Area 4. Then the lower panel is Years 5 through 7 of their plan. And then the final lower right panel is those not in the plan, mainly South Philadelphia. 206 10/31/00 PUBLIC PROPERTY, BILL 000452 Again, the concept is --
I'm sorry, in the fourth chart, are those not in the plan?
So that analysis was done for all of Philadelphia. Any other questions just about that chart? (No further questions.)
So basically, the concept is comparing the demographics of the build-out to the City as a whole and seeing that particular lowest income group is under- represented. It was like a racial composition, the same layout as before, we see the composition for Philadelphia as a whole. By the end of four years, the whites would compose 86 percent of those with access. Clearly. This is the part 207 10/31/00 PUBLIC PROPERTY, BILL 000452 that's kind of -- it's kind of extremely different than a balanced plan. And even -- you can see at the end those not in the plan, there's still a residual imbalance. As I said, the full report breaks this down year by year if you wanted to see the roll-out, particularly, you know, looking at, ay, the first two or three years. Most -- all of these trends, as I say, are more extreme in the first year than in the second year.
So it's your contention through your analysis that from a racial perspective in the Years 1 through 4, practically all of the white households in the area, in the OVS service area, would be built out, and that the African-American households in that same area would not be built out in any large numbers until Years 5 and 7.
I think the answer's yes to that. These show the demographics of the areas, this is with those who would have access in principle. So I don't do any analysis of who might subscribe, not subscribe, or how far into any area they were going to wire. It just says, 208 10/31/00 PUBLIC PROPERTY, BILL 000452 of those with access, at the end of the fourth year, according to their plan, 86 percent of that population would be white.
Those who are eligible to take advantage of RCN's offer --
-- in the first four years, only thing 6 percent of those people would be African-American.
The other non-African-American or non-white, the percentages stay basically the same. Is that fair?
Available, accessible African-American households in those 209 10/31/00 PUBLIC PROPERTY, BILL 000452 service areas.
That's right. Now, this is just those that are added; this is not cumulative. So this is the population that is being added in Years 4 to 7. And those --
Let me ask you the question the another way. In Years 1 through 4, are any of the people, are any of these African-American households in the bottom left chart, the bottom left pie chart, eligible to sign up for RCN services in Years 1 to 4?
Mr. James, the question that I have relative to this chart is that -- was there a change in the original OVS requested agreement, moving a large portion of potential African-American and minority homeowners or potential subscribers from Year 6 to Year 3? Was there any change?
So the construction 210 10/31/00 PUBLIC PROPERTY, BILL 000452 schedule we see now is what it was from the original? The staff has some belief that there was a change in the construction build-out schedule that included more minority potential subscribers in Year 3 than was originally called for in the beginning of this process, which had them coming more in Year 6.
It's my recollection that there were several reiterations of the build-out schedule, but the last one that went into the bill 12 was the one that you see, and there was no 13 specific, that I recall, change that affected any particular diversity.
Okay. And this analysis is based on the most recent build-out schedule?
It's based on what we believe to be Appendix J of the exhibit submitted with the application.
Okay, that's fine, thank you. 211 10/31/00 PUBLIC PROPERTY, BILL 000452 Is there anything else either of you would like to add to at least the initial presentation before we get into any questions?
In the interest of the hour, we look forward to any questions.
Okay. All of this issue is based on price and competitive pricing and money and who is going to be eligible to experience the positive side of competition and who isn't in the period of time we're being asked to approve in the OVS agreement. Could you do me a favor and -- or do yourself a favor, perhaps -- and explain some of the issues that have been in the press lately about Comcast's pricing position as it relates to major cities in the country who are served by Comcast or aren't served by Comcast, and whether or not and why, if it's true, is it perceived that Philadelphians pay more than their immediate suburban counterparts for either similar or the same service? Could you kind of go through the whole pricing issue?
'Cause I think one 212 10/31/00 PUBLIC PROPERTY, BILL 000452 of the things that has been a problem for Councilmembers, the media and the public in general is a story that was in the Inquirer not too long ago touting the fact that Comcast was way out of line in its pricing structure, and that this kind of competition would help alleviate that problem.
