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K.C. NEEL AND ANDREA FIGLER
Annual cable rate increases are as reliable as Big Ben, but at least one operator is keeping different time than other MSOs who are staying within the 5% industry guidelines most companies have kept to in recent years.
In raising its "average overall rate" by about 7%, Cablevision Systems will push its typical rate from $40.42 a month to $43.19 for its 2.9 million customers in the New York metropolitan area. A spokesman for the Dolan-run company declines to say by how much its average expanded basic tier will increase next year.
Cablevision's expanded basic tier will rise by substantially more than that. Newsday reports Cablevision's "Family" level of service will go up by 12.6% to about 800,000 customers on Long Island, N.Y., while the Journal-News of Westchester County, N.Y., says those rates will rise by 12.2% in 2001 for 276,000 subscribers. A large majority of the MSO's customers, however, take the company's "Optimum" service - one tier above "Family."
Cable companies generally point to rising programming and operational costs as the reasons for the rate "adjustments," and Cablevision is no exception. The company did not say why the MSO raised its average rate by almost 30% more than in 2000 when customers paid about 5.5% more for cable.
Other MSOs, such as Cox Communications, Insight Communications and Time Warner Cable, cite the fear of competition in planning more moderate increases for 2001, capping out "average" increases at the 5% industry norm.
"We're in a much more competitive world," says Cox spokeswoman Ellen East in explaining why the Atlanta-based MSO will increase expanded basic rates by 5% on average.
Insight, which plans to raise rates by about 4% on average in 2001, will rely on stronger consumer demand for its digital cable tier to pay for expenses instead of upping analog rates, says Kim Kelly, the company's EVP/CFO. She expects about half of Insight's subscribers to pay another $16.85 for its basic digital cable package over the next five years.
"With only about 20% penetration, you are looking at a substantial increase in revenue without the negative aspects from a consumer standpoint or a governmental standpoint," Kelly says.
Competition often, but not always, helps keep a lid on rates, notes Time Warner spokesman Michael Luftman.
"We have several markets where we do have competition, and consumers may see a 5% hike," he says. "We also have some systems that do not have competition that won't see any rate hikes at all this year. Each division makes the decision on how much to raise rates each year. For us, 5% if more of a cap than an average."
Consumer advocates and politicians are still likely to rail against the rate hikes, pointing out they are twice the rate of inflation. As usual, operators say programming costs - especially sports - are rising by double-digits, and they need the cash flow to finish building out their advanced networks and bring new services to their customers.
In some places, operators still have to back down. AT&T Broadband was forced to draw up a new proposal last week to hold onto its franchise in the small southern California town of Tustin, Calif. The city council, egged on by residents' complaints, had been prepared to snuff the company's franchise, which was due to expire in 2002, at the council's Nov. 20 meeting.
AT&T inherited the problems of an antiquated system from MediaOne, but grouchy residents objected to an additional 3% increase for an analog set-top box upgrade. Customers will receive an extra 27 channels with the new box, but since Tustin averages about four set-tops per home, the increase to customers would have been substantial. The city gave AT&T 60 days to draft another franchise plan.
Operators are generally staying on their best behavior, keeping double-digit rate increases limited to areas where they are introducing dozens of new channels.
"They have no incentive to raise analog rates because of the competition and governmental reaction," says David Goldsmith, an EVP at Buckingham Research, who notes the introduction of digital tiers represents a de facto rate increase.
Cable's satellite competitors are taking separate tacks. DirecTV raised rates by $2 this past year, while EchoStar Communications kept its lowest tier at $20 and raised its expanded basic tier by $1 to $30.
Cable World has added to its growing staff with the hiring of Shirley Brady, a veteran of Time Inc., to the newly created position of features editor, says editorial director Andy Grossman.
The New York City-based Brady will oversee the reporting and writing of the publication's cover stories and other long-form analysis and trend pieces. She will also write for Cable World.
"Shirley's extensive background in magazines and journalism is perfect for handling our cover stories and other longer pieces that we expect will give an unusual slant on the cable/broadband industry," Grossman said.
In more than two years at Time Inc., Brady wrote for Money magazine and worked on Time magazine's millennium and environmental special issues. She also covered style, entrepreneurs and the entertainment industry for People magazine and, while based in Hong Kong, wrote for Time Asia's Travel Watch section.
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