TCI to raise rates 7 percent for majority of subscribers
NEW YORK (AP) _ Tele-Communications Inc., the nation’s largest cable company, is raising rates 7 percent for about two-thirds of its subscribers to offset the higher cost of popular networks like MTV and ESPN.
The increase, disclosed today, will affect 9 million of TCI’s 14 million subscribers and raise basic service to about $27 a month.
TCI’s move comes as the company works to roll out its new ALL-TV digital cable service and reduce its $15 billion debt. It also comes three months after the company announced it would eliminate 2,500 jobs and freeze or cut senior executive salaries.
``Clearly, it’s the marketplace and the competition among other factors that are setting the prices,″ said Joann Dobbs, a spokeswoman for TCI.
The price increase, to take place June 1, is 35 percent below the maximum allowed by the Federal Communications Commission, TCI said. TCI raised prices an average of 9 percent last year, but Ms. Dobbs said that increase accounted for three years.
TCI said 60 percent of the increase would be used to offset higher programming costs, the amount it must pay to offer networks produced by conglomerates like Time Warner, the parent of CNN, and Viacom, which owns MTV and VH-1.
Dennis McAlpine, a media and entertainment analyst at the brokerage firm of Josephthal, Lyon & Ross, said programming networks typically raise rates automatically each year.
Whether the TCI increase will prompt other big cable companies to follow suit remains a question mark, though McAlpine notes that cable rates have been consistently on the rise. The increase is also likely to raise some ire in Congress.
``There has been a fair amount of complaints about rates having gone up faster than inflation in the past and this will do nothing other than to fuel that,″ McAlpine said.
Last year’s sweeping telecommunications law deregulated cable rates as part of an effort to create more competition. Many had expected lower rates, but cable companies have been taking advantage of a provision that allows them to raise rates to cover inflation, the cost of adding new channels or higher licensing fees for channels already provided to customers.
TCI’s increase comes as the cable company struggles with emerging competition from direct satellite television, companies like DirecTV that allow viewers to receive a variety of channels through pizza-sized satellite dishes. TCI itself is a partner in PrimeStar, a satellite service that uses somewhat larger dishes.
TCI, which is based in Englewood, Colo., lost 70,000 subscribers last year, some to satellite and the rest through natural attrition.
TCI shares were up 25 cents to $13.25 on the news in early trading today on the Nasdaq Stock Market.