News

AT&T Draws Flak For 4.8% Rate Hike

1/07/2001 7:00 PM Eastern

AT&T Broadband last week drew national headlines of a negative sort when it said that its 2001 price increases-which take effect as early as next month-would average 4.8 percent nationwide.

That uptick is moderate by cable-industry standards. But it generated criticism from consumer groups, such as the Washington, D.C.-based Consumers Union.

In a statement, CU spokesman David Butler said cable-rate hikes of 5 percent to 7 percent in 2001 are out of line, especially since the overall rate of inflation is estimated at 2 percent.

Like other MSOs, AT&T cites rising programming costs and the need to continue technical upgrades as the rationale for the price increases.

"AT&T's rate increase is the latest example of how the deregulation of cable television isn't working," Butler said in the statement.

In recent years, cable-industry leaders have urged MSOs to limit their price increases to 5 percent or less to reduce the possibility of backlash from legislators, who have voted for cable rate regulation in the past.

In late November, Cablevision Systems Corp. said it would raise rates at its New York-area systems by an average of 7 percent.

The MSO recently sent its Boston-area customers notice that prices would go up on Feb. 1. Increases average 6 percent across 39 communities there. AT&T is expected to take over Cablevision's New England systems before the rate increase goes into effect.

Cox Communications Inc.'s price adjustments will average 5 percent nationwide for expanded-basic customers, spokeswoman Ellen East said last week. Like AT&T, Cox will not raise rates for its digital programming packages.

Because Cox is decentralized, there's no set time frame for introducing the price increases. Phoenix is likely to be among the first to announce an adjustment, East said.

Comcast Corp.'s cable unit has not yet announced rate increases for 2001. A spokeswoman said any changes would likely occur on a market-by-market basis.

Time Warner Cable plans to keep its rate increase for expanded basic and basic packages to about 5 percent in most systems. That's the third year in a row the MSO has held hikes to five percent, spokesman Mike Luftman said recently.

Adelphia Communications Corp. spokesman Paul Heimel said the MSO is likely to implement rate adjustments sometime in the first quarter.

"It's fair to say most systems would see rate increases," Heimel said. The term "rate adjustments" is not doublespeak, he added, because rates will go down in some cases.

"We didn't take an increase in 2000, as most MSOs did," Heimel said.

AT&T bought legal notices in newspapers to alert customers about the pending increases. It will also send separate direct-mail pieces in most markets, as well as bill messages, said spokeswoman Sara Duisik.

If there's a good way to tell customers about a rate increase, "the cable industry has been trying to find it for 20 years," said Paul Kagan Associates analyst John Mansell. He advised operators to make sure customers know about any additional programming that's been added.

AT&T customers who have received three or more new channels since the last rate adjustment will see an increase of about 6.55 percent, the company said last week. That represents about 11 percent of the MSO's customers.

"Any time you increase prices, you can expect to lose some customers," Mansell said. That threat is heightened by the availability of competitive products from cable overbuilders and direct-broadcast satellite providers, he added.

"Once again, as they have done so repeatedly in years past, cable has been brazen about raising rates on its customers," said DirecTV Inc. spokesman Bob Marsocci. "It provides yet another reason for people who haven't switched from cable to satellite yet to do so."

Marsocci could not speculate as to whether DirecTV prices would go up-or down-if another company buys the DBS market leader. News Corp. is widely believed to be close to a deal to purchase DirecTV parent Hughes Electronics Corp.

DirecTV raised rates for most of its packages for the first time last year.

EchoStar Communications Corp. last year also raised rates on some of its programming. The company has not raised the price of its Dish Network "Top 40" package since the service was launched in 1996, spokesman Marc Lumpkin said last week.

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