AT&T Broadband is the first major cable provider to announce higher rates, informing its 16 million subscribers Tuesday that they could face increases as high as almost 7 percent. Other providers are expected to raise fees later this month.
That's twice last year's inflation rate, a pattern that's become fairly common since cable rates were deregulated with the Telecom Act of 1996. Coinciding with that deregulation, however, has been expensive upgrades by cable operators for high-speed Internet access and digital cable, as well as rising programming costs.
"This rate hike is one more indication that cable deregulation isn't working," said David Butler of Consumers Union, which publishes consumer reports. "We've seen an increase of 22 percent" in cable rates since the passage of the 1996 Act, he said. "Increases like the one announced today should send a signal to Congress to regroup and rewrite the law.
"AT&T's announcement is not an isolated event," Butler said, citing a recent 7 percent increase by Cablevision Systems in the New York City area. "Rates have continued to skyrocket," and the increasing popularity of digital satellite services has not kept cable rates from increasing. With a new Congress being sworn in Wednesday and a new administration on the way, "this is the ideal time to tackle this problem," he said.
Beginning next month AT&T Broadband cable subscribers will see an average rate increase of 4.8 percent, the company said. Customers receiving only standard cable, which combines the basic and expanded basic analog programming tiers, will see a 4.3 percent increase, while the 11 percent of customers who have seen their lineups expand by three channels or more will see an average 6.6 percent increase.
In contrast, the U.S. Bureau of Labor Statistics reported in November that the annual cost-of-living increase, or inflation rate, was running at 3.4 percent.
"An increase in price is definitely not good news," said Boston resident Rajeev Tipnis, an AT&T Broadband subscriber. "If I can get the same service from another provider" for less money "I'd definitely switch."
Tipnis has been a subscriber for two years, dating back to when MediaOne was his local provider. His bill for basic cable and Internet access is $72 per month, he said. He's been pleased with his cable video service but "I would like to explore other options, including DSL," for high-speed Internet access, Tipnis said.
AT&T Broadband spokeswoman Sarah Duisik said the increase for analog subscribers, who do not subscribe to digital cable or broadband Internet service, is due to an expansion in the number of channels provided.
Duisik said the cost of providing sports programming has increased "by the biggest percentage." ESPN alone can cost a cable operator a dollar or more per customer per month to carry, and few cable subscribers are willing to do without it.
Upgrading AT&T Broadband's antiquated cable infrastructure to two-way, high-speed Internet access continues to be a multibillion-dollar operation. Duisik said the company is 75 percent upgraded, with no estimate for completion. About 90 percent to 95 percent of AT&T Broadband cable customers have access to digital cable, she said.
AT&T Broadband also announced it would increase equipment and installation prices later this year, but it did not provide details.
The cable unit of AT&T, combined from the acquisitions of Tele-Communications Inc. and MediaOne, will be set up this year as a separate tracking stock and spun off next year, AT&T said recently.