Cable, satellite television rates on the rise even in intense competitive market

Cable and satellite television service rates are on the rise in Canada even as the market for TV subscribers is as competitive as ever. A number of providers have increased pricing in recent months or plan to soon as they strive to increase revenue to shore up their balance sheets. Normally, competition leads to lower prices. But industry executives and analysts say the price hikes are justified because the cost of television service in Canada is still much lower than in the United States. The Canadian Cable Television Association commissioned studies in the late 1990s to highlight the gap in prices in Canada and the U.S. (CCR, July 15/98, May 14/97). Satellite TV leader Bell ExpressVu LP will raise rates for several of its packages, including its basic packages, by up to $3 a month. The new rates become effective February 1. The move will generate about $4 million more a month in revenue or about $47 million a year. This follows a price increase of about $2 a month a year ago. Last February, the BCE Inc. company also began requiring new customers to spend a minimum of $20 a month on their subscription, which is what a basic package plus any two theme pack costs. Bell ExpressVu’s satellite TV rival Star Choice Television Network Inc. boosted its rates by $3 a month last September. Analysts say the satellite providers’ price hikes have opened the door for cable operators to follow suit without alienating customers too much. This month, Cogeco Cable Inc. and Shaw Cablesystems implemented price hikes on their basic cable packages after meeting CRTC conditions for basic cable rate deregulation. This follows the lead of other cablecos including Persona Communications Inc., formerly known as Regional Cablesystems Inc. (CCR, Oct. 11/01), and Canada’s largest cableco, Rogers Cable Inc. (CCR, Dec. 6/01). "The areas where we increased rates were well below the national average," Rogers Cable president and CEO John Tory told Canadian Communications Reports last October. "We did receive some letters, but it was time the rates were adjusted..." (CCR, Oct. 24/02). As of October 2002, all of Shaw’s Class 1 systems became rate deregulated. So Shaw increased its basic cable rates by an average of $2 a month on January 1. The move will boost revenue by about $41 million a month or $490 million a year. In raising its prices, Shaw noted that approximately 300,000 basic-only customers had not seen any significant price increases in the past five years. Before the increase, Shaw’s average basic rate was approximately $18 a month compared to satellite TV’s equivalent basic rate of $21 a month. The basic rate increase follows a $3 a month price increase across all discretionary packages and bundles implemented last May. That price increase affected approximately 90% of Shaw’s Canadian customer base. Cogeco this month raised its basic service rates in Ontario by an average of $2.75 a month, but it lowered rates for optional packages by about the same amount, meaning customers only subscribing to the basic service were affected. Last summer, Cogeco implemented basic cable rate increases for its Quebec customers averaging about $2.50 a month and reduced prices for its sole discretionary tier by the same amount. Coegco, which has experienced significant customer losses to both legal and illegal satellite TV providers, said in its fiscal 2003 first-quarter financial report released earlier this month that its average basic rate is now $20.75 a month for Ontario customers, compared to at least $20.99 a month for a Bell ExpressVu or Star Choice customer. Cogeco executives told financial analysts during a conference call to discuss the results that further price increases could come sometime after May. President and CEO Louis Audet called Bell ExpressVu’s price increase "welcome news," adding that the industry’s number one priority should be to become profitable. "We should all be building a profitable industry – that should be everyone’s priority – and that’s certainly what we’re working towards," he said. "That includes charging what these products are worth in addition to delivering superb value and service." Meanwhile, Quebec cableco Vidéotron ltée will raise its analog Telemax package rates by 59 cents a month effective February 1, and its digital basic service rate to $10.99 a month from $10 beginning March 1. The moves will bring in about $860,000 a month in additional revenue or $10 million a year. Some Vidéotron systems were rate deregulated last year, but the CRTC later suspended applications by the cableco seeking rate increases in other systems because of Vidéotron’s non-compliance with certain commission decisions (CCR Update, Oct. 2/02). Those applications are still under suspension, according to information posted on the CRTC’s web site. The deregulation of basic cable rates by the CRTC over the past year or so has allowed cablecos to adjust quickly to market changes. Prior to deregulation, the commission was loath to approve applications from cablecos for basic rate increases.

Cable, satellite television rates on the rise even in intense competitive market

Broadcast | January 30, 2003

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