Cable Operators

DBS Pounces On Rate Hikes

11/28/2004 7:00 PM Eastern

The November and December arrival of rate-increase notifications are as predictable as holiday cards in the mail — and cable's competitors are poised to take advantage of any consumer discontent.

Operators said they're feeling the full impact of increases in the prices of both programming and fuel. They've also invested in upgrades and have beefed up customer service and channel lineups, representatives said — all factors that justify the coming rate hikes.

An online check of local-news reports shows that notices so far warn of basic-cable rate increases ranging from 9.5% in locations such as Lansing, Mich., (Comcast Corp.) and Pine Level, N.C., (Time Warner Cable) to 2.9 % in Holland, Mich. (Comcast).

A Time Warner spokesman said rate increases are set on a division-by-division basis. They are announced and rolled out according to the local billing cycle.

Time Warner divisions in North Carolina and Ohio have already started to send out notices, according to published reports.

Cable rates in those locales will escalate by 5.5%. By comparison, the cost of living increased about 2.5% in 2004.

Companies are contextualizing the rate increases. Comcast plans no rate increases for its 6.5 million high-speed data customers or its 1.2 million telephony customers, said spokeswoman Jenni Moyer. The company's planned 2005 increase will be an average of roughly 3% across all products, she said.

New York City-area operator Cablevision Systems Corp. has said it will increase rates an average of 2.8% in its systems. It noted that charges for phone and Internet service would remain unchanged for the second year in a row.

Direct-broadcast satellite competitors are already touting the coming rate hikes in an effort to capture consumers angry over another cost increase.

DirecTV Inc. is running commercials attributing nothing but continually higher costs and bad service to digital cable.

EchoStar Communications Corp. is even more aggressive. In addition to pointed advertisements — which ask, “Why is digital cable so expensive?” — it has invited local reporters across the country to call the company as soon as writers receive notice of a cable rate hike.

EchoStar vowed to provide interviews with angry local cable customers who have switched to its Dish Network service.

November