City Council grills cable provider on charges, “lack of transparency”
A rate increase and new digital adaptor requirements imposed by Comcast has created confusion and concern among Eagan city officials and residents.
The Philadelphia telecommunications company has sent letters to customers in the past few months announcing major changes that include new fees and a requirement for basic cable subscribers to obtain a Digital Transport Adapter, a small box that allows programming to be viewed by decrypting digital signals.
City officials quickly became inundated with calls from Eagan Comcast customers who were concerned and confused about the fees, prompting city officials to add the item onto its Feb. 19 council agenda.
“Residents became unsure who needed an adapter, who would be charged and whether those charges were justified,” said Diane Miller, Eagan’s assistant city administrator.
Prior to the beginning of this year, Comcast digital cable subscribers required a DTA, a box about the size of two smart phones stacked on top of one another that decrypts digital signals to be viewed on a television. The most basic level of this tier is the digital starter service, which includes about 100 digital channels and OnDemand services.
Subscribers of Comcast’s digital service were provided up to three free outlets, which provide cable service to additional televisions.
Beginning Jan. 1, the company charged $1.99 per additional outlet. There is no added charge for the subscriber’s main television.
Mike Logan, director of government affairs for Comcast, explained the company imposed these new fees to match the competition, which he said often charges between $6 and $7 for additional outlets.
Previously subscribers of basic cable, which typically includes about 20 channels, were not required to have a DTA to view programming. That will change in March when Comcast converts all its cable services to digital. Of Comcast’s 15,000 subscribers in Eagan, 3,000 have basic cable to date, Logan said. The conversion will free bandwidth and provide improved service, he said.
Some residents expressed concern about losing HD quality provided by their television by connecting to a DTA.
Logan admitted the DTA will provide standard quality only, not HD.
Comcast will offer basic cable subscribers up to three free outlets, but Eagan residents and city officials worry how long the free deal will last.
“The question is whether basic customers will be charged for it, which can be difficult for these people, particularly those on a fixed income,” said Bryan Grogan, attorney from Moss and Barnett, which represents Eagan in communication issues.
Logan assured residents and the council that Comcast has no intentions at this time to charge basic cable subscribers for the additional outlets.
At the Tuesday meeting, City Council members grilled Comcast representatives about the changes and criticized the company for having a lack of transparency and poor communication with its customers.
“It feels like Comcast is very well versed with language when it is in front of our communications attorney or the FCC, but it is conveniently confusing when selling to its customers,” Mayor Mike Maguire said.
Grogan pointed out that at least one version of the letters sent to customers stated the $1.99 fee applied to each DTA box, but company representatives say the fee is for each outlet.
Logan admitted the letters created confusion, but clarified the fee is applied to additional outlets and applies only to digital cable subscribers.
“There was some wording that was poorly worded,” he said.
Council members further criticized Comcast for being unclear about rates by failing to include additional fees such as 911, franchise and others in their quotes.
“What I’d like to see is increased transparency,” Council Member Paul Bakken said. “Then people can make informed decisions in a free market.”
Logan argued that although the company isn’t always clear in its language, it is transparent about its rates and fees.
Eagan residents and council members also expressed disappointment in Comcast’s customer service.
“I’ve been a customer for at least a decade and I have never associated Comcast with customer service excellence,” Maguire said.
Logan insisted Comcast strives to adhere to high standards and improve its customer service.
Rising fees, profits
In addition to imposing new fees, Comcast’s rates have risen between 2.2 and 142.5 percent since Jan. 1 in Eagan and Burnsville.
Rates for Comcast’s limited basic cable increased 9.5 percent to $13.54 per month and its premier HD bundle increased 7.4 percent to $181.44 as of Jan. 1, 2013.
Equipment charges rose 66 percent during that time. But the greatest increase was to digital Latino, which rose 142.5 percent to $16.95 per month.
As rates rise, so do Comcast’s profit margins.
Rated 49th on the list of Fortune 500 companies, Comcast’s equity market value is $1.5 billion as of Jan. 31. The company raked in nearly $6 billion in net income.
After a record-breaking year, Comcast purchased 49 percent of NBC Universal last week for nearly $17 billion. This comes two years after the cable provider acquired 51 percent of the entertainment conglomerate. Comcast had an option to purchase the remaining portion owned by General Electric beginning in July 2014, but decided to acquire it early.
The city of Eagan in partnership with Burnsville had previously maintained regulatory authority over its cable franchise. In 2007, the FCC stripped them of that authority after Comcast submitted a petition to the federal regulator that stated the company could be effectively regulated by the free market.
The FCC decided that cities cannot regulate cable providers if at least 15 percent of its population subscribes to a competitor such as Dish Network. A survey at the time concluded 16.5 percent subscribe to satellite.
Refuting the survey’s outcome would likely cost a substantial amount of time and money that the city wouldn’t want to invest in, Grogan said.
Since losing its regulatory authority, Eagan and other city officials have been disappointed by Comcast’s rising rates.
“I don’t think the FCC’s intended impact for deregulation was effective,” Maguire said. “Personally, I don’t think deregulation is effective in any industry.”
As city officials look at renewing its contract with Comcast, which expires January 2015, their hands remain tied.
“Because nothing Comcast is doing is illegal, using it as a basis to not renew the contract would not be a legally binding position,” Grogan said.
Eagan officials plan to send a letter to the FCC and local Congressional leaders expressing their concern with what they perceive to be Comcast’s lack of transparency and poor customer service, as well as their concerns about the inconsistency in allowing some cities such as Inver Grove Heights to regulate cable providers but not others due to subscriber percentages.