Sure. We believe that the Inquirer article was misleading in terms of its calculation of our rates structure. When comparing cable rates in the top ten markets, as the Inquirer sought to do, we believe that a cost-per-channel methodology is critical in fair criteria for determining value. I'd like to show you a chart, if I may, for one moment.
With apologies to Councilman Cohen, I'll ask him to move. Let me tell you a few things that are on that chart. Number one, the Inquirer article 25 included optional levels of services in the 213 10/31/00 PUBLIC PROPERTY, BILL 000452 pricing that it showed for Comcast. These are levels of services such as an optional programming guide and an optional tier of channels that customers do not have to take. When you look at our cost per channel in terms of the package and the value we prove our customers, our cost per channel basis, Comcast Cable ranked 13th out of the cable systems 10 surveyed. In other words, while other markets 11 charge nearly as much overall, they delivered far 12 less service. 13 Cable systems in the following cities 14 charged subscribers higher rates per channel than 15 Comcast: San Francisco, Washington DC, L.A., 16 Chicago, Houston, and Boston. Comcast's ranking 17 in the Inquirer's chart would have improved even 18 dramatically had the Inquirer not included our 19 optional $2.25 printed cable guide. This cost was 20 not included in other cable systems' pricing. 21 While the Inquirer presented a chart 22 illustrating the rates for the Disney Channel, the 23 paper did not present a chart showing other premium channels such as Encore, a commercial-free, 24-hour movie service, which 214 10/31/00 PUBLIC PROPERTY, BILL 000452 Comcast includes as part of our basic cable package. The Inquirer failed to mention that 18,000 Comcast customers in the City of Philadelphia pay either $9.84 a month or $15.29 for 27 or 35 channel cable packages respectively. The Inquirer failed to credit Comcast for its flexible structure in providing a basic-only off-air reception package.
I'm sorry. What is it the basic-only on the off-air package?
Essentially, it's our limited basic service, it provides 27 channels of off-air reception -- Channels 3, 6, 10, 17, 29, everything you could get off air for free, and you could get great reception and service along with several other educational access and government access programs.
How was the Inquirer article structured to come out with the conclusion that you guys are overpriced and not competitive with major cities? How did they add it up as opposed to how you added it up?
They took all of our 215 10/31/00 PUBLIC PROPERTY, BILL 000452 levels of service, our limited basic level of service, our tier of satellite channels as well as an additional tier. They added in an optional monthly programming guide, which customers do not have to -- are not require to take. So, in essence, they took our -- well, when you go to McDonald's, you get the family value pack.
I'm not allowed to go there anymore. When I used to go. . .
Essentially, they took our super-sized package and compared it to everyone else's bare-bones rate structure.
Okay. You guys got a great product with your SportsNet. I happen to enjoy it, being a Flyers, Sixers and, most of the time, a Phillies fan. Could you talk a little about that? 'Cause one of the criticisms of the company is that somehow, you've cornered this market on this sports delivery here in Philadelphia and you're being unfair in your desire not to make it as part of a basic -- well, it is a part of the basic cable. Explain the SportsNet dynamic 'cause 216 10/31/00 PUBLIC PROPERTY, BILL 000452 it's been part and parcel of some of the criticism of the company.
I'm going to defer to Mr. Wang, who is more familiar with the issues surrounding it.
The SportsNet Company is owned by Comcast, by Ed Snyder and his group and the Phillies, so there's a group of three people who own Comcast SportsNet. So we -- Comcast don't make all the decisions; the decisions are made by a group. When we started, there was a company called Prism. Prism was --
-- a high-priced premium service that that delivered movies and that delivered sports. Prism -- we bought the teams, Prism went out of business. We took the product that was delivered by Prism and that was terrestrially delivered. In other words, no 217 10/31/00 PUBLIC PROPERTY, BILL 000452 satellite. We took the Prism-delivered system and we put Comcast SportsNet on that system, on that terrestrially delivered system because it was cheaper and because we had no reason to put the signal outside of the Philadelphia market. We had no reason to send it up and bounce it off to Wichita, Kansas, because we're not permitted to deliver that signal to Wichita, Kansas. We're only under league rules to deliver that signal to this market. So for economics and for an existing system, we delivered it terrestrially. Under the law, when you deliver it terrestrially, you're not subject to --
See, I knew that Latin at the Prep was going to help me.
