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Cable Technology Feature Article

July 19, 2012

New Cracks Appear in Video Business Framework

By Gary Kim, Contributing Editor

There are some new cracks appearing in the traditional U.S. cable TV framework, which has included an informal “agreement not to compete” against other cable operators, as well as growing friction between all leading video distributors and leading programming suppliers, going well beyond the normal contract renegotiations that happen from time to time.

In an unusual show of support, in recent days Time Warner Cable Inc., Cox (News - Alert) Communications Inc. and Mediacom Communications Corp. have each publicly backed DirecTV's position in the firm’s negotiations with Viacom (News - Alert) , as each of those companies share a similar concern about the spiraling cost of programming, which is resulting in annual rate increases for consumers that are significantly above the rate of inflation.

Time Warner (News - Alert) Cable itself recently issued a warning to television programmers. “We deplore that programmers have once again pulled the plug on television viewers, this time with DirecTV, Dish Networks and Time Warner Cable,” the company said.

“Television networks can’t continue to demand huge price increases and expect us to silently pass those cost increases on to our customers,” Time Warner Cable said. “We will continue to stand up for consumers against programmers’ outrageously large price increases that serve no purpose other than to line network pockets at our customers’ expense.”

Separately, Cablevision apparently is selling a fixed wireless broadband Internet and telephone service in Florida, using the Clearband or “OMGFast” brand names, charging subscribers $29.95 monthly for a 50 Mbps Internet connection that competes with Comcast (News - Alert) and Time Warner Cable, at least in the voice and broadband access areas.  

Moreover, Cablevision also appears to own licenses in 45 total markets. Cablevision acquired MVDDS licenses in 45 markets in 2004, including New York, Los Angeles, Chicago, Philadelphia, San Francisco, Miami, Cleveland, Nashville, and Tampa-St. Petersburg.

Federal Communications Commission cross-ownership rules likely would require that Cablevision sell the New York license, or limit its broadband wireless service to parts of the market in which it doesn't market its Optimum (News - Alert) digital cable, phone and Internet products to subscribers.

Cablevision, almost singularly among top U.S. cable operators, thus appears ready to break ranks in a major way with its other top U.S. cable operators in respecting an informal "we don't compete with each other" understanding.

It wouldn't be the first time. Cablevision in the past has backed satellite direct broadcasting efforts that would similarly have competed with cable operators around the United States.  

It isn't clear what Cablevision might be thinking about operations elsewhere. But if Cablevision decides to "overbuild" in some or all of its other areas, it would be historic, marking the first time a top-10 U.S. cable operator has decided to compete with other cable operators in their franchise areas.

None of those moves would have occurred one or two decades ago, and the new developments show growing stresses in the traditional subscription video business, relating first to the degree of competition and secondly to the traditional distributor willingness to accept, if grudgingly, continually-higher programming costs from networks.

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Edited by Brooke Neuman

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