Cable Execs Explain High Prices

cable tv rates
AP
Cable TV executives told senators Tuesday that giving people more freedom to choose channels would help combat skyrocketing cable prices.

Cable bills have risen about 50 percent since 1996. Cable companies say the reason is higher programming costs passed along from networks, especially sports channels.

"Less than 20 percent of our customers are avid sports fans that regularly view sports on TV, but sports programming is disproportionately driving up cable prices for everyone," James Robbins, president and chief executive of Cox Communications Inc., told the Senate Commerce, Science and Transportation Committee.

Atlanta-based Cox, the fourth largest cable company with 6.3 million customers, says it pays $2 per subscriber for the sports channel ESPN, and that price has increased in each of five consecutive years. Last week, ESPN, owned by Walt Disney Co., announced a 20 percent rate increase to cable operators.

Congress requires cable companies to offer a basic service package that includes local broadcast stations. The companies also offer expanded basic packages that typically include bundles of cable networks such as ESPN, CNN and USA. Premium services such as HBO and Showtime cost more.

Cable companies negotiate contracts with the networks to use the channels.

Robbins said one solution to rising rates would be to remove sports and other expensive channels from expanded basic lineups. Instead, consumers could buy the channels individually or in specialized packages.

Charles Dolan, chairman of Cablevision Systems Corp., which serves 3 million customers in the New York area, said he wants Congress to help make that happen by limiting the negotiating tactics of the network owners, who sometimes demand that a channel be placed in a basic package.

Dolan said lawmakers also should eliminate the requirement that consumers buy basic service before they can subscribe to other channels.

"Would the government insist that all customers entering a supermarket to buy a loaf of bread be required to buy a dozen eggs and a quart of milk?" he said.

ESPN and ABC Sports President George Bodenheimer said cable companies are asking for regulations to give them leverage in contract negotiations.

"Ripping ESPN and other popular networks out of basic cable and charging more for them is not pro-consumer," Bodenheimer said in a statement released at the hearing. He said that system would cost consumers more.

Consumer groups support giving people the ability to choose more channels but doubt the cable industry's explanations for rising rates, contending that revenue from advertising and new digital services more than cover the costs.

"They're the ones who pull the trigger on prices for consumers," said Gene Kimmelman, director of public policy for Consumers Union, the publisher of Consumer Reports magazine. "Cable operators have been showing burgeoning profits to Wall Street, which runs at odds with what they have told their customers and policy-makers."

The cable television industry won deregulation of its rates and service 1984, was re-regulated in 1992, and won deregulation again in 1996.

Kimmelman said deregulation has failed to produce more competition, and a few companies dominate the cable industry. That gives them the monopoly power to raise prices, he said.

Leo Hindery, chairman and chief executive of the YES Network, a sports channel with exclusive rights to most New York Yankees games, said lawmakers should pass legislation to protect independent programmers.

Cablevision's customers couldn't watch Yankee games during the last baseball season because of a dispute with YES, which insisted on being offered as a basic cable channel. Cablevision wanted customers to pay extra and the two sides reached a temporary truce in March to air the games this year.

By David Ho