Consumers Have Little Recourse on Cable Rates

In 1992, with consumers in a frenzy over skyrocketing cable television bills, the federal government gave cities across the nation the ability to regulate basic rates.

Today, four cities in Ventura County--Simi Valley, Ventura, Moorpark and Ojai--are still in the regulation business.

But officials in those cities are increasingly resigned to the fact that there is little they can do to control rates for most of their residents. In fact, all indications are that rates will continue to rise as more high-tech services come online.

Cities can and have been able to use federal guidelines to keep basic rates stable--they have risen only 6% countywide over the last decade. Basic services include traditional television networks, government access channels and other limited programming.

But most consumers don’t want bare-bones service. They want channels such as CNN, A&E; and other programming that requires expanded cable services.

Cities can’t regulate expanded service packages. And the federal government, which used to, got out of the business two years ago. A Times analysis found monthly rates countywide for expanded service climbed 53% over the last decade, from an average of $18.79 to $28.80.

In Simi Valley, the city’s cable expert, Joe Hreha, says only 8% of cable customers take basic service. “For the 2,500 who have the basic tier, it works well,” he says of the city regulation. “But there are 32,500 subscribers who don’t have any rate regulation.”

Joe Van Eaton, a Washington lawyer and cable consultant for the city of Ventura, says about 90% of customers nationwide subscribe to services beyond the most basic packages.

“Cities end up chasing their own tails,” Van Eaton says. “They spend money to get basic rates down. Then their expanded rates go up. And there’s no one to appeal to.

“I used to handle a lot of rate cases. Over the last year I’ve handled maybe one. A lot of communities have come to the conclusion it’s just not worth the effort.”

Cable operators throughout the county note that they have added more channels over the last decade, from an average of 34 with expanded services to about twice as many, and grappled with rising programming costs.

They have also invested in costly technological improvements such as digital service and high-speed Internet access.

“Those issues are part of the mix,” says Bill Rosendahl, Los Angeles-based vice president of operations for Adelphia Communications, which provides service to 65% of cable customers countywide.

*

“We try not to raise rates,” added Pamela Drake, marketing director for Avenue TV Cable, which provides service to the west side of Ventura. “But there are times when we really don’t have a choice. We’re plowing so much back into the system that we’re really not making more profit.”

Local critics don’t find these explanations for rate hikes convincing.

A $2-per-month increase to expand service was announced in Simi Valley at the start of this year, the day before Adelphia was set to take over the franchise from Comcast Cablevision.

Politicians could do nothing more than stomp their feet, with Mayor Bill Davis calling the timing of the rate hike “a prime example of corporate greed.”

“This is an unconscionable way for Adelphia to enter our community, increasing rates over which we, as a city council, have no control and stripping our ability to protect our community’s cable customers from escalating costs,” Davis says.

Adelphia officials maintained the rate hike was Comcast’s decision, but acknowledged the new provider would reap the benefits. With a national trend of consolidations in the industry, Adelphia now controls 65% of the market in Ventura County.

Consumers should not expect federal relief on expanded cable rates any time soon, says Rep. Brad Sherman (D-Sherman Oaks). Congress has no immediate plans to step in on their behalf, he says.

“The Bush administration is just reflexively opposed to regulation,” says Sherman, whose district includes Thousand Oaks and part of Los Angeles County. “It wouldn’t shock me if the president moved to remove the one bit of price regulation we still have.”

Sherman says he would fight to keep basic rates regulated in areas without competition if that protection were threatened.

But he doesn’t support regulation of expanded service. “I understand the slogan ‘I want my MTV,’ ” he says. “But so far, not even they have popularized the slogan ‘I need my MTV.’ ”

In 1996, Congress passed legislation allowing telephone companies to get into the cable businesses and vice versa. Supporters of the legislation argued that increasing competition in the telecommunications arena would be a way to keep down cable prices and improve customer service.

But competition didn’t take hold in most places. Industry experts say providers found it too expensive to lay wiring and weren’t convinced the investment would pay off.

In Ventura County, however, GTE--now called Verizon--decided to experiment in areas where it already provided telephone service. Verizon Communications now competes against Adelphia for cable customers in Thousand Oaks, Camarillo, Oxnard and Port Hueneme.

*

Of those cities, all but Port Hueneme had been regulating basic rates. Under the 1996 legislation, these cities could no longer regulate basic rates once competition took hold. Experts in those cities aren’t complaining.

