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The truth behind what’s driving up TV subscription costs nationwide Your Telco (Content Providers/Networks)

(Customers/Subscribers)

As a provider of TV service, we are caught in the middle of a tug-of-war. On one side, content providers and networks are demanding more money every year from companies like ours who carry their programming. On the other side, consumers demand quality content but are growing weary of package prices that continue to rise.

“W

hy does my bill keep going up?” It’s a common question consumers nationwide are asking, as they watch the steady climb of TV programming costs. There are two main factors driving these increases.

1) Cable channels charge us a fee to deliver their programming to you — and those fees keep rising.

We work to include as many channels as possible in our lineup. But most channels add an expense to our cost of providing you TV service. According to estimates from analysts SNL Kagan and Barclays Capital, sports programming accounts for four of the top ten channels as ranked by their monthly subscriber fees. ESPN/ESPN HD leads their list at $5.06 per subscriber. The NFL Network comes in at 84¢. Compare that to Nickelodeon’s 52¢, MTV’s 39¢ and Discovery Channel’s 37¢ and you get a clear picture of the dominant driver behind programming price hikes. (Note: These estimates are based on fees paid by the large, nationwide providers, and do not reflect the exact cost we pay for these channels.)

2) Local network affiliates now charge us a fee to deliver their programming to you — and those fees keep rising. There was a time when your “local stations” charged nothing for a carrier to rebroadcast their signals. Not anymore. In order for you to enjoy channels such as ABC, NBC, CBS and FOX, we must pay them a fee based on our number of subscribers —

and these fees continue to rise each time we renegotiate what is known as the retransmission consent agreements with them. SNL Kagan reported in November that the revenue TV station owners receive from these fees could reach $5.5 billion by 2017 — an even higher number than was previously projected. Why? “The increased projections are due to the success of a wider range of TV station owners in securing sequentially higher (retransmission) fees from multichannel operators over the last year of negotiated deals,” says the report.

Will this trend continue?

Unfortunately, there is no end in sight. Content providers know that consumers want their channels, and they continue to build fee increases into their contracts with providers like us. Furthermore, sports channels are negotiating huge deals with teams and leagues that are driving up their production costs (for example, in late 2011 ESPN agreed to pay the NFL some 70 percent more to carry Monday Night Football through 2021). They are passing these costs on to providers like us nationwide, who have no choice but to pass the increases on to consumers. The bottom line is that we are committed to providing all our subscribers with the channels they want. And as your local telecommunications company, we are doing everything we can to control our operating costs and keep our prices as low as possible. In the end, however, the reality is that TV rates will continue to move upward as long as content providers keep increasing the fees we must pay and the number of channels we must carry.  May/June 2013 | 3

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