Programming, Service Drive Cable Rates Up

When millions of cable television subscribers begin writing bigger checks for their basic service this year, at least theyll have someone to complain to. One of the factors driving up costs is improving customer service, industry officials claimed.

“Its a response to the fact that its a competitive world out there,” said Dave Beckwith, vice president of communications at the National Cable Television Association. “The direct broadcast satellite industry has gone from nothing to 14 million customers in a few years, and everyone has a choice.”

Increases of roughly 10 percent in what cable operators pay for programming are the biggest reason for the latest rate increases. One major cable operator, Cablevision Systems, has seen those costs soar as much as 15 percent, contributing to an average rate increase of 7 percent. Cablevisions rate hikes are higher than the 5 percent industry average.

AT&T Broadband, the nations largest cable operator, is boosting rates an average of 4.8 percent. For the 63 percent of AT&T customers taking the main analog package, the increase will average 4.3 percent. Customers whose channel lineups have grown by three channels or more — about 11 percent of the total — will see increases averaging 6.55 percent.

No. 2 cable operator Time Warner has begun announcing rate increases on a local basis, but across the system, the cost increase for basic and expanded service is capped at 5 percent, said Time Warner spokesman Michael Luftman.

“In some cases, as in Houston, it was 0 percent,” Luftman said. “It depends on local circumstances.”

Cox Communications has boosted rates 4.8 percent, in line with AT&T, while Adelphia Communications is expected to raise rates in the first quarter. “A lot of factors are being assessed,” said Adelphia spokesman Paul Heimel. “We did not take any increases in the year 2000. We experienced such rapid growth in 1999 that it wasnt appropriate to turn around and increase rates on new customers.”

By far the priciest channels cable operators are paying to carry are sports channels such as ESPN, industry officials said. The premier sports channel increased rates an average of 20 percent over the past three years. Cable executives have long complained that their customers pay much of the inflated salaries of sports stars.

While direct satellite broadcasters must also pay for programming, the two U.S. players, EchoStar Communications and DirecTV, have raised rates less frequently. EchoStar said its rate on its basic 40-channel package has not changed in five years.