Rising pay-TV rates could play role in merger debates

With two planned megamergers threatening to further reduce competition in the pay-TV industry, consumer advocates have been looking for a way to shoot down the deals. A new report on industry pricing may have given them some needed ammunition.

The Federal Communications Commission quietly released a report documenting that -- yet again -- the average pay-TV bill grew faster than inflation in 2012. In addition, the FCC report noted that cable-related equipment prices, such as monthly fees for DVRs, also outpaced inflation. "Consumers continue to see price hikes and lousy service," said Delara Derakhshani, policy counsel at Consumers Union, the public advocacy group that publishes Consumer Reports. But pay-TV operators have argued that rising content costs -- the amounts they pay companies such as Disney to carry channels -- largely explain the rate hikes. And as noted in the FCC report, the pay-TV operators have consistently added channels to their offerings at a faster pace than their prices have risen. For example, expanded basic customers had access to about 160 channels last year, up from about 150 the year before, according to the report. The FCC report on pay-TV bills, which the agency is required to issue annually under the 1992 Cable Act, comes as federal regulators are about to weigh the merits of two mergers that would reshape the pay-TV industry.