Wiring For Cash

by Cara Gardner


The New Year symbolizes a fresh start, but with it comes the onslaught of holiday bills, taxes and yet another rate increase for cable TV subscribers. It happened last January in Spokane, and it's happening again this year. Comcast Cable, Spokane's only cable company, will increase its basic cable service by two dollars per month.


According to Steve Kipp, executive director of communications for Comcast in the Northwest, the average person's cable bill in Spokane is about $40. "Consumers are paying more for cable than they were five or six years ago," Kipp says, "but when you look at Spokane, there were about 50 or 60 channels and now you can get over 300. [Customers are] getting more choices and taking advantage of a new and improved network with better service and picture quality."


Kipp says Comcast has spent more than $400 million in Washington state in the past two years, upgrading and maintaining its digital fiber network. But even tolerant cable subscribers are starting to ask questions about their bill. Laurie DeVarney, chair of Spokane's Cable Advisory Board (CAB), says the board has been soliciting feedback from cable customers.


"The most significant concern is the rates [customers] are being charged for cable and the rate at which it cable rates continue to go up," DeVarney says. "I'm a cable subscriber, and I see my rates going up. I think it concerns a lot of us."


The CAB is conducting this research because the city's contract with Comcast is coming due in August 2005. Many believe that Spokane can "fire" Comcast, or choose not to renew if the city isn't happy with the services or the rates.


"With cable franchise contracts, [a city] can't do that," DeVarney explains. Unless Spokane can prove in a court of law that Comcast failed to meet the needs of consumers, or will not be able to meet the future needs, it cannot tell Comcast to leave the market. Only three cities in the history of cable have been able to pull that off. And Comcast, with more than 22 million cable subscribers nationwide and more than a million in Washington state, can definitely meet the needs of its consumers. As for the rate increases, it turns out the city can't do anything about that, either.


"Unfortunately, because of FCC rules and regulations, we cannot regulate rates; there's not a whole lot we can do about rates," DeVarney says. If the city of Spokane can't make Comcast lower its rates and it can't make them leave, what good is a contract? DeVarney says the CAB will be able to negotiate with Comcast, but that ultimately, the company is in control of what it charges.





Media Monopoly? -- Kipp points out that Comcast has plenty of competition. If consumers aren't happy with Comcast, they have the choice of satellite technology. But rates are increasing in that business as well. Companies say consumers have better technology and more options than ever before. But plenty of customers are starting to wonder whether it's really such a good deal. Holding their cable bills this January, many subscribers might want to know why rates are increasing and what's causing the hikes. Why isn't there more than one cable company in the market? And why do you have to buy a package of multiple channels you'll never watch in order to get the one channel you really wanted?


"The thing about cable that people need to understand," says Kipp, with Comcast, "is that it's a very capital-intensive industry. It is difficult to operate two cable systems in one town. There's never been a situation where there's been more than one cable company in a town and both of them make money. It generally ends up where there's a winner and a loser."


DeVarney, with the CAB, says that Spokane hasn't been approached by other cable companies.


"It doesn't happen because the cost of building another cable infrastructure in a market that is pretty well penetrated is very hard," explains DeVarney. "So you're not going to find another cable operator very enthused about trying to build in Spokane."


Kipp claims that even though Comcast doesn't have competition from other cable providers, satellite technology provides the impetus to keep its products and services topnotch.


"Satellite competition has increased dramatically," Kipp says. "Our competitors are out there... it's required all of us to do better."


But in terms of pricing, competition hasn't seemed to keep any of the rates down. "The dish networks are hammering us about raising our prices, but they're doing the same thing," Kipp says. "They raised their prices around 9 percent. They have the same situation with cost increases."





Not Comcast's Fault -- Whether holding a cable bill or a dish bill, the rates aren't decreasing; in fact, the channel packages are getting larger. People find themselves stuck with numerous channels they never watch, in order to have the few they enjoy. Why can't people choose the channels they want a la carte, paying only for those? According to Matt Polka, president of the Pittsburgh-based American Cable Association (ACA), it's because major media conglomerates are operating a gravy train and no one can stop them.


"Comcast is just a distributor, not a content provider in the way Disney, Viacom, Fox or General Electric are," Polka says. "These huge content companies control and bundle programming in such a way that they're able to force programming to our consumers and make them pay for it whether they want it or not."


Polka claims cable companies like Comcast aren't choosing to bill customers for packages of channels, but that's how distributors purchase channels from media conglomerates; the distributors' contracts with those conglomerates call for the packaging of channels.


Sports channels are a good example. "The networks will tell you that by looking at the viewing public, about three out of 10 [people] are rabid sports fans," Polka says. "The other 70 percent could take it or leave it. If they had the choice to leave it, they would. But they don't, because neither Comcast nor any other provider can put [sports channels] on a separate tier. So, if you're not a sports fan, you're paying to receive a lot of programming that you don't watch. It's because Disney and Fox, which are the providers of most of the sports channels, force them to carry those packages whether consumers like it or not. Sports programming is one of the highest-cost services they carry on their systems."


Polka says that channel packages force rates up, and then cable and satellite companies get the blame.


"All these prices are dictated by programmers who require [distributors] to take it, and prohibit [distributors], by contract, from telling our subscribers how much these programs cost. All the viewer sees is the bill from the cable provider for $40 or $50 and they say, 'There goes the cable company again.'


"When you have 70 percent of all programming controlled by Disney, Fox, Viacom and General Electric," Polka continues, "and they have the ability to control what they do, they'll raise rates as much as they can. There is no such thing as 500 channels for 10 dollars. It's going to get increasingly expensive because these companies are forcing expensive programming on consumers."


It's a bleak scenario, but Polka says it's up to consumers to demand fair play from the media conglomerates. Kipp, with Comcast, has the mindset that consumers should just try to enjoy what they're paying for.


DeVarney, with the CAB, says even though municipalities don't have as much control over cable contracts as they used to, when Spokane renews its contract with Comcast, it will be a chance to negotiate for better customer service and to voice concerns about rates.


"You never know what's going to end up on the table," DeVarney says. "The city could say [to Comcast], 'If you lower your rates for seniors and disabled people on fixed incomes... or if you will consider the rates your charging in the Spokane market, and compare those to the actual income and adjust accordingly, we'll give you something for that.'"


As for a la carte programming, Polka says it'll probably be available someday, but customers shouldn't count on it anytime soon.


"We're moving toward digital telecom, where everyone can design their cable system," Polka says. "But we're pretty far away from that. [Media conglomerates] don't want that because giving cable companies the right to sell higher-cost services on a separate tier, to those who want to pay for it and not force it on everyone, will make their gravy train go away."





Input Needed -- DeVarney and Polka agree that feedback helps, even if the consumer doesn't have a whole lot of power.


"Write to the FCC, Congress, Disney and say [you're] sick of escalating program bills," urges Polka.


DeVarney says Spokane customers should take advantage of the upcoming contract negotiations with Comcast.


"There are a lot of opportunities for people to speak," DeVarney says. "The more people know about it, the better franchise we can negotiate. We look forward to having as much participation as possible. People are sending very serious, well-thought-out comments to the city about cable."





The CAB will hold a public hearing toward the end of January to discuss cable issues with Comcast customers. In addition, the CAB encourages comments regarding cable to be left on their Web site at [email protected] or left in a voice mail box at 625-6557.





Publication date: 12/25/03