Cable TV rates go up

The increase for Time Warner Cable is the least in five years

Time Warner Cable is raising its rates for standard TV service again -- and, once more, it's outpacing inflation.

But consumers seeking a silver lining should note that it will be the smallest increase in at least five years, and Time Warner isn't raising the price of its Road Runner Internet service or its digital phone service.

On Jan. 1, Time Warner, the dominant cable TV company in the Triangle, is raising its rates an average of 4.7 percent, down slightly from 4.9 percent last year. Rate increases were at least 5 percent in each of the prior three years.

The standard tier of cable TV service in Raleigh, which includes basic service, is rising from $48.50 a month to $50.80.

The change in individual customers' bills will vary, depending on where they live, what level of TV service they subscribe to and whether they also subscribe to other services. (See accompanying box.)

Time Warner is following a nationwide trend of reining in price increases, if only slightly. Comcast, the nation's largest cable operator, is raising the cost of its most popular package an average of 4.5 percent, its lowest increase in more than a decade, the Wall Street Journal reported.

Consumer advocates have complained for years about cable companies profiting handsomely from annual price increases, while cable companies blame higher costs, especially for popular programming. Inflation rose at an annual rate of 3.4 percent through September.

Cable companies can afford to rein in price increases a bit because they're generating more revenue from Internet and phone services, said Bruce Leichtman of Leichtman Research Group in New Hampshire.

And they don't want to raise video TV rates so high that they lose customers who buy bundles of services at a discounted price, Leichtman added, since phone companies offer similar bundles. Local companies have deals with satellite-TV companies that enable them to sell TV service packaged with phone and Internet service.

Mark Cooper, director of research at the Consumer Federation of America in Washington, offers another reason for the moderating price increases: "There is an upper limit to how much monopolists can charge people."

Kagan Research projects that cable rates will rise an average of 4 percent this year, down from 5.1 percent last year. Satellite TV prices rose even more last year, 8.1 percent, Kagan reports.

DirecTV spokesman Robert Mercer said the company is "looking at the possibility of a small price adjustment" in 2007, but hasn't yet made any decisions. He said that past annual increases have been in the range of 3 percent to 4 percent.

Time Warner's new pricing takes effect Jan. 1, but customers will begin paying them this month -- the company bills a month in advance. Customers should start receiving bills that reflect their new rates in the next few days.

Comparing the cable television price increase to the rate of inflation isn't a good measuring stick, contends Brad Phillips, vice president of the cable company's Raleigh division, which serves a 16-county area. As of the end of September, the division had 539,022 cable TV customers.

"What is driving our rates is the cost of programming," Phillips said. "That is the single largest cost we incur."

The lowest-priced digital TV service is rising to $64.75, a 4.9 percent increase.

Bundles with cable TV and other services are rising about 2 percent.

The contention by cable companies that programming costs are driving up prices has some validity, Leichtman said. A case in point: Cable companies across the country typically aren't raising prices on phone and Internet service, where there are no programming costs.

Some consumers are waiting for the day when local phone companies start offering TV service over their phone lines, hoping that new rivals will rein in prices.

But the Consumer Federation's Cooper says that's a fallacy. In regions of the Northeast where the phone company Verizon is offering TV service that competes directly with Comcast, he said, both companies have raised their prices.

"There is no prospect for relief," Cooper said.

None of the three major phone companies in the Triangle -- BellSouth, Sprint and Verizon -- have announced definite plans to offer TV service over their phone lines.