Service Electric and RCN say programming costs are being passed on to customers.

FROM THE MORNING CALL

et ready to pay more for cable TV, again.

In what has become an annual ritual, the new year will greet cable customers with a rate hike. So it has been since cable rates were deregulated in the late 1990s — though this hike will be bigger than most for many Lehigh Valley residents.

Service Electric Cable TV & Communications of Allentown, the region's biggest cable provider, is raising the price of its standard Premier package, which includes 112 channels, by $5.62, or 9 percent, to $68.49. The increase includes $2.12 in new fees.


RCN Corp. of Herndon, Va., the region's second-biggest cable provider, is increasing the price of its standard Signature package, by $4. But the expiration of a 2009 promotion on digital converter boxes means some customers also will have to pay an additional $3.95, meaning the final price tag will be 11 percent higher at $77.45.

For customers of both companies, rate hikes will vary widely depending on subscription specifics and special deals. For example, a customer who subscribes to TV, Internet and phone service could see a bigger increase than someone who gets only basic TV.

But generally speaking, cable pricing is outpacing the nation's rate of inflation, which was 3.4 percent for the 12 months ending in November, according to the federal Consumer Price Index.

And the long-term trend is clear. Compared with a decade ago, the price for Service Electric's standard cable TV package has risen by nearly two-thirds, and RCN's has doubled.

The cable companies say their hands are tied. They blame rising rates on programming costs — what they have to pay media companies such as Disney or News Corp. for access to the likes of ESPN or Fox News.

Service Electric General Manager Jack Capparell sounded exasperated as he explained his company's predicament:

"We are put in the position of passing that increase on to our customers. … The cable bill is going up but the money is going directly to the channels," he said. "We're not keeping the money, bottom line."

Yet, he added, "We're looked at as the bad guys!"

One of the biggest cost drivers is sports. In 2006, TV sports giant ESPN spent $3.5 billion on programs for its flagship channel. This year, the channel's content costs have mushroomed to $5.2 billion, according to consulting firm SNL Kagan.

"Sports fans love their sports, and they just want more and more," RCN Marketing Director Joanne Guerriero said.

Of course, even cable customers who don't give a hoot about football, baseball and basketball end up paying for ESPN. And that, in effect, means they are subsidizing the cost of sports programming, which in turn helps pay for multimillion-dollar salaries of professional athletes.

Think of it as a charitable donation toward the 10-year, $254 million contract Albert Pujols signed with the Los Angeles Angels baseball team earlier this month.

Also a factor in rising rates is the proliferation of original dramas such as AMC's "Mad Men" and TNT's "The Closer," which can cost several million dollars an episode.

The solution, industry critics have long contended, is to allow customers to pick and pay for only the channels they want. Indeed, this approach, called a la carte pricing, has been the Holy Grail of reformers ever since the Telecommunications Act of 1996, which removed the government from the business of setting cable rates.

The main reason a la carte — the French term for picking from a menu of choices — has yet to be adopted is it would entail a complete overhaul of the business model that has made cable television networks the most lucrative divisions of many large media companies.

So TV watchers shouldn't begrudge their local cable company, Service Electric's Capparell said. "If we could do a la carte, we would do it tomorrow."

From one cable company to the next, rate hikes vary widely year to year because their contracts with individual media companies expire and are renewed on different

Blue Ridge Communications of Palmerton, which serves northern portions of the Lehigh Valley region, is increasing the price of its standard package 5 percent, to $61.94.

Rates are also going up for customers of Comcast Corp. of Philadelphia, which serves some southern portions of the Lehigh Valley region. The company declined to disclose details to The Morning Call.

http://www.mcall.com/news/local/mc-allentown-cable-20111227,0,3985066.story