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Cable rates are rising, but don’t blame your provider — entirely

By Johnny Diaz
Globe Staff / June 5, 2011

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Cable subscribers in Boston are fuming about rising bills, and many blame what they see as Comcast Corp.’s virtual monopoly in the city.

The renewed focus on cable prices has come as Mayor Thomas M. Menino, outraged by a recent 19 percent jump in the charge for basic cable, or the lowest service tier, petitioned the Federal Communications Commission to give the city the power to determine basic cable rates, now $15.80. That’s about double the cost in communities that already set those rates.

But since few households settle for basic cable, essentially limited to local broadcast stations and community access channels, the authority to set these rates would have little effect on the vast majority of subscribers, who purchase more extensive packages of cable and premium channels. In Boston, only 15,000 of the city’s 170,000 customers have basic service: The average cable bill in Boston is $65 a month, up from $62 last year, and $58 in 2009, according to the city.

For most subscribers, the biggest driver of these rising cable bills is the increased cost of programming — the result, ironically, of competition with satellite companies, Internet TV, movie rental providers, and Verizon Corp.’s FiOS network, analysts said. As these services bid for programming, sports, entertainment, and local channels demand — and receive — higher fees from cable companies, which ultimately get passed on to consumers.

Programming costs have increased nearly twice as fast as cable bills in recent years. While the average US cable bill has risen about 6 percent a year, according the FCC, the fees cable companies pay to distribute programs from cable and broadcast networks have risen 11 percent annually, according to New York research firm Sanford C. Bernstein.

“The cable operators are the face of the industry to the consumer, so they end up taking the brunt of feeling the customer backlash,’’ said Craig Moffett, cable TV analyst at Sanford C. Bernstein. “The programmers are relatively insulated. The prices that they charge the cable and satellite provider never become visible to the end user.’’

The pressures on cable companies came to light in December 2009 when Time Warner Cable and Fox Network haggled over retransmission agreements that were set to expire on New Year’s Eve. News Corp., Fox’s parent company, wanted as much as $1 per subscriber to allow Time Warner, with more than 10 million customers, to distribute programming from Fox-owned stations.

Fox threatened to shut off its signal just as New Year’s festivities and college football games approached. Ultimately, Time Warner and Fox settled for reported fees of more than 50 cents per subscriber. That’s less than the most popular channels, such as ESPN, which receives more than $4 per subscriber, but substantially more than other channels, such as Food Network, which gets 14 cents per customer, according to research firm SNL Kagan.

“The programmers have so much leverage,’’ said Moffett.

Certainly, analysts said, lack of competition in Boston plays some role in rising prices. Comcast’s biggest competitor in Massachusetts, Verizon’s FiOS service, is unavailable in the city, while RCN, with 15,000 Boston subscribers, isn’t available citywide.

Satellite is also not an option for many residents because apartment buildings can’t accommodate mounted dishes and other equipment. In communities where there are two or three cable carriers, as well as widely available satellite service, cable bills are generally lower, analysts said.

In Arlington, where residents can choose from Comcast, Verizon, and RCN, Verizon said it has cut the price of its phone, cable, and Internet package to $85 a month from $110 four years ago.

“In the past six years, our rates have dropped while our channels, video on demand titles, and features have increased,’’ said Phil Santoro, a Verizon spokesman. “Competition is creating, in effect, a whole different industry.’’

In Boston, a similar cable, phone, and Internet package can cost $100 or more, according to the city. Comcast officials said Boston customers might be paying more than a few years ago, but they’re getting more, including more free movies and high-definition channels.

“We believe we continue to offer the most affordable options and best values for consumers in a highly competitive marketplace,’’ said Doreen Vigue, a Comcast spokeswoman.

Standing in line at a Comcast office in Dorchester, Lenny Maillet wondered why a phone, cable, and Internet package has increased $20 to $130 a month. RCN doesn’t service the 42-year-old construction worker’s neighborhood, and the roof of his South Boston apartment can’t handle satellite, he said. So for now, he plans to stay with Comcast. “It’s not like we have another option,’’ he said.

Johnny Diaz can be reached at jodiaz@globe.com.