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Comcast is boosting cable rates for 2006: Annual price hike could be ammunition for competitors

December 5, 2005

Comcast plans to increase cable TV rates an average of 5.1 percent in its suburban Indianapolis territory next year, even as SBC Communications threatens to roll out a cable-killing video service via phone lines.

Annual rate hikes by cable companies have become as inevitable as sitcom reruns. Comcast last jacked up local basic cable rates a year ago, by 6.5 percent.

Although the 2006 increase is more modest, SBC already is using it in an attempt to soften up consumers for its own video incursion. Even before Comcast mailed customers letters about the planned rate hike, some at SBC's Indianapolis offices were telegraphing Comcast's plans in e-mail to the media.

Mostly, though, SBC has been digging in for video war more subtly, through the efforts of Consumers for Cable Choice, an Indianapolis-based group advocating relaxed regulation of the industry.

Both SBC and Verizon gave $75,000 to CCC. The group claims to represent interests of grassroots consumers, chronicling negative experiences of cable customers (mycablenightmare.com) and advocating-surprise, surprise-video competition from phone companies.

Part of Comcast's rate hike, scheduled for January, stems from its costly foray into a competitor's business-the phone and Internet services that have been the bread and butter of SBC and other phone companies.

"We've put a lot of money back into Indianapolis," said Mark Apple, Philadelphia-based Comcast's local director of corporate affairs. "Obviously, when you're putting millions of dollars into developing your technology, you have to adjust your pricing."

Prices are unchanged for Comcast's Internet and phone products in 2006.

Most Comcast cable TV customers likely will see their bills rise less than 5 percent, Apple said, because many receive discounts for subscribing to packages and the company's phone and Internet offerings.

But is a rate hike risky ahead of SBC's supposed entry into video?

"We already face significant competition for every single product we provide. We are very conscious of our prices in the market," Apple said.

Satellite TV providers, for example, raise prices less frequently and in many cases charge less than comparable packages from cable companies. Cable firms argue that satellite firms don't pay municipal franchise fees; Comcast, which has more than 110,000 cable customers locally, said it paid the city of Indianapolis more than $4 million last year.

Phone companies are trying to avoid the regulatory hurdles faced by cable. SBC won a huge victory in its home state of Texas recently, with a law allowing phone companies to obtain statewide, rather than municipal, video franchises.

Phone giant Verizon quickly jumped into Texas with a fiber-optic video service. St. Louis-based Charter Communications cited Verizon's entry in lowering the price of cable service in Keller, Texas.

"If that is any guide, it shows that the cable companies, once they're faced with competition, are changing their price structure," said Mike Marker, spokesman for SBC's Indiana operations.

Despite all the bluster, one industry observer doubts SBC will even unveil video services in some markets. SBC acquired AT&T Corp. on Nov. 18 and is in the process of transitioning its regional phone companies in Indiana and elsewhere to the AT&T name.

Bruce Kushnick, chairman of consumer advocacy group TeleTruth, said SBC played up the issue to help it win regulatory support for the AT&T acquisition, and to crack open the door to changes in telecommunications laws favorable to its other business interests.

The Federal Communications Commission, in a report issued this year, said cable rates nationally rose an average of 5.4 percent in 2003. But in areas where cable operators faced "effective competition," rates rose only 3.6 percent, it said.

Indianapolis' other cable TV provider, Bright House Networks, which serves the core of the city, said it had no plans for a rate increase next year, but hadn't completed its 2006 planning.
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