Posted on: Tuesday, May 21, 2002

Premium cable may go digital only, cost more

By David Lieberman
USA Today

Fans of premium channels including HBO, Showtime and Starz/Encore may soon find they'll have to pay an additional monthly fee, as operators make them available only to those who buy digital cable service.

Digital service typically costs an additional $10 or so a month, although specific pricing for premium channel customers is still being worked out.

"It's a very current initiative," said AT&T Broadband CEO Bill Schleyer. "We're talking to some markets now, especially ones that haven't been rebuilt," to handle hundreds of channels.

But even subscribers in areas with state-of-the-art systems may see their premium channels moved from cable's conventional analog tier to digital.

The change worries consumer advocates.

Operators are "leveraging their monopoly to squeeze more revenue from consumers for the same services," said Consumers Union's Gene Kimmelman, a frequent critic of cable rates. He adds that a switch "may violate the prohibition (in the 1992 Cable Act) against requiring consumers to buy more than basic cable to get movie channels."

There's little doubt that cable companies would like to collect more revenue from some of their best customers, the 30 million who already pay extra to see recent movies and original programming such as HBO's "Six Feet Under" or Showtime's "The Chris Isaak Show." Besides the added fee, once customers have new digital set-top decoders, operators could sell them video-on-demand and handle e-commerce.

Executives said customers shouldn't mind. Many of cable's premium customers already subscribe to digital. In some markets, the rate is as high as 80 percent.

Digital typically includes dozens of niche services (such as Outdoor Life Network and Noggin), an on-screen program guide and music-only channels. HBO, Showtime and Starz/Encore subscribers also get more versions, built around genres.