ACA Survey: Programming Costs Crippling

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Small cable operators are eager to roll out offerings like video-on-demand
and HDTV, but they are being forced instead to divert their financial resources
to pay growing programming costs, according to a new survey.

Nonetheless, members of the American Cable Association, a lobbying
organization for independent cable operators, believe the deployment of advanced
services is vital for them to stay competitive and viable in smaller markets,
said a survey conducted by The Carmel Group. The survey’s results were released
Monday.

The consulting firm questioned about 700 ACA members between December 2002
and May 2003 on important issues impacting their business. The survey found that
more than one-half of the ACA’s members are now providing digital cable and
high-speed Internet service, with most of the other half set to launch those
services near term.

In addition, 89% of the ACA members plan to launch HDTV, 81% will roll out
VOD and 72% will launch digital-video recorders.

But in the survey, the operators complained that rising programming costs and
retransmission consent -- which is forcing them to carry networks they don’t
want -- are threatening the deployment of advanced services like broadband.

"ACA cable-system operators are doing no more than raise rates to cover the
increased costs of items necessary to deliver the basic product to the consumer,
especially including programming," according to the Carmel Group survey.

"Put simply …we find that ACA members are typically small and midsized
businesses that are reducing margins to avoid having to pass along significant
price increases to their customers," the survey continued.

The survey showed that 53% of ACA members spend between 35%-49% of their
expense budgets on programming, while 20% spend more than 50% on
programming.

About three-quarters of ACA members expect to remain in the cable business
"indefinitely," while 16% said it might only be four to 10 years and 12% said
one to two years unless significant programming, retransmission-consent and
digital-transition problems were addressed.

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