We did not use the satellite; we put telephone wires or wires between the microwave, between where the product was emanated, which is the Sports Center, First Union Center -- it keeps changing names -- to the cable operators. And there were a number of cable operators in the market at the time, and there are still are, but we had bought up a substantial portion of it, no question about that. So we delivered it terrestrially. The law says that when you deliver it terrestrially, you do not have to comply with something called "the program access rules." The program access rules say -- they're federal rules. They say if you put a program on a satellite and you, as a cable operator, own that program, you have to distribute it to everybody who wants it under essentially equal terms. We do not have to do 219 10/31/00 PUBLIC PROPERTY, BILL 000452 that under the law. We chose not to sell it to DirecTV, who had their own exclusive programming called "The NFL." And come September and October, if you look in the Inquirer, you see large ads, "Go to DirecTV Exclusive Programming, the NFL." It's a powerful product. They have other exclusive programming. EchoStar, our other major satellite competitor, also has exclusive programming. So we, as businessmen, decided not to sell the product to DirecTV and EchoStar. DirecTV and EchoStar complained, they went to the FCC, they brought two proceedings. Both proceedings were decided in our favor. The matter is on appeal to the full FCC, and that has been sitting at the full FCC for probably 18 months or 2 years. But both decisions said that Comcast was perfectly legitimate within its rights to distribute that programming to whomever it wants without regard to the program access rules. So what we've done has been blessed to date by the FCC. Now RCN comes into town, and they say, 220 10/31/00 PUBLIC PROPERTY, BILL 000452 We would like this product. And the truth of the of the matter is, we've given that product to RCN. We've served everywhere that RCN wanted the product, we've given the product to them. I believe they were in Allentown, they had a system and in various other places. They get the product in Delaware County. We provided them with a six-month agreement, an extension recently. We've treated them exactly the same way that we've treated every other cable operator, a six-month agreement. During those six months, we are analyzing what to do with Comcast SportsNet. We have negotiations with the Phillies, with Snyder. There may be a change in April, but we needed a period of time to consider our business purposes of what we do with the programming. Perhaps we'll start a second channel, perhaps we'll move games somewhere or someplace. We don't know yet. So we have a short-term contract. In answer to your questioning, which is going to come, will we renew? The intention is to renew for every cable operator in the region, including RCN, including Popvision. If you've 221 10/31/00 PUBLIC PROPERTY, BILL 000452 driven down the Schuylkill Expressway, you'll see big signs, "Subscribe to Popvision, we offer Comcast SportsNet." So we are not using it exclusively, but we are excluding DirecTV and EchoStar. And to this moment, the FCC has said that's fine. Did I say too much, does that answer your question?
That's fine. I just wanted the record to be clear. Councilmember Nutter?
Thank you, Mr. Chair. Mr. Pardini, I'd like to raise another issue with you. I have my own concerns about the chart that you laid out and some of the other newspaper stories. I will get to those. The other matter that's been in the news a fair amount recently is the retransmission agreement with WPVI, or commonly known as Channel 6 or ABC, which, it's my understanding, that Comcast, I guess, is negotiating nationally with ABC. I had the experience in the area where 222 10/31/00 PUBLIC PROPERTY, BILL 000452 I live and where I have cable service to have experienced a loss of that signal for some period of time. It was sudden, it was without notice, and I know that at least my constituents who are in Area 2, which is also shared by Councilwoman Blackwell in Council District 3 in West Philadelphia, there was a tremendous outcry with regard to that for that period of time that the station was literally off the air. I was watching a show and the screen went blank. One, you might want to touch base with some of the Time Warner people about the anxiety that their viewing area experienced. You obviously have three-quarters of the City and would affect an even larger citizen base. Second, there were numerous angry calls and demonstrations and the like with regard to Time Warner while larger decisions were being made in another part of the country. Naturally, the backlash came to the local operation. My concern is you have your issues with RCN, and you have a right to have issues with RCN. My concern is WPVI Channel 6 is in my district. I do not wish to see other people 223 10/31/00 PUBLIC PROPERTY, BILL 000452 throughout this city experience the same kind of disruption to their lives as a result of battles between Comcast and ABC and what Disney is doing or what Mickey Mouse is doing or what the Cartoon Network is doing or anybody else. What I want to know is, as a part of this process that we're going through, what is the status of the retransmission agreement going forward? What are the issues related to, are you going to pay for the service, are you not going to pay for the service, and provide a comfort level to people throughout the City about that particular issue.
