Most cable operators, mindful that rate regulations are set
to lapse in March if Congress doesn't act, are keeping their 1999 rate increases close to
about 5 percent.
That's what the big operators said they're doing, and
spot-checks of systems that have notified customers of January increases bore them out.
Smaller operators -- especially those sinking cash into
rebuilds -- weren't as willing to toe the 5 percent line. The odd 20 percent hike for a
significantly increased channel lineup has already shown up.
But overall, rate increases will be significantly lower
than, for example, the average 8.5 percent increase in 1997, as operators conceded that
they've throttled back to avoid stirring up trouble in Washington, D.C.
Time Warner Cable -- currently the second-largest MSO, with
about 12 million subscribers -- figured that "the average customer's bill will be
going up by slightly under 4 percent," spokesman Michael Luftman said last week.
All Time Warner systems are capping standard-service rate
increases, where they occur, at 4.9 percent, he said. And in nearly all systems,
basic-tier rates will be frozen or decrease slightly in 1999.
Time Warner subscribers in Charlotte, N.C., and Tampa,
Fla., recently received notices of their 4.9 percent increases, according to several
That's down from Time Warner's average 7 percent to 8
percent increase in 1998. And it's a more specific forecast than the company usually gives
"There's no question that the environment this year is
much more competitive, and I think that's the main reason for the smaller increases than
we've had in past years," Luftman said. "But we're also going to be sensitive to
concerns that have been raised by government officials. Certainly, if you re going to do
that, it makes sense to communicate it."
Like Time Warner, MediaOne has had a reputation for being
among the leading rate-bangers over the past couple of years. MediaOne also predicted that
its rate increases in 1999 will average about 5 percent, down from estimated average
increases of 8 percent to 9 percent this year.
"It'll be right around 5 percent," vice president
and chief financial officer Richard Post said, referring to the average percentage
increase in 1999. "We believe that in the near term, this is the right thing to do,
as we balance both growth and the regulatory arena. If we go much above that number, we
could attract some unwanted regulatory action as an industry."
Cox Communications Inc. has been "encouraging our
cable systems that are doing price adjustments to keep them at around 5 percent,"
company spokeswoman Ellen East said. Cox is decentralized, and it leaves rate decisions up
to local management, East added. But CEO James Robbins "has said to the system
general managers, 'Here's what we'd like you to keep in mind.'"
Robbins is believed to have prompted the company's Phoenix
system to knock back a 7 percent increase in basic and expanded-basic service this past
September to 5.5 percent after customers were notified of the higher increase.
Increases in the company's New England cluster averaged
about 5 percent, East said. In Rhode Island, the average was 5.7 percent, bumped up by a
16 percent hike in Pawtucket, where a rebuild added five channels.
Tele-Communications Inc. president and chief operating
officer Leo J. Hindery Jr. helped to get the ball rolling over the summer by encouraging
an industrywide 5 percent cap on rate increases. TCI took a 3.9 percent increase in 1998,
which cut into the company's cash flow in the third quarter.
For 1999, spokeswoman LaRae Marsik said, "I can say
that we will be very managed in our adjustments." The company would like to see
systems aim for average mid-single-digit increases, she said, adding, "I can say that
we will have no systems in double-digits." After pending system deals close, TCI will
own and operate systems with about 10 million subscribers.
Comcast Corp. senior vice president Stephen Burke predicted
that his company's regulated rates would increase by an average of "close to" 5
percent in 1999. Comcast has about 4.5 million subscribers. While lower rate increases
translate into somewhat lower cash flow, Burke said in an interview, "The most
important thing that we can do is to get through March and to become a deregulated
industry that then gets to operate with more flexibility. That flexibility clearly
justifies the restraint and the hit that could occur next year."
Century Communications Corp. president Bernard Gallagher
said last week that he was "guessing" that average rate increases in 1999
"would be in the 3 percent to 5 percent range." Rate hikes were larger this year
-- averaging more than 6 percent -- as 1.3-mllion-subscriber Century came off some
rebuilds, Gallagher added.
Charter Communications Inc. CEO Jerald Kent said he wasn't
sure yet what the average rate increase would be, but it's likely to be more than 5
percent when newly rebuilt systems are added in. Including the Marcus Cable operations
that are being consolidated into Charter, about 20 percent of the company's 2.5 million
subscribers are in recent rebuilds.
Kent also banged the drum against programmers. He said
Congress has to realize that "escalating programming costs -- particularly the
ridiculous prices that are being forced down our customers' throats for sports programming
-- [are] the real culprit of cable pricing."
Cablevision Systems Corp. said its average rate increase
would stand at 5.25 percent, according to spokesman Charles Schueler. He said that would
range from about 3.7 percent in Boston to 6 percent in Connecticut -- where he said the
MSO has not raised rates in two years, and where it recently completed rebuilding the
Southern New England Telecommunications Corp. is
overbuilding Cablevision in Connecticut.
Schueler termed the increases the MSO's lowest in more than
five years, but he denied that they were related to the March 31 sunset of rate
"It has much more to do with the general environment
that we're in," Schueler said. "As we move aggressively to roll out new services
as much as can, the promise of new services holds within it the promise of cable-rate
reductions when new services are bundled with video."
In Boston, Cablevision has notified customers that the
average monthly charge for expanded-basic service will go up by about 6 percent, according
to Mike Lynch, director of the city's office of cable television. That includes cuts in
lower tiers of service and a 10 percent increase in a popular tier, he added.
Schueler said the 3.7 percent rate hike that he mentioned
in Boston represented an average across all eight of its service tiers in the market.
But FrontierVision Partners L.P., a top 20 operator with
about 700,000 subscribers, figures to pass through increases of about 6 percent to 7
percent next year, CEO James Vaughn said. The average gets lifted because a
"substantial number of our subscribers" are in systems that are close to being
Mediacom LLC has put together about 365,000 subscribers by
buying rural, low-capacity systems that the company is now rebuilding. On top of that,
Mediacom chairman Rocco Commisso said, "My programming costs are going up 22 percent
So Mediacom's Lower Delaware system, with about 30,000
subscribers, passed through double-digit hikes where its rebuild swelled its
expanded-basic package to 45 channels from 28. Those subscribers saw their monthly charges
rise to $27.95 from $21.95 -- an outsized 27 percent. Subscribers in portions of the
system that haven't added channels yet got $2-per-month increases (9 percent).
"This is a huge rate increase on a percentage basis,
the way that some politicians want to look at it," Commisso said. "In fact, the
consumers see tremendous benefit." On a per-channel basis, the monthly rate fell to
62 cents from 80 cents, he calculated. And since the increases took effect in July,
subscribers have filed no complaints, he said.
Interestingly, systems that face competition from the likes
of Ameritech New Media and RCN Corp. are also raising rates, and the competitors
themselves are looking to rate hikes.
A spokesman for RCN said it is re-evaluating the pricing
structures for all of its services, and ANM spokesman Geoff Potter said, "We're not
immune to the cost pressures that every operator faces."
ANM raised cable rates in Glen Ellyn and Naperville, Ill.,
and in Lincoln Park, Mich., this year.
Mike Farrell and Monica Hogan contributed to this report.