Rocco's Proposal: Let's All Freeze Rates

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Anaheim, Calif.— Mediacom Communications Corp. chairman and CEO Rocco Commisso, always looking for creative ways to keep programming costs down, floated a witty trial balloon during Thursday's Western Show general session.

His plan: Mediacom wouldn't raise rates for one year if his programming costs held steady. "Let's have one year of no rate increases, and I'll do the same," Commisso said.

But when moderator Sallie Hoffmeister of the Los Angeles Times
asked audience members what they thought, there was only lukewarm applause for Commisso's idea.

As in years past, rising programming rates became the key topic of discussion, which also involved Insight Communications Co. CEO Michael Willner, Charter Communications Inc. CEO Carl Vogel, Cablevision Systems Corp. New York president Tom Rutledge and Rogers Communications Inc. CEO Ted Rogers.

While Commisso suggested affecting a marketplace solution to the problem of rising programming costs, Willner warned against regulators getting involved and creating a "law of unintended consequences" that would come with such a move.

Both Willner and Vogel suggested the marketplace needs to solve the issue of programming coasts.

Commisso went as far as to suggest that programmers charge distributors a uniform rate, no matter what their size. "One way of handling it is to have a financial plan where the rates are the same for everyone," he said.

ESPN drops

This exact cost issue prompted Mediacom to drop ESPNews and ESPN Classic about a month ago, Commisso said in an interview Friday. ESPN claims the dispute involves about 200,000 subscribers for both networks.

ESPNews and ESPN Classic had been carried on an 800,000-subscriber group of systems Mediacom acquired from AT&T Broadband about a year ago. Commisso's company was looking for a discount on license fees since it had gained so many more subscribers.

"It's just unfair that because I now own these subscribers, that I should be paying higher rates than AT&T was paying, that I have to subsidize the programming discounts of our satellite competitors, which they obtain as a result of their size," Commisso said.

An ESPN spokesman responded, "We have been negotiating with Mediacom for many months to reach an agreement for ESPNews and ESPN Classic in systems [Mediacom] acquired from AT&T in July of 2001."

Commisso added that more networks could be dropped.

"We have an obligation to our customers, our investors and our employees to maintain growth in programming costs, which exceed 50 percent of all our expenses, at the low double-digit levels," Commisso said.

Merger impact

The impact of Comcast's acquisition of AT&T Broadband was also a big topic of discussion. Rutledge said the merger is good for cable because "having Comcast take care of the old [Tele-Communications Inc.] assets makes the whole industry more competitive."

Willner said the merger would result in cheaper programming rates for Insight. "We have certain obligations as well as certain rights as a result of the fact that Comcast is a 50 percent owner in equity of the cable systems that we own and manage."

Turning back to Commisso's proposal, Hoffmeister asked the Mediacom chief, "You're counting on the programmers to be generous to you?"

He replied: "I'm asking for favors. They all tell me they're my friend. I want to make sure they mean what they say."

When discussing the prospect of Rupert Murdoch's News Corp. eventually acquiring DirecTV, Commisso said he's concerned such a deal would enable DirecTV to get an unfair look at how his systems operate.

"I guess the bigger question is, am I going to let my competitor to come in and audit my books?" he added.

Other notable comments: Responding to a question about talk that Cablevision could eventually merge with Time Warner Cable, Rutledge said the MSO would be just fine on its own.

"It's a perfectly capable business. Who knows what the future may bring, but there's no reason that Cablevision can't operate its systems independently in the New York metropolitan area."

Vogel decided to take a shot at Charter's investors when asked why MSO chairman Paul Allen isn't putting more capital into the struggling company. Vogel thinks the reason why people are talking about why Paul Allen doesn't put money in "is to take advantage of their own trading activity, quite frankly."

The session ended with each executive talking about where cable stocks would be one year from now. Commisso: "It's definitely going to be up, if I'm around. We're going to have a great year next year. Let the market decide what our stock should be."

For his part, Vogel offered, "I think our stock will be significantly higher than it is today and hopefully the overhang will be gone."

While Willner predicted a 30 percent uptick for cable stocks in 2003, Rogers said: "I'm hoping people will stop asking me when I walk down the street: When did you split your stock?"

Mike Farrell contributed to this report.

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