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Originally published July 5, 2007 at 12:00 AM | Page modified July 5, 2007 at 2:01 AM

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Cable users to see increased rates for new set-top boxes

Cable companies are planning to charge more for set-top boxes to help pay for new, more expensive versions mandated by the Federal Communications...

The Associated Press

PHILADELPHIA — Cable companies are planning to charge more for set-top boxes to help pay for new, more expensive versions mandated by the Federal Communications Commission (FCC).

They say the price increases are a result of the government's push to spur competition for the boxes, which are required to receive digital programming and change channels. It's not yet clear how much the charges will rise.

The FCC has been trying for nearly a decade to open up the set-top market so subscribers actually buy their own and then use a cable-company-provided card to decode their programming. The retail market for the boxes, however, has largely failed to materialize, and millions of consumers still rent the boxes from their cable company.

As of July 1, the FCC required cable companies to start shipping the new set-top boxes with detachable cable cards.

The companies have lobbied against the rule, saying the new boxes are more expensive. Consumer groups say it's yet another excuse for cable companies to raise rates.

"They raise rates three times faster than inflation every year, for more than a decade," said Chris Murray, senior counsel at Consumers Union. "Cable companies want to have absolute control. We don't think they should have it."

And higher rates are definitely coming. Cable-industry officials said even consumers using the older set-top boxes will likely be hit if the cable company decides to spread the cost to all box renters.

Cable operators won't yet say exactly how much more consumers will pay to rent set-top boxes. It's also unclear whether the fee increases will apply to cable cards.

Cable-trade groups have said consumers would see $2 to $3 more in monthly rental rates for the new boxes, but that doesn't take into account spreading the cost out to all box-renters.

Comcast, the nation's largest cable operator with 24 million video subscribers, is planning to spread out the cost of the new boxes among all cable-box renters.

Time Warner Cable spokesman Alex Dudley said the company agrees with the cable industry's stance that the FCC cable-card rule is a "tax" on consumers. New York-based Time Warner is the second-largest cable company with 13 million video subscribers.

The FCC has said that it's time for cable operators to comply with the law, especially since the industry had already been granted extensions.

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The American Cable Association, which represents 1,100 smaller cable operators, said its members will be charging more for set-top-box rentals.

"It's guaranteed," said Ross Lieberman, vice president of government affairs for the trade group. "We can't absorb this cost. This rate will be passed along to consumers."

He said the increases would likely come when cable operators typically raise rates: in early January after an announcement in late December.

The cable industry is upset that the FCC on Friday denied its petition for a blanket exemption to the cable-card mandate but granted a temporary one to Verizon, which is rolling out its fiber-optic television, phone and Internet service.

The FCC said Verizon provides needed competition against cable.

"The commission's 11th-hour action on the many long-standing waiver requests doesn't bode well for consumers," said Rob Stoddard, a spokesman for the National Cable and Telecommunications Association in Washington, D.C. "There's nothing in these decisions to stave off a $600 million set-top box tax likely to affect the great majority of cable customers while providing no benefit to consumers."

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