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Time Warner Cable's price increases don't even make sense

As many households nationwide drop cable service, Time Warner Cable keeps reaching deeper into the pockets of the customers it still has. Clearly this is an untenable situation.

December 27, 2011|David Lazarus
  • Time Warner Cable is raising some of its prices dramatically. Its price to wire a home for video, Internet or phone service will soar 51.5%, to about $50.
Time Warner Cable is raising some of its prices dramatically. Its price… (Jonathan Fickies, Bloomberg )

Happy holidays. Your cable rates are going up. Again.

In its most Grinch-like fashion, Time Warner Cable, the dominant cable company in Southern California, is alerting customers that rates for nearly all its services will increase as of the next bill.

Some rates will be significantly higher, such as a 27.4% increase to $17 from $13.34 just to receive local broadcast channels.

Others will be modestly higher, such as a 9.5% increase to $69 from $63 for broadcast plus basic cable channels, or a 7.3% increase to $58.99 from $54.99 for the digital video package.

Compare that with a 3.5% annual inflation rate as of October.

"The cable industry maintains a near-monopoly over television services," said Doug Heller, executive director of Consumer Watchdog, a Santa Monica advocacy group. "Their prices are completely disconnected from the real lives of their customers."

Brian Bentley, 48, of Hollywood has been a Time Warner customer for more than a decade. He gets basic cable service plus HBO, some sports channels, a digital video recorder and a couple of boxes for his two TVs.

All that now runs about $100 a month. With the latest price hikes, Bentley figures his monthly bill will come to about $125 — a 25% increase.

More cruelly, he estimates that he watches about 20 hours of TV per month. That'll translate, as of his next bill, to $6.25 an hour.

In other words, that would be $6.25 for an episode of "The Real Housewives of Orange County." Or $6.25 for an installment of "Celebrity Apprentice." Or $6.25 for some life-affirming time with Snooki and the rest of the "Jersey Shore" gang.

"Aside from certain sports events, I can't imagine anything on TV that's worth $6.25 an hour," Bentley said.

Jim Gordon, a spokesman for Time Warner, laid blame for the latest rate increase on higher fees charged by broadcasting companies for access to popular channels such as ESPN and Fox Sports.

"There's never a good time to raise rates," he said. "We continue to see exorbitant increases in the cost of programming."

Cable TV networks spent a total of $20 billion on programming last year, according to market researcher SNL Kagan. Programming expenses for cable channels have increased at an annual rate of nearly 9% over the last five years.

But that doesn't mean cable and satellite companies are raising prices across the board. A spokesman for Comcast, the heavyweight cable provider in Northern California, said the company has no rate hike planned for the immediate future.

A DirecTV spokesman said its prices went up an average of 4% earlier this year, roughly in line with the inflation rate. "We anticipate a similar nominal increase next year," he said.

Some of the biggest jumps in Time Warner's rates will be seen on the installation front. The cost of wiring your home for video, Internet or phone service will soar 51.5% to $49.99 from $32.99. Installing Time Warner's Wi-Fi service will jump 40% to $69.99 from $49.99.

Time Warner's Gordon said that these are just the "rack rates" and that most customers will pay less for installation after cutting a deal for their programming package.

But if that's the case, why not list the actual rate rather than a bogus inflated rate? And why on Earth would Time Warner's rack rate for installation go up more than 50% in a single year?

Gordon said the higher price "reflects the value associated with the installation charge," including labor costs and employee healthcare expenses. Apparently Time Warner technicians are a lot better paid and are receiving significantly better medical benefits than they were a year ago.

What's particularly galling is that cable companies are bleeding customers. About 8.5 million people have dropped basic video service since 2002, according to industry estimates.

In many cases, people are trying to save some money by walking away from their average $75 monthly cable bill. Some are switching to alternative viewing options, such as online resources like Netflix and Hulu.

What that means, though, is that cable companies are compensating for these losses by reaching deeper into the pockets of customers who stay with them.

"They're punishing people for being loyal," Consumer Watchdog's Heller said.

Clearly this is an untenable situation. Cable companies will keep alienating their customers by raising prices well beyond the inflation rate, and those customers will continue leaving in droves, compelling cable companies to raise rates even more.

What's the answer? As I've said before, it's time for cable (and satellite) providers to switch to so-called a la carte pricing, allowing customers to pay only for the channels they want to watch. The typical cable customer regularly watches only about 17 channels, according to Nielsen Co.

This would undoubtedly play havoc with the bottom lines of service providers and programmers. But ultimately, it would lead to a fairer marketplace in which consumers are charged only for the services they desire.

It would also provide a strong incentive for broadcasters to improve their offerings as they compete for viewers' business.

This is supposed to be the season of miracles. I'm keeping my fingers crossed.

David Lazarus' column runs Tuesdays and Fridays. He also can be seen daily on KTLA-TV Channel 5. Send your tips or feedback to david.lazarus@latimes.com.

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