Ops Set Post-Sunset Rate Hikes

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In the first few months after the cable-rate-regulation
sunset, operators seem to be heeding industry admonitions to keep rate hikes in check.

Summer rate increases at most systems surveyed for this
story fell roughly within the National Cable Television Association-recommended 5 percent
range, although a few stray systems have posted increases of as high as 12 percent, or
even 24 percent.

While the timing might suggest otherwise to irate
subscribers or watchdog consumer groups, the recent rate hikes weren't knee-jerk reactions
to the Federal Communications Commission's cable deregulation, which went into effect
March 31.

Rather, operators said, they were annual adjustments based
on prescheduled cost reviews.

Bresnan Communications raised its prices an average of 5.5
percent to 6 percent in a number of its Midwestern markets this month. Roughly two-thirds
of the MSO's systems are rate-adjusted in June.

In Rochester, Minn., Bresnan announced a 5.9 percent rate
increase, or roughly 80 cents per month, for its basic and expanded-basic packages. The
system added TV Land at the same time, after comprehensive subscriber surveys,
Rochester-area general manager Sherry Dostal said.

The feedback to Bresnan on its rate increases has basically
consisted of clarification questions, rather than complaints, Dostal said, adding,
"Good ongoing communications, we've found, really helps."

Through newsletters every other month, Bresnan talks about
new channels, the increasing costs of sports programming and trends in cable, including
new products and services.

To help combat hefty price increases in its basic packages,
Bresnan also tries to place much of its new programming on digital tiers.

Cablevision Systems Corp. said early this month that it
would raise rates for four of its New Jersey systems starting with the July billing cycle.

About 500,000 Cablevision customers in former
Tele-Communications Inc. systems in Oakland-Paterson, Morris, Elizabeth and Raritan Valley
will see increases averaging 5.4 percent, ranging from 5.17 percent to roughly 6 percent.
The average subscriber increase is $2.25 per month, according to a Cablevision spokesman.

Last month, Cablevision also raised rates in several of its
systems in Westchester and Rockland counties in the New York City suburbs.

But most of the MSO's systems set their rate adjustments in
January and February. Eventually, all of the company's rate adjustments could be scheduled
for the same cycle.

When asked whether Cablevision had seen any backlash from
the recent rate hikes, vice president of consumer video products Tracy Nelson said,
"We get customer letters every day," some negative and some positive. She added
that Cablevision has a policy of returning customer letters and calls within two days. In
some cases, contact with a disgruntled customer can help to turn the situation around.

At AT&T Broadband & Internet Services, annual rate
adjustments take effect in January and February in unregulated communities, and in June
for most regulated towns.

Several AT&T Broadband markets -- including Pittsburgh,
Chicago and St. Louis -- saw rate increases this month.

"With deregulation, our main goal is to remain as
managed as possible," AT&T Broadband spokeswoman LaRae Marsik said. "We are
approaching our markets as though we continue to be regulated."

The MSO's average rate increases for the year fell beneath
5 percent, Marsik said, adding that they vary market by market.

June 1 was the effective date for rate increases at many of
AT&T Broadband's TCI Great Lakes systems in the Midwest.

In Chicago, rates went up 4.76 percent, with similar
increases in many suburbs, according to executive director of communications Pat
Andrews-Keenan. Some of the nearby towns, however, saw increases of as low as 1.2 percent,
she added.

Andrews-Keenan said she wasn't aware of any consumer
backlash, since the rate increases were communicated through billstuffers in April and
May, and since subscribers had already been prepared for the hikes due to all of the
stories in the local press prior to the sunset.

At AT&T Broadband's TCI of St. Louis, subscribers in
most of the 85 towns served will see rate increases in this month's billing cycle,
although a few adjusted their rates in January, manager of communications and public
affairs Deb Seidel said.

The rate increases varied from about 5 percent to 7 percent
in the St. Louis market, Seidel added, and they were influenced by the state of the
systems' upgrades.

To communicate the changes, the general manager of each
system sent a letter to subscribers' homes, along with the new rates and new channel
lineups in cases where systems added channels.

The best time to talk about rate increases is after a
system has added channels to a basic-cable package, B.G. Marketing Inc. president Barbara
Sullivan said.

"If you take away programming with a passionate
following and then raise rates, that's a problem," she added.

In Colorado Springs, Colo., Sullivan said, a Century
Communications Corp. customer who she knows disconnected her cable service when a hefty
rate increase coincided with the operator's dropping Courtroom Television Network.

Adding 24 new channels to its expanded-basic package helped
one smaller Pittsburgh-area AT&T Broadband system to offset a 24 percent rate
increase, said Dan Garfinkle, regional director of communications for the Three Rivers
region.

Initial customer feedback indicated that customers are
"pretty pleased" with the new channel lineup and the "greatly improved
service" on the upgraded plant, Garfinkle added.

Not all of the 355 Pittsburgh-area communities that
AT&T Broadband serves saw price increases this month, while some received rate
increases of roughly 2 percent.

In the city of Pittsburgh, which serves 105,000 of the
system's 570,000 customers, expanded-basic rates rose 84 cents to $19.18 per month,
Garfinkle said.

Some of the system's markets adjusted their rates in
January, but Garfinkle said he doesn't think the twice-a-year media coverage should cause
too much consumer confusion.

"Clearly, people are interested in what their own bill
is, versus what the media has to say," he added.

The upgraded plant in and around Pittsburgh will allow the
system to continue to offer new services, such as high-speed Internet access, which has
enjoyed great response from subscribers and the local press.

Cablevision communicates with its customers on a regular
basis about changes in its customer-service operations and local programming additions.

When a system is about to launch online services, Nelson
said, it starts promoting them to subscribers about 30 days in advance.

But Cablevision has yet to communicate its plans to
subscribers for next year's digital-cable launch, she added, because the company does not
want to create call-center phone volume too early.

While Sullivan recommended that cable operators promote the
new technologies that they're able to offer to subscribers, they should keep in mind that
such messages won't appeal to all of their current customers.

"You don't want to be paying for a rebuild or an
upgrade if you're very happy with basic-only," she added.

That's not to say that promoting the value of today's cable
service is not important. According to Sullivan, it's critical. "With all of the new
competition, consumers' expectations are growing exponentially," she added.

Operators should play up value messages -- focusing on
enhanced customer service, timely technical support and more accurate billing, for example
-- year-round, and not just with rate-increase notifications, Sullivan recommended.

"Just like an ad campaign, the value message needs
three or four times to sink in," she said. "Unfortunately, the rate increase
sinks in right away."

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