Across the country cable companies are sending out notices of next year's rate increases, some as much as 6%. Most consumers across the country only have one choice for cable service in their area. Some are looking to satellite service, but according to a recent article in the Wall Street Journal, the cost of satellite service is also on the rise.
According to the December 1, 2005, article, "Cable Rates to Increase as Much as 6%," prices are going up across the board.
"Most Cable-TV bills will continue to climb next year, with Comcast Corp., the country's largest cable operator, leading the way with a 6% increase for its most popular service.
But with industry pricing under scrutiny from the federal government and new competition emerging from phone companies, price increases at other large cable companies are expected to be more subdued. Cablevision Systems Corp., for example, is raising the price of its standard package, which includes channels like CNN, MTV and ESPN, an average of 1.3% to $46.73 a month. Cablevision's customers in the New York City region have been targeted by telecommunications giant Verizon Communications Inc., to be among the first to be offered its new television service.
Meantime, Cox Communications Inc.'s system in northern Virginia, which also is in Verizon's cross hairs, at this point has no plans to raise rates next year, according to a spokesman. Last year that system increased the cost of its most popular package of analog channels by 3.9% to $41.99.
Satellite-TV operators are expected to announce their price increases early next year. But this year, both EchoStar Communications Corp. and DirecTV Group Inc. raised their prices an average of 4%, according to company representatives. The rate of inflation in the 12 months through October is 4.3%, and excluding food and energy the inflation rate is 2.1%.
The article goes on to say that cable companies are raising prices just as the debate over cable ala carte heats up in Washington.
"Cable companies, which typically launch a round of rate increases around this time every year, today have to worry about competition from companies such as Google Inc. and Yahoo Inc. as well as satellite and telephone companies.
Cable and satellite rates also are rising at a time of renewed calls in Washington for legislation that would require operators to sell channels individually instead of packaged together. Advocates of so-called a la carte pricing argue that it is unfair to consumers to make them pay steep price increases for channels they don't watch.
While most cable TV prices are still rising faster than inflation, increases have cooled a bit in recent years. In the 1990s, cable companies would typically increase rates in the high single or even in the double digits. The Federal Communications Commission in February reported that the average cable price increase in the country for the standard package was 5.4% in 2003 -- to $41.04 from $38.95 -- down from 7.8% in 2002.
Next year, overall rate increases may be even less than that. While Comcast is increasing the average price of its standard cable package to $47.70 from $45, or 6%, price increases of other services will be less. Average rates will go up only 4.3% for Comcast customers who subscribe to digital cable or take other video products, such as digital video recorders. Comcast isn't increasing at all the cost of its high-speed Internet service, which is being offered by phone companies for lower prices.
At Time Warner Inc.'s cable division, the country's second-largest operator, price increases will vary widely next year. In the company's southwest Ohio region, which includes Cincinnati, the rate for the most popular package will increase 5.1%. But in the Binghamton, N.Y., area, there will be no price increase in 2006.
Overall, the average Time Warner Cable rate increase will be 3.1%, according to a company spokesman. He said some systems are raising their prices more than others partly because they had lower prices when they were acquired by Time Warner.
In raising their rates, cable operators say they are passing on increased programming charges from popular cable channels like ESPN. At Cox, programming costs rose 7.6% this year, while cable bills to customers increased an average of 3.9%.
Comcast says its price increase this year will be used to pay for investments in new services like video on demand and improved customer service. Company executives say they believe that customers will accept price increases if they feel they're getting more for their money."
The article closes with a look at satellite rate increases.
"Satellite operators are particularly successful at picking off consumers who want inexpensive TV packages. EchoStar's Dish TV service, for example, charges $31.99 a month for about 75 channels, which is more channels for the money than is offered by most cable operators. But as consumers take more channels and services like digital video recorders, cable prices become more competitive. "When a consumer looks at what he can get from satellite in the $40 to $45 price range versus cable there's a large difference," Mr. Leichtman says. "That difference may not be there at the $60 to $75 price" range.
Phone companies also are putting price pressure on the cable industry. In Keller, Texas, where Verizon has launched its TV service, the telephone company is charging $36.90 for about 140 channels and $43.90 for about 185 channels of digital service, including the $3.95 rental charge for a set-top box. Verizon and AT&T Inc. plan to roll out TV services in many more areas next year."
Find out more about rate increases across the country.
