and expanded basic plans and equipment rose by 5.4 percent in 2003 to $45.32, down from 7.8 percent in 2002.
Among cable companies that faced effective competition, rates went up by an average 3.6 percent, while those that didn't had an average price hike of 5.6 percent, according to the FCC report.
Cable operators say that they are facing rising costs and have to continually invest in new products and services. Moreover, they say they already offer enhanced value for what consumers pay, such as free movies through video on demand.
"Price adjustments reflect the increased value of the service, new product enhancements, and investments to continually improve the quality of our network and customer service," said Jenni Moyer, a spokeswoman at Comcast.
Bethpage, N.Y.-based Cablevision said higher programming costs are one reason the cable operator is boosting rates. In 2005, Cablevision said its programming costs rose by 12 percent.
Major cable operators, however, aren't increasing prices for their high-speed Internet and phone services — in part due to competition from phone companies and the desire to build those businesses.
AT&T Inc. (T), formerly known as SBC Communications Inc., and Verizon Communications Inc. have been trying to lure Internet users away with low digital subscriber line prices. Although the target is mainly dial-up customers, cable operators feel the pressure to keep prices down and want to keep gaining market share.
Herb Reddy, a 49-year-old North Philadelphia resident who has a Comcast digital package, said the planned increase for next year was terrible.
"It is too high," he said. "Eventually, I'm going to move to satellite."
Savings there might soon prove elusive as well. Satellite TV companies have been raising rates in the last three or four years, Leichtman said.
"It would be difficult for them not to," he said. "Programming costs are increasing."
Dish Network, a unit of EchoStar (DISH) in Englewood, Colo., and DirecTV, which is 34 percent owned by News Corp. (NWS) in New York, said no announcement or decision has been made on rate hikes for 2006. News Corp. is the parent company of the Fox News Channel, which operates FOXNews.com.
But the two satellite TV providers confirmed they raised rates annually in the last few years.