Soaring programming costs and unreasonable retransmission-consent demands are driving up cable prices. Battle lines between operators and programmers are being drawn over this contentious subject.
Cable customers are the victims of the war. So, on their behalf, I've taken up this fight. We're seeing the groundswell of consumer discontent bubbling up in Washington. Consumers are screaming at us to restrain prices, and policymakers are demanding an explanation for why prices are rising.
Last year, Cox raised cable prices an average 5.3%. Meanwhile, our wholesale costs for cable programming increased 12%. Programming costs, which top $1 billion annually, are now Cox's largest expense behind salaries and labor.
By law, we can pass all programming costs on to consumers, but what business hikes prices by double digits annually? Unfortunately, that's exactly what some programmers do. They're not accountable to cable customers, so they charge us outrageous prices, and Cox has to deliver the bad news.
Our contractual obligations with programmers require us to sell most networks on the expanded-basic tier. This means that all customers are forced to foot the bill for pricey programming like sports, whether they want it or not.
Tiering presents an intriguing solution to improve consumer choice and restore an acceptable price/value proposition for the most expensive networks. If Cox could tier networks that charge a wholesale price of more than $1 per subscriber, consumers would gain a significant opportunity to manage their cable expenditures. Likewise, programmers would be motivated to keep their prices reasonable to remain on our expanded-basic lineup.
Retransmission-consent abuses also are harming consumers. As media consolidation proliferates, networks owning broadcast stations and cable channels negotiate for nationwide carriage of new, unproven cable networks in exchange for retransmission consent of their broadcast stations in a few markets.
Unreasonable network demands cost consumers dearly through inflated cable bills. And forced carriage of unproven cable channels consumes scarce network bandwidth that could impede the availability of nascent services like HDTV.
Before the shouts from consumers and Washington reach a deafening pitch, operators and programmers must take action to address rising cable prices—together—
before the government steps in and does it for us.
Our triple play of video, telephone and Internet is our growth engine. Customers love the convenience and flexibility of buying multiple services from Cox, and it shows in healthy customer growth numbers and high satisfaction ratings.
But make no mistake: Consumers have had it with rising cable bills and the programming costs and unreasonable retransmission consent demands that drive them. For their sake, operators and programmers must join forces to rein in prices, before someone does it for us in a way that harms everyone.