A recent survey sponsored by the Alliance for Community Media and the National Association of Telecommunications Officers and Advisors indicates that despite growing competition for incumbent cable operators, retail cable rates are actually rising. Sixty-six percent of the survey respondents said basic cable rates have increased in their communities, even after the arrival of competition. The survey focuses on the trend of statewide cable franchising bills, which the survey sponsors oppose, citing the loss of control by local communities for franchising issues. Only 1% of the respondents indicate lower cable rates as a result of new competition, which is coming mainly from telcoTV operators like AT&T, Verizon, and hundreds of independent telcos. Multichannel News offers more details on the survey results.
Having a market research arm at Telecompetitor’s parent, Pivot Media, I’m certainly not one to bash survey results. But I would argue that this issue needs more time before firm conclusions can be drawn. Competition between cable and telco simply hasn’t been present long enough in a sufficient number of markets to conclude that retail rates have not been impacted. I would also argue that while retail rates may not have dropped, their rate of ascent surely has been slowed by the arrival of competition. Additionally, perhaps a more accurate measure of competitive impact may lie with digital cable rates, since telcoTV offers are more closely aligned with digital tiers.
It’s hard to lower cable TV rates when programming costs rise 10 to 20% per year.
Both the IPTV and the traditional MSOs face this challenge.
As a small competitive cable company, we have experienced discriminatory pricing from broadcasters and cable networks. I know that we pay more for content than does the incumbent MSO, which makes offering a lower priced competitive product in the communities we serve very difficult, if not impossible. As a new entrant, we have no customers, so we don’t have a subscriber base to warrant volume discounts on programming fees. So we pay a higher price, and combine that with trying to recoup capital expenditures to build a competitive system, we can’t offer much less than the incumbent provider and remain solvent.
It seems like the study researched the symptoms and not the cause of cable retail price increases.
We are a very small (under 600 subs) CATV provider and we had over a $3 wholesale price increase last fall. We were forced to increase our retail rates, which by the way, at $3 was a 10% increase!
Our hands are tied. It’s the broadcasters and networks increasing their wholesale rates that cause CATV rates to increase. Make ESPN, Discovery, and Nickelodean come to the table and allow the smaller operators the same wholesale rates at the “big boys”, and we’ll see cable rate decreases…or at the very least no increases for several years. Guaranteed.
In the past 10 years, we have not raised our cable rates unless we were forced to by a price increase issued by our wholesale providers.
Put the focus on the wholesale providers, networks and broadcasters, and you will find your reason for price increases. Again – Guaranteed.