FCC SURVEY SHOWS CABLE RATES HAVE RISEN 5.8% IN YEAR
Despite increasing competition from DBS providers and cable overbuilders, cable operators boosted their average monthly rates 5.8% in year ending July 1, 2000, according to latest annual price survey by FCC. That increase, which was identical for both monopoly cable operators and ones facing effective competition in their markets, exceeds respective 4.5% and 5.2% boosts by 2 groups of cable systems in Commission’s 1999 price report. It also exceeds nation’s general inflation rate of 3.7% for that period by wide margin, as well as 4.7% cable inflation rate calculated by U.S. Bureau of Labor Statistics for same period. But latest increase still is less than that in agency’s 1997 and 1998 price reports.
In its new survey, FCC found that both competitive and noncompetitive cable operators largely blamed their rate increases on higher programming costs, with former attributing 44.1% of their rises to programming and latter attributing 41.4% to programming. System operators also blamed system upgrade costs, higher equipment expenses, inflation and costs of adding new channels to their programming lineups, among other things. Monthly basic service rates rose slightly more than expanded basic rates for competitive group, while expanded basic rates jumped much more than basic rates for noncompetitive group. Differential between overall prices charged by 2 groups stayed same at 5.3%, with competitive cable operators boosting rates to $32.40 monthly average and noncompetitive operators to $34.11 monthly average.
Consumers Union immediately seized upon report as further evidence that cable industry needed renewed rate regulation. Arguing that head-to-head cable competition in markets nationwide could save consumers more than $4 billion annually, group again urged Congress and FCC “to clamp down on cable monopolies and find new ways to jump-start competition.” Consumers Union also said report “demonstrates why policymakers need to require effective competition before deregulation.” “Another day, another couple of bucks on your cable bill,” said Gene Kimmelman, co-dir. of Consumers Union’s Washington office. “That’s what happens when the government deregulates a monopoly.”
NCTA retorted that cable operators continued to “hold the line on cable prices” despite “escalating programming costs, especially higher sports rights fees, and system upgrade expenses.” It said rates actually “stayed unchanged on a cost- per-channel basis” because of new channels added by cable systems. It also said basic service rates rose just 2.3%, well below general inflation rate of 3.7% for period. “While cable programming service tier rates increased somewhat more rapidly last year, these tiers grew in the number of channels offered and face head-on competition from the 2 national satellite providers,” NCTA Pres.-CEO Robert Sachs said.
In other notable findings, FCC price survey said: (1) Competitive cable operators averaged 59.9 channels as of July 1, up 4% from year earlier, while noncompetitive systems averaged 54.8, up 5.4%. (2) Percentage of cable operators offering digital programming tiers doubled to 54% in year, 47% offered Internet services, 7% telephony. (3) Nonvideo services generated 3.5% of total cable revenue as of July 1, more than double year earlier. (4) Cable operators said DBS providers had overall 14.7% share of TV homes in their markets, ranging from 11% penetration in urban areas to 18% in rural regions. (5) Demand for cable service is “somewhat price elastic.” (6) Price gap between cable and DBS service continues to diminish, particularly on installation and equipment cost side. (7) Cable clustering, despite cable industry claims, didn’t lead to greater availability of Internet or telephony services or relatively lower cable rates.