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JP Morgan to Cable Companies: Go Ahead, Keep Raising Prices
by Karl Bode 04:29PM Wednesday Apr 09 2014
Over the last few years, cable operators have paid a lot of lip service to lowering cable TV prices, insisting that they were very conscious of the fact that the recession and housing implosion left many users struggling. Instead, the industry has refused to compete on price, not only passing on bi-annual rate hikes from programmers, but imposing new fees and higher rates for services like DVR rentals whenever possible.

The cable and broadcast industry simply refuses to seriously compete on price. They also refuse to offer more flexible programming and bundle options. Over the years, even the cable industry's biggest cheerleader and stock fluffer, former Sanford Bernstein telecom analyst Craig Moffett, has noted that these rate hikes simply aren't sustainable and something has to give.

In contrast, a new JP Morgan report claims that cable operators should ignore these dire warnings about cord cutters and continue raising rates wherever and however possible:
"Cable operators are better off raising video prices than eating higher content costs," said Philip Cusick, a JPMorgan analyst, in the report. "Our analysis indicates that cable companies are better off raising prices and catching customers with broadband if cord cutting becomes widespread, (rather) than eating the programming increase."..."Despite a roughly 5% increase in video pricing, our analysis indicates that the video subscriber universe lost only 0.1% of its nearly 100 million homes in 2013 — hardly an indication of cord-cutting," said Cusick.
Cable operators appear to agree and in fact are already doing this. While cord cutting is a small but important trend, most consumers keep paying their cable operators despite the relentless hikes. Cable companies are happy to keep pushing their luck so long as they keep signing up broadband customers, who clearly are the future. Once they seriously start feeling the pinch from the inevitable surge in cord cutters fleeing to Internet video, they'll move like lightning toward usage-based pricing to help counter those lost revenues (if they haven't already).

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