“Competition made everything better,” says Dennis Scala,a city analyst in Oxnard. “They upgraded their channel lineup, lowered their cost and improved their infrastructure,” he says of Jones Intercable, which had been the sole provider. Adelphia has since acquired Jones’ franchise and continues to compete with Verizon.

Countywide, a Times analysis found customers pay lower rates in cities with competition.

Basic service costs an average of $11.06 a month for 26 channels in the cities with competition. That compares with $17.69 a month for 30 basic channels in cities where there is no competition. Those cities are Simi Valley, Ventura, Ojai, Santa Paula, Fillmore, and Moorpark, and a sliver of Thousand Oaks.

Although there are two cable providers in Ventura, their coverage areas do not overlap. Adelphia serves the east side of the city and Avenue TV Cable serves the west side.

Expanded service also costs less in cities with competition--on average, $26.92 a month for 71 channels, compared with $30.93 for 63 channels in cities without competition.

Simi Valley officials have been trying for five years to attract a competing provider and are frustrated by their inability to do so. “Competition is the No. 1 way to ensure effective rate regulation,” Hreha says.

Meanwhile, satellite providers, which don’t need the same infrastructure, have been aggressively marketing their services throughout the county in the last couple of years.

Several residents in cities without competition have jumped at the alternative. Ventura Councilman Jim Friedman is one.

Friedman, who went to war with Adelphia’s predecessor, Century Communications, two years ago says, “I proudly delivered my cable box to the Century office in Ventura. I switched to satellite in January of 2000, and I’m quite pleased.”

For a dollar more than he had been paying, Friedman says, he gets “so many more channels, so many more options, a clearer signal and so much more flexibility. I didn’t have to think too hard.”

So far, cable providers say they haven’t lost that many customers to satellite. Avenue’s marketing director Drake estimated satellite has captured about 3% of her customers since 1999.

Still, the threat of losing customers has kept cable providers on their toes, Drake and others say, pushing them to offer high-speed Internet service as well as digital cable service. Digital provides a clearer picture than analog cable, more channels and commercial-free radio stations.

These technologies are available now to customers in several parts of the county and should be available everywhere within the next two years, providers say.

That is good for consumers who want the technology, says Los Angeles-based industry consultant Michael J. Friedman.

But customers who would just as soon live without those improvements are likely to see their bills rise anyway.

“As systems get rebuilt and more services are offered, rates are going to go up,” the consultant says. “Operators have the ability to raise their rates as much as they think the market will bear.”

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Cable Television Cost Comparison The following is a list of basic and expanded cable rates offered by each of the county’s four cable operators:

*

Adelphia Communications

*--*

Install Basic Extended basic Digital Camarillo east * $21.50 $13.00 (21 channels) $24.20 (65 channels) Yes Camarillo west * $21.50 $10.40 (28 channels) $25.45 (64 channels) Yes Fillmore * $21.50 $14.05 (21 channels) $26.05 (65 channels) Yes Moorpark * $21.50 $11.10 (21 channels) $27.80 (65 channels) Yes Ojai * $21.50 $11.95 (18 channels) $27.65 (46 channels) Yes Oxnard $30.00 $10.75 (29 channels) $26.50 (73 channels) No Port Hueneme $30.00 $10.75 (29 channels) $26.50 (73 channels) No Santa Paula * $21.50 $14.05 (21 channels) $26.05 (65 channels) Yes Simi Valley $29.49 $14.03 (23 channels) $39.09 (62 channels) No Thousand Oaks * $21.50 $11.10 (21 channels) $27.80 (55 channels) Yes Ventura east * $17.73 $25.07 (45 channels) $40.36 (57 channels) No

*--*

*

Avenue TV Cable

*--*

Install Basic Extended basic Digital Ventura west $40 $27.25 (46 channels) $34.95 (77 channels) Yes

*--*

*

Charter Communications

*--*

Install Basic Extended basic Digital Thousand Oaks $26.50 $24 (42 channels) $25.50 (68 channels) No

*--*

*

Verizon Communications

*--*

Install Basic Extended basic Digital Camarillo $49.95 $10.95 (26 channels) $27.95 (77 channels) Yes Oxnard $49.95 $10.95 (26 channels) $27.95 (77 channels) Yes Port Hueneme $49.95 $10.95 (26 channels) $27.95 (77 channels) Yes Thousand Oaks $49.95 $10.95 (26 channels) $27.95 (77 channels) Yes

*--*

*

* Installation charges are higher for homes being wired for cable for the first time.

Source: Cable companies