Under Contract

by Cara Gardner


You've no doubt noticed your cable rates going up. It's happening to everyone. According to the Consumer's Union, the nonprofit that publishes Consumer Reports, cable rates have skyrocketed 53 percent since the 1996 Telecommunications Act was passed -- legislation that was supposed to at least stabilize prices.


"The unregulated cable TV monopoly has led the way in consumer abuse by pushing cable TV rates up at almost three times the rate of inflation," reads the Consumer's Union report on the Telecommunications Act. The report concludes that "In real terms, price increases since the 1996 Act have been greater than at any time in the history of the industry."


Cable companies argue that consumers are getting the best technology available; in the past two years in Washington state alone, for example, Comcast spent about $400 million on fiber upgrades. There's no doubt Comcast provides top-of-the-line technology to its customers. But the gravy train is getting too heavy for consumers not to notice. With more than 21 million subscribers throughout 41 states, Comcast is the biggest cable company in the nation -- it has even tried to buy the Disney Corporation in recent months. Cable consumers in Spokane have seen their rates go up two years in a row, and there's no indication the rates will stop rising.


"My concern is the cable rates and the inability to do anything about them," says Bob Hamacher, a member of the Cable Advisory Board, the city entity that oversees the contract with Comcast, which is Spokane's only cable provider. "I'm concerned that the rates will continue to go up over the next five years."


That's one of several concerns listed by the hundreds of Spokane cable customers who have responded to the CAB's request for comments regarding the city's upcoming contract renewal with Comcast. The contract must be renegotiated by August 2005. But, contrary to what many believe, the CAB can't really make Comcast do anything differently -- and it definitely can't make the company change its cable rates.


"The Cable Advisory Board has literally no authority," says Hamacher. "[The board is] only advisory; it can't do a thing."


In fact, the CAB is actually required to sign a new contract with Comcast, ensuring the cable provider's future in this market.


"In all the years of franchise renewal, the number of franchises turned down is fewer than you can count on one hand," says Howard Stetson, a former CAB member and a network analyst for the Educational Service District 101. "[Comcast is] giving service on a reliable basis, and they have a right to continue. The issue of rates can't be addressed in the contract. Image and pocketbook are the only two things important to Comcast. They work hard to make a positive image, but they don't do anything that might impact their pocketbook -- other than spending money on their image."


But what is Comcast's image like in the Spokane market?


"People are watching their rates go up for the past two years," says City Councilwoman Cherie Rodgers. "[In addition] there's the whole thing with Comcast being involved with the Disney dispute and other acquisitions."


In February, Comcast made a $54 billion bid for the Disney Corporation, attempting a merger that could create the biggest media company in the world. Comcast has received more negative feedback for its takeover attempt than it expected, and in a New York Times article, CEO Brian L. Roberts described his shareholders' response as "sobering." And members of Congress, responding to their constituents' alarm over rising rates, have started to criticize the cable industry, some even saying there should be legislation to allow consumers to pick their cable channels, rather than have to buy packages determined by the cable companies.


As for the folks in Spokane, the city is still waiting for Comcast to fork over more than $80,000 for the consultant needed to review the cable company's contract.


"Comcast is dragging its feet," says Rodgers. "It says right there in the contract that the cable company has to pay for that consultant. Well, the city had to pay for it up front and Comcast hasn't paid us back. We might have to go to court with them to get our money."


Comcast has a different view.


"I certainly haven't heard anything about that," says Steve Kipp, Comcast's spokesman. "Regarding the contract, we're not going to comment,"


The missing $80,000 may be one reason some board members of the CAB are wondering why the city never audited Comcast during the last 15 years.


"No, they were never audited," says Marlene Feist, city liaison to the CAB and City spokeswoman.


"They've gone through several ownerships," notes Rodgers regarding Comcast's changes from Cox to AT & amp;T to what is now Comcast. "And we should have required [an audit], but we didn't, and now we're going to audit and they're dragging their feet."


"I would say the monitoring process has not been what it should be," agrees Stetson, who adds that auditing the company doesn't mean they suspect any unethical behavior.


Feist says part of why the city never analyzed its cable contract over the past 15 years is because there isn't a full-time cable monitor.


"It's part of what the city has chosen to do. We don't have full-time cable-monitoring, unlike a city like Seattle, which has four full-time cable monitors," says Feist. "I suppose [the merits] can be argued either way, depending on what you're looking for out of the franchise. Many of the CAB members would like to see a full-time monitoring role. It depends upon how much revenue you're getting out of it."


The city of Spokane makes about $1.9 million a year on the Comcast cable contract. That's six percent of Comcast's revenue for cable subscribers within the city limits, meaning the company pulls in close to $32 million -- just for cable, not Internet, and just for the city of Spokane, not the county. Comcast would not confirm that amount.


"We don't comment on what we make in revenue," says Kipp, Comcast's spokesman. Even though the city's CAB is supposed to monitor the cable company, its revenue is based on how much Comcast makes; each time Comcast raises its rates, the city makes more money from cable subscribers.


If the city is struggling just to get reimbursed for a fee Comcast should've paid for in the first place, what does the CAB have control over? It controls how long the new contract will last and whether or not to entertain the idea of venturing into municipality-owned telecommunications. Though the CAB is still in the early stages of wading through public commentary and research, Feist and Hamacher say the board is open to ideas regarding the franchise agreement.


"We are still obligated by federal law to negotiate in good faith with the cable company," says Feist.





Publication date: 04/08/04