Some Time Warner Cable customers are quite unhappy about the recently announced rate hikes that could add as much as $9 per month to their bill.
The question for them, and the rest of the company’s 300,000 customers in Western New York, is what they will do about it. Cable service, which often includes Internet service and sometimes phone service, has become a near necessity.
Yet, Al Green of East Amherst is debating whether to remain a customer. “I find it outrageous that they are increasing rates again and to that degree,” he said.
Green rents a modem and subscribes to HBO, so he is preparing for his bill to go up significantly.
“I think we would be hard pressed to find any business in Western New York that could get away with increasing their rates that dramatically,” he said.
Green said he will explore switching to Verizon FiOS – an option not available everywhere in Western New York – to see how much he might save by switching services. “I pay $180 a month for all this aggravation,” he said.
Charles Chrystal of Buffalo said he and his wife briefly talked about “downsizing” their cable TV service, but decided to stick with their current package. But if prices continue to rise, he said, they might scale back. “It is really too bad cable companies such as Time Warner don’t provide a la carte station selection, for if they did the future might be brighter for them,” he said.
The increases take effect with customers’ next bill, unless they are still on a promotional discount. The amount of the price hikes will vary depending on the services and equipment customers signed up for. The increases also come as Comcast seeks federal regulators’ approval of its proposed acquisition of Time Warner Cable for $45 billion in stock, a deal which would merge the nation’s two largest cable operators.
Time Warner Cable’s rate increases include a $2.75 “sports programming surcharge,” and a 50-cent increase in its “broadcast TV surcharge,” to $2.75, as well as a hike in its Internet modem lease from $5.99 to $8.
The sports programming surcharge and the broadcast TV surcharge that is rising by 50 cents are “only a fraction of what we actually pay for broadcast TV and sports content,” said Nathalie Burgos, a Time Warner Cable spokeswoman.
Burgos said broadcast and sports programming costs are the main force behind higher prices for TV service. The fees Time Warner Cable pays local broadcast channels have risen 60 percent in the past two years, and the cost of cable sports networks has climbed 91 percent since 2008, she said.
About 30 percent of Time Warner Cable’s customers won’t pay the sports programming surcharge or the higher broadcast TV surcharge immediately because of discounts that have not yet expired, she said.
Time Warner Cable also continues to invest in its network, “making it possible to add new content and features for customers,” Burgos said, noting that the company has poured more than $233 million in “network improvement and reliability” in its Northeast market.
Fred Floss, an economics and finance professor at SUNY Buffalo State, said he feels there is a “little bit of truth” to the fact that the cost of TV networks’ agreements to broadcast games are getting passed along to subscribers via the cable companies. However, “I think they oversell the cost of that, because they do make money with advertising and other things on those channels, so how they pass the cost along, we have to be a little bit careful about,” he said.
Subscribers have lived through disputes between cable TV companies and networks that temporarily knocked channels off the air or threatened to do so. “Both sides are using it to maximize profit, so we really are squeezed between the middle of these two kinds of giants that are fighting over all of this,” Floss said.
Other than simply paying more for service, finding another provider, or dropping service altogether, what can consumers do about rate increases? Floss said subscribers need to speak up with lawmakers, and that there is “room for regulation” on the issue.
“We need to make sure that our voices are heard in City Hall when we ask to have more than one choice for a cable company, which is possible,” he said. “The obvious threat is that a city will decide to run its own cable network, if Time Warner or others get too far out of hand.”
Lawmakers tend to have their most leverage with cable TV companies when the companies’ franchise agreements are up for renewal, he said. But a smaller pool of cable TV companies reduces municipalities’ negotiating power, since there are fewer competitors to turn to.
Lawrence Southwick Jr., a retired economics professor from the University at Buffalo’s School of Management, said the rate increases are a matter of what the cable companies can do, and how much consumers are willing to pay. “Competition makes a big difference in a lot of things.”
And it’s not just cable service. Many customers receive their cable, phone and Internet service “bundled” from a single company. “The bundling does give you some benefit, except it is intended to keep you from seeking competitors,” Southwick said.
When it comes to rate increases, Southwick said, most people tend to not try negotiating a better price. “If people did that, I suspect it would be lower prices.”
One Buffalo subscriber – who asked not to be identified so as not to jeopardize her deal – was unhappy to learn she was facing a $30 increase in her Time Warner Cable bill after she was told a promotional offer recently expired.
After some back-and-forth on the phone with a customer service representative, she was able to get her bill back down to essentially where it was before, though she faces a $5 increase six months from now. “You have to be your own advocate for this kind of stuff,” she said.