Cable TV Costs: A Clear Picture

Actor Bill Paxton, right, and his father, actor John Paxton, arrive for the Tribeca Film Festival premiere of "Spider-Man 3" on April 30, 2007. The elder Paxton appears in the film, which opens on on May 4.
AP Photo/Jason DeCrow
Whatever happened to the reduced rates Americans were promised with the deregulation of the cable industry?

CBS News Correspondent Wyatt Andrews reports cable TV rates are on the rise in America.

Just a few months ago, Allan Fritz couldn't have been happier with cable TV. At his home, Fritz had five TVs wired along with a computer that gained him high-speed movement on the Internet.

What angered him was a 13 percent hike in the price of his basic cable package, from Long Island based Cablevision.

Fritz responded by canceling part of his service. "It's a lot of money when you think about it."

"I think I'm getting ripped off quite honestly. By now the (cable company's) equipment has been paid off and they are now reaping the harvest big time."

This year, millions of consumers nationwide are facing cable rate hikes of 5 to 13 percent, well above the rate of inflation. At Cablevision, which says its average increase was 7 percent, President and CEO Jim Dolan blames the increase on the escalating costs he has to pay to buy and run cable programs.

"The number one expense that's going up is programming costs -- purchasing the programs to put on our line to serve our customers."

At Cox Communications, President Jim Robbins blames sports channels in particular. "Sports programming has increased 20 percent a year for the last 3 or 4 years and they continue unabated."

But in some cities, the cable company itself may own the local sports network. Cablevision owns four cable channels and the sports network of the New York Knicks.

Dolan has an answer. "We own five channels out of 80 that we play -- the increase is across all 80."

The industry says cable programs are up an average of 15 percent and that includes price hikes from MTV and VH-1, which are owned by Viacom, the corporate parent of CBS News. But that, to many consumer advocates isn't the whole story.

"We think there is a lot of price gouging going on in the cable market." says Gene Kimmelman, co-director of Consumers Union.

Consumer groups say cable prices are rising because most cable operators face no real competition. Any industry free of competition and regulation, critics say, will raise prices because it can.

"There are few communities where you have cable companies competing head-to-head," says Kimmelman. "In those communities, prices are anywhere from ten to 35 percent lower."

Cable operators respond by saying they do face competition— not from other cable firms, but from the explosion of satellite TV.

Allen Fritz, an 18-year customer of Cablevision, says satellite is exactly what he may try next.