Councilman, your concerns are completely valid. For our negotations with Disney and a status report on where we stand, I again defer to Mr. Wang.
Let me start off at the end. We will never take off the Disney local stations.
Well, you have no 224 10/31/00 PUBLIC PROPERTY, BILL 000452 reason to take it off.
Each Friday now, we wait for a letter from Disney. Friday night, at 5:30, it comes in and says, You are extended for another week, two weeks, and now until November 29th. Until they say to us, Take that off, and they have the absolute legal right to say that at any time, we will never take that off. So if your station goes blank, and it won't, it is because Disney has said to us, which they're entitled to do, that you cannot carry our local station, WPVI, anymore.
Do you pay any operators or programmers to carry their particular programs?
We do not pay and broadcasters. But there's a fiction here that's been going on for years. The fiction started with Disney seven years ago, when they came in with the same local station, broadcast stations. This is free television, if you remember, free television, 225 10/31/00 PUBLIC PROPERTY, BILL 000452 but free television is no longer free television; free television is something called retransmission consent, where Disney has the right to ask us for payment for free television.
Well, you're obviously making a distinction between broadcast and the cable people.
We pay Disney for ESPN, we pay Disney for ESPN2. We pay the Disney Channel. We pay HBO, we pay Turner for Discovery -- I believe Turner owns Discovery.
Right. We pay Time Warner for -- well, that's all the Turner stations.
And where you don't 226 10/31/00 PUBLIC PROPERTY, BILL 000452 pay, you end up making agreements about carrying other portions or whatever, Disney, or somebody else might have to offer? What do you do with NBC and CBS.
NBC and CBS, we've reached agreements with them. They come in and say, Well, would you pay us to carry NBC in all of the markets? And we say no, we won't, but we will carry CNBC and MSNBC, and we negotiate a deal on CNBC and MSNBC, and thrown in is something called "retransmission consent."
I understand that. I don't care what you end up carrying. At the end of the day, I just want to know that there is an agreement. And if you want to carry Mickey, Minnie, and all of their cousins, that's fine with me. What I want to know is, when are you going to have an agreement? because I don't think the citizens of this city should have to continually, after you wait for your letter on Friday, read the newspaper on Saturday to see whether they're going to have service on Sunday.
Well, we're going to have an agreement when us -- 227 10/31/00 PUBLIC PROPERTY, BILL 000452
-- and Walt Disney get together and negotiate what is, quote, fair. Now, what is fair from their angle is one thing, and what is fair from our side is another thing. And if we agree to what they consider --
Well, do you think whatever they're offering has no value?
We think it does have value, but we don't think it has 2000 times the value that it had seven years ago.
Well, what do you think the value's going to be and what's the impact on the company if, somehow, that station is not on the air? What do you think three-quarters of the City is going to think about Comcast?
Well, I would hope they would think that about Disney because, again, it would be our decision to take it off the air.
It is my impression, as a consumer, that in the last 228 10/31/00 PUBLIC PROPERTY, BILL 000452 battle, Time Warner, ABC, that in the court of public opinion, Time Warner took a serious butt-kicking. Now, is Comcast prepared to deal with the same thing?
That would be a terrible thing that would happen for the City and we will use all of our efforts to negotiate a deal with Disney. However, that doesn't mean that we will pay them everything they ask because --
I don't want to be in the middle of your negotiations.
