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Summary:

AT&T and Time Warner are both planning rate hikes in 2011, well out of step with projected inflation. But while cable companies pass along the costs of a decrease in subscribers and an increase in retrans fees, online services adjust their rates to consumer need.

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We open every episode of our web series Cord Cutters by reminding viewers that dropping their cable subscriptions is a great way to save money, and in 2011 that’s going to become even more true.

AT&T Uverse announced today that it’s increasing its prices for 2011, effective Feb. 1 — and rates may increase from 2.4 percent to 10.2 percent, according to Multichannel News. And it’s not the only company planning to up rates — the Los Angeles Times says that Time Warner will be tacking on an additional five percent to its customer bills. Time Warner customers in New York saw increases of over 6 percent, depending on their service plan: Digital bundle rates are being raised from $71.00 per month to $75.95, and “All the Best” bundles of digital cable, phone, and broadband are being raised from $144.95 per month to $153.99. Even the monthly fee for Time Warner Cable remotes are being raised: $0.50, as compared to the previous $0.30 per month.

As the L.A. Times points out, a five percent hike can’t really be considered a response to inflation, which is projected to only be about one percent in 2011. What’s really going on is that subscriptions are dropping, and retrans fees for content are rising — and at least in the latter case, cable companies are promising to pass those increases onto the consumer.

At least, that’s the case with Cablevision. When it settled its retrans dispute with Fox last October, its official statement stated that:

In the end, our customers will pay more than they should for Fox programming, but less than they would have if we had accepted the unprecedented rates News Corp. was demanding when they pulled their channels off Cablevision.

Not to beat the cord-cutting drum too hard here, guys, but while cable companies in 2010 found new justifications for increasing prices, online subscription services didn’t. Netflix did raise its DVD rental rates in November, but came up with a series of adjustable plans, including a $7.99 subscription-only service for people who don’t care about physical media.

And the fledgling Hulu Plus dropped its monthly cost from $9.99 to $7.99. Both of these services are adjusting their pricing options for consumers, in short, while cable companies hike up rates believing that subscribers won’t mind an extra $3 a month, and hoping that subscribers don’t figure out how much of what they’re paying over a hundred dollars for every month can be gotten for cheaper online.

Check out the latest episode of Cord Cutters below:

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  1. Increasing prices will most definitely lead to more cord cutters. I remember recently hearing about Time Warner also testing a lower priced bundle to slow cord cutting; so maybe they haven’t made up their minds yet. I think the cable/satellite companies are at the mercy of the content owners regarding pricing strategy. I wonder if there will be other attempts from cable/satellite to buy content companies.

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  2. All of this assumes of course that all this streaming video does not cause ISPs and CDNs to raise their prices.

    Someone has to get the bits there somehow.

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  3. [...] TV blackouts were all the rage in 2010, as negotiations got increasingly heated between TV programmers and distributors. Last year, the number of blackouts that consumers faced broke records, as broadcasters asked for higher rates while distributors attempted to hold the line on the rates they charged consumers. For the most part, pay TV distributors have been unsuccessful on that front, with rates rising between 5 and 10 percent last year, and more increases being on the way. [...]

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