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December 06, 2001
Time Warner Cable customers got a familiar notice recently: a glossy brochure saying they would pay a couple more bucks a month next year to get a couple more channels.
Time Warner increased the charge for its top-tier analog service, which includes 92 channels, from $35.02 to $37.24. That's $2.22, or 6.3 percent.
The two other major cable providers in the area -- Comcast Cable Communications and Insight Communications -- raised rates earlier this year. On its full basic package, Comcast raised rates in May by $2 to $39.95, a 5 percent jump. In June, Insight increased its equivalent package $1.24 to $33.99, a 3.8 percent increase.
Price increases have become a yearly ritual for cable providers. But that tradition may come at a price for cable companies, as their competition with satellite television providers heats up. Cable still dominates the national market with 67.7 million subscribers as of June 2000, according to the Federal Communications Commission.
But satellite has quickly grown to 13 million customers. While local cable providers have launched new efforts to improve service and win back customers who switched to satellites, satellite providers say they still get an influx of business every time the cable companies raise prices.
"As soon as the (price) changes were announced, the phone would start ringing off the hook," said Don Megher, whose company, The Firstep Group, is a satellite dealer and Web page design consultant.
Chris Ellis, warehouse manager at The Satellite Store, which sells and installs Dish Network equipment and service, said they usually see a similar bump.
"We get people irate about cable," Ellis said. "They call in and talk for half an hour."
But cable providers say their rate increases are just the cost of doing business. They list three main factors for rising prices: higher programming costs, infrastructure upgrades and the addition of channels.
Al Aldridge, public relations manager at Time Warner, blamed programming costs. He said his company would pay 17 percent more in 2002 than in this year for the rights to broadcast the various cable networks.
The biggest increases, Aldridge said, come from sports networks such as ESPN. Mark Apple, spokesman for Comcast, said it is widely reported that ESPN increases its licensing fees as much as 20 percent a year.
Cable companies also have added channels. Time Warner switched Disney from a premium to a standard channel earlier this year. Next year, it will increase the Golf Channel from part-time to full-time availability and add Oxygen, a channel aimed at women.
Apple said Comcast will add Turner Classic Movies to its mid-tier analog cable package at the end of this month. Earlier this year, Comcast added the Fox News Channel and FX, which broadcasts many NASCAR races.
All three cable providers are considering a video-on-demand service. Video on demand lets subscribers buy movies and control them like a videotape in a videocassette recorder.
In addition to programming, cable companies have poured in money to rebuild their delivery networks. Apple said Comcast has spent $80 million in the last few years to lay fiber-optic lines around Indianapolis.
That upgrade has allowed cable companies to offer services besides their traditional analog television. All three local providers now have digital cable options, as well as high-speed Internet service.
"We're trying to show that our digital programming is very comparable to their satellite programming," Aldridge said. And the cable companies are going directly at the satellite providers.
While The Satellite Store's ad in the Yellow Pages says "Dump Cable," all three area cable providers have responded with satellite dish buyback programs.
Comcast offers to pay satellite customers $25 a month for 16 months if they turn their dish and other equipment in to Comcast and sign up for any level of digital service. In a little over a year, Apple said, Comcast has wooed 1,024 customers to take the deal. Time Warner has a similar program it started two months ago, and Insight is testing a buyback program in targeted areas.
In addition, Time Warner also had its marketing staff talk directly to satellite subscribers to try to identify the reasons they switched.
"We're winning some of them back," Aldridge said.
But cable companies' efforts may still not be enough. According to the FCC, satellite providers added 3 million subscribers from June 1999 to June 2000 -- nearly three times the growth rate for cable.
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Call J.K. Wall at 1-317-444-6287.
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