What I want to hear about and what I want to read about in the newspaper one day is that there is an agreement. So my last comment on that particular point is, I would encourage you to get in touch with your counterparts at Time Warner and ask them what it was like for the 36 hours that that station was off the air. And then we can talk about it, okay?
It is not going to 229 10/31/00 PUBLIC PROPERTY, BILL 000452 be a good thing for you.
I can assure you that it's not going to be a good thing for you.
I don't want you to wonder about it, I don't want you to think about it.
Councilman, we have in the last year achieved over 70 retransmission consent negotiations and successfully completed those. We will give our absolute best efforts to require a suitable agreement be achieved with our counterparts at the Disney Company.
Thank you. Let's talk about your chart. With regard to, I guess, the first issue, I think maybe I read in the testimony or saw the chart, and as you know from all of our earlier exchanges, I'm not in your area, but the company that serviced me 230 10/31/00 PUBLIC PROPERTY, BILL 000452 is on the chart, and I was not aware, I guess, of the option of a price-per-channel combination.
I mean, you change the terms and I'm not directing this to you necessarily, it seems to be a kind of cable thing. From time to time -- I mean, you know, basic, sub basic, super basic, premium. RCN was in earlier and they've got, you know, gold platinum, titanium, diamond. I mean, everyone's got a different name to their thing.
And the package is what the package is, and you either want Package X, Package Y, or Package Z. But I was not aware that you could get Package X and then say, Well, I'd like two channels from Package Y, 'cause the price is, you know, 50 cents, I guess, a month per channel, and I'd like to add those in. I mean, you can't do that, right?
You are correct, you cannot do that. The channels are not sold on an a la carte basis. There are different tiers or 231 10/31/00 PUBLIC PROPERTY, BILL 000452 combinations of channels within tiers that customers can choose amongst. The chart here is designed to show relative value of the total package in similar price-per-pound, so to speak. And when you look at the relative value that our package delivers relative to these other marketplaces, we are not the most expensive. In terms of the value that we deliver, we are 13th or lower, depending upon the combinations or permutations of packages that are subscribed to.
Earlier we heard testimony about the whole issue, and Councilman Kenney was very extensive in talking about competition in areas where there is competition. Obviously, we've not, from a cable standpoint, experienced that in Philadelphia, and how it all shakes out remains to be seen. When I look at the chart, though, and this is not to boost anybody, but just trying to understand. Comcast is listed as 13, 15, 16 and 22 for the areas where you're competing against other similar size cities or other companies. I understand what 22 is about, that's the limited 232 10/31/00 PUBLIC PROPERTY, BILL 000452 basic. I guess that's all the off-air stations plus probably a couple thrown in --
13, and seem 9 to out-rank from a price standpoint 21, 23 and 24, 10 which, naturally, is the topic of discussion with 11 the company today, and all of those seem to have 12 more channels at a lower price. 13 Would you wish to give us your views on 14 that and what's going on with that and why is that 15 the case? 16
For the record, items in 21, 23 and 24, which you referred to, are RCN's packages in New York City, Washington DC, and Chicago in cases where they are entering the marketplace. When you're entering the marketplace, it's often common to offer a low introductory rate in the acquisition of new customers.
Do you have a chart or any materials? And if you don't, I understand 233 10/31/00 PUBLIC PROPERTY, BILL 000452 and I'd ask that you forward them to the Chair. Could you give us a similar chart and show us on a city-by-city or a county basis or a comparable- area basis some -- a display of competition as it relates to Comcast and RCN, where you do compete in the same locales? And give us -- I mean, for my purposes -- the Chairman might be interested, I'm not sure, about the price-per-channel concept, but I'd be very interested to see, for instance, if you guys are competing in the suburbs on a comparable area basis. If it's Narberth or Ardmore or whatever the case may be, I'd like to see what the packages are and how they match up system to system. That would be very interesting to see.
We will provide that for you and get it to you very quickly.
All right, thank you. Tell me just a little bit about some of the pricing strategies, and I think in some of the newspaper stories, probably the last for me, are there differences in prices between the City and the suburbs, whether on -- and I don't know what 234 10/31/00 PUBLIC PROPERTY, BILL 000452 your terminology for, I guess, your pricing plans, whether it's full basic or what have you got? Full basic without guide or even the limited basis in Philadelphia as compared to the surrounding suburban areas on similar channels in the package.
