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10:00 AM Sat, Oct. 20th

Cable One, Disney at odds over rates; Viewers may lose popular channel

Cable One and The Walt Disney Co. are embroiled in a financial dispute that could cause Cable One to drop the Disney Channel from its lineup.

John Pezzini, general manager for the local Cable One office, says that Disney is gouging the cable company with double-digit price increases for programming.

In addition to the Disney Channel, Disney also provides ESPN and ESPN2. Even though ESPN is included in the dispute, Cable One still has a valid contract with that channel and has no intentions of dropping it, Pezzini said.

He said that Disney has increased prices for its channels by 40 percent in the past three years. This year alone, Disney raised its rates by 10.2 percent.

Not surprisingly, Cable One has increased its subscriber rates by about 30 percent in the past four years. Since it started operating in Prescott in 1996, Cable One has raised its rates four times, for a total increase of $10.55 per month. The most recent increase, this past March, amounted to $1.65, or 5.3 percent.

Basically, Pezzini explained, Cable One – which is the country's ninth largest cable company with 740,000 customers in 50 systems across 18 states – is finally taking a stand against Disney.

Cable One, he said, simply cannot continue absorbing Disney's increasing costs and remain competitive with other cable and satellite-dish companies.

Despite its hard-nosed position, Cable One is still negotiating with Disney, and, Pezzini said, it hopes to resolve the matter before its contract with the Disney Channel expires at the end of the year.

"We certainly hope it will work out," he said. "But we just don't know at this point."

Likewise, the folks at Disney are less than thrilled about the possibility that one of their channels may lose Cable One's 740,000 viewers.

"We definitely don't want Cable One to drop us," said Karen Hobson, a Disney spokesperson. "No major cable provider has ever dropped the Disney Channel."

During its negotiations with Cable One, Hobson said, Disney put several options on the table, and Cable One refused all of them.

Cable One also has offered several deals, Pezzini said, and Disney has refused them as well.

One Cable One proposal suggests that Disney provide its Disney Channel as a premium channel that subscribers pay an additional fee to receive.

But, as Hobson pointed out, 98 percent of the country's cable companies carry the Disney Channel in their basic lineups, and the company cannot make a special provision for Cable One.

Despite Cable One's proposal that the Disney Channel go premium, Pezzini said that a recent Cable One survey of its customers found that virtually none of them wanted to pay extra to keep the Disney Channel.

In a press release issued last week, Pezzini suggested that losing the Disney Channel might not be such a big loss.

"Young children are no longer Disney's most sought-after target audience," he stated. "The Disney spotlight is now on 'tweens' (11 to 14 year olds) and its programming content reflects tweens' more sophisticated taste. We believe that shift diminishes the impact of this loss."

Hobson strongly disagreed with Pezzini's assertion.

The Disney Channel's "Playhouse Disney," which is geared toward children between 2 and 6, runs each day from 6 a.m. until 2 p.m. Between 2 p.m. and 7 p.m., she said, the programming shifts to older children, between 9 and 14. And in the evenings, the programming is more oriented toward the whole family.

"All of our programming is kid-driven," Hobson said. "'Playhouse Disney' is a huge priority here."

Since the law requires Cable One to notify its customers of any broadcast changes at least 30 days in advance, it has started notifying customers that it might be dropping the Disney Channel at the end of the year.

As a replacement for the Disney Channel, Cable One has offered its subscribers one of three choices: Fox News Channel, Animal Planet or Discovery Kids.

So far, the company has received about 1,500 responses from its local subscribers, Pezzini said, and most people tend to be leaning either toward Fox News or Animal Planet.

Even if Cable One decides to drop the Disney Channel, it will not lower its rates, Pezzini explained, because it will be replacing the channel with something of similar value.

Although Disney is hoping that Cable One will decide to keep the Disney Channel, it also has started looking into contingency plans, Hobson said.

If Cable One drops the channel, she said, Disney might decide to link up with either Dish Network or Direct TV – the nation's two largest satellite-dish companies – and offer incentives for cable subscribers to switch to satellite.

Incidentally, both satellite-dish companies carry the Disney Channel in their standard lineups.

The Walt Disney Co., with headquarters in Burbank, Calif., posted revenues this year of $25 billion – an increase of 9 percent from 1999.

Overall revenues for its media networks division increased by 21 percent to $9.6 billion – thanks in large part to gains made by the ABC network.

The operating income from Disney's cable networks, including Disney Channel and ESPN, increased by 25 percent to $1.2 billion – thanks in large part to subscriber growth and contractual rate increases.

Since it is a subsidiary of The Washington Post Co. – a privately held company – Cable One does not disclose its revenue figures.