Time Warner Cable announced that its rates in the Rochester area will increase between 6% and 10% on Jan. 15th. The rate increases will happen across the board so the increased costs will be borne by digital phone and broadband subscribers in additions to cable television watchers.
Unfortunately, the price increases are not reflective of changes in TWC’s cost to deliver each of those respective services. Cable TV profits are clearly down. Subscribers rates are not continuing to increase year on year as in the past. There’s debate if this is because people are watching more TV online or if the customers are belt tightening because of the economy. Margins are being further eroded by TV content suppliers demanding higher rates from TWC, such as their most recent spat with Sinclair Broadcast Group. Meanwhile, costs to deliver broadband service are falling and profits for that business are continuing to rise. In addition, America ranks 28th in global speed of Internet connections while having comparatively more expensive ISP service.
The only reasonable explanation is that broadband customers are being forced to subsidize cable TV service. For customers who subscribe to both this may be a financial wash, but it still hides the true cost of TV service. And while there are other TV options in the market, there is nowhere else to go for true broadband ISP connections. This is yet further reason why we need unbundled service options and more competition in this space.
TWC has an effective monopoly in Rochester on broadband service. While their speed is paltry by international standards, it blazes with respect to other ISP options in the area. It is completely unfair of TWC to now demand that the broadband customers it is holding hostage prop up its faltering cable TV profits.
Competition would solve this problem as would regulation. At present we have neither, and broadband consumers are left at the mercy of TWC. Ouch.