News

MediaOne Hikes Rates in Ameritech Area

10/04/1998 8:00 PM Eastern

MediaOne has raised its cable rates by 9 percent for
subscribers in three Detroit suburbs, despite competition in the market and calls for
restraint by some industry leaders.

On Sept. 1, the MSO boosted prices from $22.95 per month to
$24.95 in Plymouth, Canton Township and Northville, Mich. -- communities where it's
gone head-to-head with Ameritech New Media since 1996.

As a result, ANM's service is now $2 per month cheaper
than MediaOne's offering, although local government officials expect the
Chicago-based video arm of Ameritech Corp. to follow suit with an increase of its own.

The increases affect 30,000 MediaOne subscribers. The
company has 300,000 customers in the Detroit area, making it the second-largest MSO in
that metropolitan area and the third-largest in Michigan.

Surprisingly, consumers were taking MediaOne's price
hike in stride.

"We haven't heard any complaints," Canton
Township supervisor Tom Yack said. "Even my wife hasn't complained to me. And
that's usually a pretty good indication."

Citing competition, Yack said cable rates in Canton
Township are $4 to $5 per month less than in neighboring communications with only one
operator. Moreover, he added, consumers who don't subscribe to premium services can
take $5 off their monthly bill and also receive multiple hookups free-of-charge.

"We saw the benefits of competition immediately,"
he said.

In some Detroit-area communities, however, cable costs have
been a sore point since the passage of the Telecommunications Act of 1996, climbing 11
percent between May 1996 and July 1997. That despite ANM building a local cluster that
passes some 500,000 demographically attractive households.

MediaOne spokesman Dave Wood said the price hike was the
first in 18 months, and it was allowed by Federal Communications Commission regulations
that have declared the market open under the agency's effective-competition rules.

"This has also been a test market for us, where
we've introduced things like high-speed data and digital," Wood added.

A survey by the Detroit Free Press revealed that the
area's other major MSOs -- Time Warner Cable, Tele-Communications Inc. and Comcast
Corp.'s Comcast Cable Communications Inc. -- are not ruling out future price
increases of their own.

Meanwhile, ANM officials said the company is holding the
line on cable rates in the three affected communities.

"It's still too early to tell, but we'll see
if these [MediaOne] increases causes people to move over to us," ANM spokesman Geoff
Potter said. "But it's our belief that price is just one element of what
consumers perceive as value."

The MediaOne rate hikes came despite TCI president and
chief operating officer Leo J. Hindery Jr.'s recent warning that any increases should
be held to the 5 percent range in order to prevent an uproar in Washington, D.C., where
politicians are increasingly under pressure from disgruntled consumers.

Nevertheless, MediaOne implemented rate spikes of 9 percent
for most of its 5.1 million subscribers nationwide this year -- a figure well above the
average industry increase of between 6 percent and 7 percent.

"We're trying to balance the need for more
revenues with concerns in Washington and sensitivity for our customers," Wood said.

Want to read more stories like this?
Get our Free Newsletter Here!
October