[IP] Some Pay for a TV Service That They Didn't Choose
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From: Richard Forno <rforno@xxxxxxxxxxxxxxx>
Sent: 31/3/'05, 7:05
Some Pay for a TV Service That They Didn't Choose
http://www.nytimes.com/2005/03/31/business/media/31cable.html?ex=1269925200&;
en=5dbe7c40f42c4e72&ei=5090&partner=techdirt
By KEN BELSON
Published: March 31, 2005
Bob Teitelbaum is a sports fanatic who gets his daily fix of football,
baseball and basketball games from DirecTV, the satellite television
provider. In all, he spends about $150 a month for his premium programming
package.
But his household, like every other in his West Palm Beach, Fla., golf
community, is also required to pay about $31 a month for cable TV from
Adelphia Communications.
The real estate development company that runs Mr. Teitelbaum's community has
a deal with Adelphia that obligates every homeowner to subscribe to a
standard cable package whether they use it or not.
"That's the rule, so that's what I pay," Mr. Teitelbaum said of the
mandatory fee that is included on his quarterly maintenance bill from the
property owner's association. "But I hardly watch it. I would pull it if I
could."
With new subscribers harder for companies to find, more consumers like Mr.
Teitelbaum are being locked into compulsory plans. Among the hottest
battlegrounds now for customers in the pay television market are planned
communities sprouting up across the Sun Belt and apartments and other
multi-unit housing blocks in big cities - basically any development where a
homeowners' association or management company charges residents for property
upkeep, security and the like.
Cable and satellite providers, of course, love striking these bulk
subscriber deals because with one contract they can capture hundreds and
sometimes thousands of customers who generate a steady stream of fees for
years.
Developers, condo boards and property associations like the deals, too,
because they need to work with only one television provider and because the
deals can offer homeowners significant discounts for their cable service.
But for homeowners who do not want paid television programming or would
rather spend the money on programming available from another provider, the
lock-ins amount to a tax.
Cable companies have been making these compulsory deals for years. But in a
field they once dominated, they now have to fight with satellite providers,
resellers and even the Bell companies, which are fast moving into the video
market.
"Like everyone else, we want to be the provider of choice," said Chris
Scurto, the vice president in charge of bulk contracts at Charter
Communications, the country's fourth-largest cable company. "This is
becoming a complex-by-complex battle, a development-by-development battle."
What makes this fight so fierce is the dearth of new subscribers. With
approximately 85 percent of American households already paying for some sort
of television and the remaining 15 percent unlikely to sign up for any
service, cable and satellite providers are increasingly chasing each other's
customers.
"Everyone who is going to pay for TV already pays for it," said Todd
Mitchell, an industry analyst at Kaufman Brothers Equity Research. "The only
people without it are Luddites and people too old to appreciate it."
While industrywide data on exclusive contracts is unavailable, many pay
television providers say the number of new customers acquired through bulk
deals is growing faster than the number of new customers over all. Of the
roughly 20 million housing units in apartment blocks or communities governed
by an association, industry analysts and company executives say, from two
million to three million are locked into a bulk deal. Cable companies
typically try to reach agreements with developers before they start
construction so they can lay fiber optic cable in the ground before all the
roads are paved. That also allows them to share the cost of laying the cable
with the phone company, electric utility and others who are also installing
equipment.
The Comcast Corporation, the country's largest cable provider, said it spent
$133 million in 2004 to reach new agreements with landlords of apartment
complexes and other multidwelling units. Comcast, like other companies, does
not release information on how many of its subscribers are included in these
compulsory contracts.
While cable companies have most of these contracts, satellite providers have
made gains in this market. Robert Grosz, the director of commercial sales
for EchoStar, which runs the Dish Network, said his company's bulk
subscriber sales had enjoyed "strong double-digit growth" for the last five
years.
Satellite companies have also been pitching their services in apartment
buildings, once cable's stronghold.
For years, satellite providers found it hard to sell in apartment towers
because landlords were reluctant to have satellite dishes mounted outside
every unit. Nowadays, satellite companies install a dish on the roof and use
existing coaxial lines installed by a cable company to get television
signals inside the building.
Bulk deals with apartment buildings are particularly attractive because such
deals do not need a franchise or right-of-way agreement with the local
municipality.
To win a contract, cable and satellite providers offer discounts of 30
percent or more, according to many companies. Often, landlords sign deals
that obligate residents to buy a standard package of about 75 channels. Mr.
Teitelbaum and his neighbors, for instance, pay 36 percent below the retail
rate for his standard cable plan. Residents who want, say, digital channels,
a digital video recorder or a high-speed Internet line pay extra for those
features.
People like Mr. Teitelbaum who want programming offered by a rival company,
however, must pay redundant fees.
Two years ago, Steve Santos, who lives in Mr. Teitelbaum's development and
pays for Adelphia cable service, ordered satellite television from EchoStar.
Mr. Santos, who spends about $70 a month for the extra television service,
signed up with Dish Network because it offered a digital video recorder that
Adelphia did not offer at the time.
Adelphia now offers its own digital video recorder, but Mr. Santos has not
pulled the plug on Dish, because he is reluctant to change what is not
broken.
"I could get a premium television plan from Adelphia, but it's easier and
it's here," he said, referring to his satellite service.
Mr. Santos uses the basic cable service for the televisions in his spare
rooms. Still, with two television services, Mr. Santos says, "I can never
find anything to watch."
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