MVPD Fee Hikes Seen Unrelated to Acquisition Plans

Price hikes for video and broadband in 2015 for Comcast, DirecTV and Time Warner Cable likely have more to do with rising content costs than their pending deals before the FCC, several communications attorneys and the companies themselves told us Tuesday. “The cost of content is increasing for everyone, and these rate hikes are just part of the trend,” said American Cable Association President Matthew Polka in an interview. Though price hikes could be an attempt to get ahead of possible conditions on the deal that would keep prices down, rising content costs are likely an influence, said Public Knowledge Senior Staff Attorney John Bergmayer. PK opposes media consolidation and the Comcast/TWC deal. Price hikes are always blamed on content costs, Bergmayer said. “There's nothing forcing Comcast to pass its costs on to consumers,” Bergmayer said.

Comcast is rolling out 2015 price increases that affect Internet service and video customers in phases nationwide, amounting to an average increase of 3.4 percent for most markets, a Comcast spokeswoman told us. Increases aren't related to the proposed acquisition, she said. “Historically, we have needed to adjust our prices,” she said. In 2014, the average increase was 2 percent, Comcast said. This year's fee hike includes an increase to the price of the high speed “blast service,” increases in broadcast and sports surcharges and an increase on the price of renting a cable modem. Customers who buy their own cable modem won't incur that part of the increase, and customers of other Comcast packages, such as “limited basic,” won't be included in some of the other rate hikes, Comcast said.

Time Warner Cable also is increasing the rental price of its cable modem to $8 a month from $5.99 a month in 2014, a TWC spokesman told us. The price increase on rented equipment is an illustration of the anticompetitive effects of consolidation, Bergmayer said. “In the consumer electronics industry, equipment is getting cheaper. Why is this equipment getting more expensive?” Bergmayer asked. TWC and Comcast said the price increase reflected the cost of providing new technology and services to customers. A TWC spokesperson said the acquisition by Comcast had no relationship to the company's rates, and TWC was being run as an independent company while awaiting purchase approval. “This is a stand-alone business,” the spokesman said. AT&T U-verse is also increasing TV and Internet rates in 2015, a spokesman told us.

TWC, DirecTV and Comcast all announced increases to their sports surcharges for 2015, a rate hike that Polka and Mediacom Vice President-Legal and Public Affairs Tom Larsen said wasn't unusual in the industry. A “glut” of sports channels receiving low ratings but still expensive to carry affected all multichannel video programming distributors in 2014, Polka said. Mediacom also passes along retrans and sports charges to its customers, but “eats everything else,” Larsen said. Last year, members of negotiating body the National Cable Television Cooperative renewed deals with Disney and Viacom, and they face a negotiation with Discovery in 2015, he said. While Comcast and larger MVPDs may not take as hard a relative hit in such negotiations, they still face rising costs, he said. Mediacom has petitioned the FCC to take steps to limit programmers from bundling content in negotiations (see 1410020048).

It's unlikely the FCC would impose an acquisition condition on Comcast/TWC or AT&T/DirecTV that would prevent them from increasing prices in response to their costs, Larsen said: “What company would agree to that?” Companies involved in mergers and acquisitions aren't the only ones raising prices, a Comcast spokeswoman said. Verizon has announced “targeted increases for existing FiOS customers at some point in 2015,” a Verizon spokesman told us.