Comcast Gets Breather In McHenry

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Washington— Comcast Corp. won some time from an all-Republican county board in Illinois that was set to vote last Tuesday on a resolution that called for a federal probe of cable rates in the vast majority of markets.

The 24-member McHenry County Board agreed to postpone the vote in order to give a Comcast representative time to explain recent system upgrades and rate increases, which sparked a backlash in the predominantly GOP community, northwest of Chicago’s Cook County.

“The cable company has an opportunity to address the full county board. They had not been given that opportunity,” said Illinois state Sen. Pamela Althoff, a Republican and former mayor of the town of McHenry.

EX-BROKER MEDIATES

Althoff, a former cable broker and system investor, said she stepped in to mediate differences between Comcast and county officials pressing for the rate probe.

“I put them together,” Althoff said.

A Comcast spokeswoman said the company appreciated the chance to address the board.

“Informed discussion between both parties is very good for us,” said Patricia Andrews-Keenan, Comcast’s vice president of communications in Chicago.

A fast-growing community of 280,000, McHenry is not fertile soil for a cable-rate rebellion. But Comcast’s system upgrades — something the MSO promised to do when it acquired the property — and rate hikes angered some board members, who felt the channel additions did not justify the rise in monthly bills.

“We’re an unusual county, a little independent,” Althoff explained.

Two weeks ago, a board subcommittee voted 5-2 in support of the cable-rate resolution, setting up a full board vote for Jan. 18.

Ann Kate, chairwoman of the county’s management-services committee and sponsor of the resolution, agreed to pull it when Comcast asked for a chance to explain the situation.

“I think it’s great,” said board member Tina Hill, reacting to Kate’s move. “I was a no vote.”

Pointing out that cable rates have far outpaced inflation for many years, the McHenry resolution asked Congress and the Illinois Legislature to examine cable prices, especially in markets that lack cable companies that compete with the incumbent.

The resolution urges lawmakers to “implement measures to address those pricing practices resulting from the lack of competition.”

According to the U.S. General Accountability Office, just 2% of markets have a second wired pay TV provider. But that could change in a few years, as Verizon Communications Inc. and SBC Communications Inc. have vowed to invest billions of dollars to provide more video competition.

In February 2004, the GAO analyzed cable overbuild markets and found that expanded-basic rates were lower by 15% to 41% in five of the six markets studied, compared to markets with a single cable provider.

But the National Cable & Telecommunications Association said the study was flawed, because new entrants typically price services at below cost in an effort to grab market share.

Capitol Hill Republicans liberated all but basic-cable rates nearly six years ago, and they have shielded cable from a return to a price-cap system ever since.

But some McHenry Country Republicans have decided to break with national leaders.

“Maybe it’s a local revolution. We may not be following the national Republican Party,” said Peter Merkel, a McHenry board member.

Comcast and Charter Communications Inc. are McHenry’s cable companies, but they don’t compete with each other.

“If we don’t put price controls on them, what can we do?” said Kate, upset that her Comcast bill just went up $3 per month for basic and expanded basic.

Expanded-basic cable has risen more than 7% per year over the past five years, or about three times the rate of inflation, according to the Federal Communications Commission.

Cable operators have raised prices as they’ve poured more than $95 billion into network upgrades since 1996, when Congress removed price controls on upper-tier cable services effective March 31, 1999.

Comcast spokesman Bob Ryan said the company upgraded the McHenry system as promised and doubled the number of channels offered in expanded basic — moves that raised the monthly price of basic and expanded basic to $47 from $33.

“We are working with the county to address their concerns,” Ryan said. “Value lies not in having the lowest prices, but in giving consumers the most choice.”

Ryan is expected to to address the county board Feb. 15 to explain Comcast’s position.

The cable industry’s chief defense against rate regulation is fierce competition from satellite providers DirecTV Inc. and EchoStar Communications Corp., which together serve more than 20 million subscribers.

SATELLITE VS. CABLE

Merkel, for example, decided to drop cable over rate and service issues.

“Myself, personally, I went to satellite over a year ago. I’ve been very happy,” he said.

Althoff disclosed that she subscribes to basic cable and satellite.

“There are options,” she said, adding that with an inexpensive off-air antenna she can pick up 35 local TV stations for free.

Hill said she has no problem paying Comcast for cable and high-speed data service.

“My bill is over $100 a month and I’m not screaming,” she said.

After looking into the price of satellite, Kate found that it would be more expensive than cable because she was required to connect set-tops to four TVs. Satellite signals, she added, degrade or disappear in heavy snow and rain.

In her view, satellite is not a real alternative.

“There is one cable company, and that is Comcast,” she said. “To us, it may as well be a monopoly.”

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