And are there any differences between what's in the package in Philadelphia versus what's in the package in a suburban area?
Speaking in generalities, I'd be happy to submit further documentation to flesh out the full facts. I would suggest to you that in the suburban marketplaces that the channel lineups are generally not as robust as what the City of Philadelphia currently enjoys. The primary --
Let me try and understand that. So you're saying that we get more channels --
Further, the differences in pricing are in many ways technology-based. In the City of Philadelphia, all of the original cable-providers required a cable customer to take a cable converter, or a piece of equipment, in which to view the cable signals. In many of the suburban franchises, because of the terrain or the technology that was utilized at that point in time by the original franchise operator, those boxes are not necessarily required. Now, there are some unique features to the --
Boxes are generally only required in suburban areas when you subscribe to a premium service like HBO or Showtime. Here in the City of Philadelphia, most of the basic channels at the time the system was built, channels like CNN and ESPN and other major networks were scrambled so that the unauthorized reception of 236 10/31/00 PUBLIC PROPERTY, BILL 000452 cable services could not take place.
What happens going forward as you move to a digital network? I mean, it's my understanding that there will be these fairly expensive new digital boxes that cost in the neighborhood of 3 to 400 dollars. Would you needs those in the City and in the suburbs or --
For those customers who elect to take our Comcast digital cable package -- and right now, that's approximately 12 percent of our subscriber base here in the City of 13 Philadelphia, but those customers do require a 14 digital cable converter in order to decode the 15 little 1's and 0's into an intelligible picture. 16 When you cram 200 channels or more into one 17 digital cable package, you're going to need some 18 technology at the end-user to make it all a 19 friendly and happy experience for the customer. 20
-- A digital cable 237 10/31/00 PUBLIC PROPERTY, BILL 000452 converter in the suburban areas as well.
Okay. So you're going to get us information not only on the competitive comparison but also information about suburban billing versus the City billing?
Are there any premium -- are there any services that are premium in Philadelphia that are a part of a basic package in the suburbs?
I'm sorry, I apologize. In our suburban systems, the Disney Channel was put on basic as part of the previous -- it's -- the Disney Channel is carried as part of our basic lineup in the suburban systems, and that was a decision made by the previous company prior to our acquisition of it. So the Disney Channel is part of basic in, for example, Bucks County, and it is sold on an a la carte premium channel basis here in the City of Philadelphia. 238 10/31/00 PUBLIC PROPERTY, BILL 000452
But it was like that when you picked up the system, and you decided to maintain it?
Were you concerned that if you made it a premium that people would drop it?
We find that our experience in the City is that less than 5 percent of the --
No. We inherited a previous contract and we honor our contracts, so we kept the Disney Channel as part of the basic package because that was the agreement that we assumed. Here in the City of Philadelphia, we have not done anything with the Disney Channel because we've been in negotiations for the last 18 months with the Walt Disney Company, and we have not made any decisions with respect to its carriage. Currently in the City of Philadelphia, 239 10/31/00 PUBLIC PROPERTY, BILL 000452 approximately to percent of residents subscribe to the Disney Channel as a part of their cable services, for an additional charge.
It's anywhere from $8 to $11.75, depending upon the area. The difference, again, being the pricing structure that was inherited upon the acquisition and our -- we didn't want to do anything with the pricing structure while we were negotiating with Disney. We wanted to see what that final agreement would look like.
Okay. Well lastly on that, I mean, an 8 to $11 additional charge for most of your packages, I mean, that's like a 25 to 33 percent increase in your bill just for one station. I mean, do you think that that affects the decision-making process as to whether you're going to pick up a premium channel or not?
I would think that if -- and I think back to the time when I had young children in the house, I would think that $8 or $11 was a phenomenal value for the opportunity for 240 10/31/00 PUBLIC PROPERTY, BILL 000452 my children to be entertained while I attended my other responsibilities.
I understand. Thank you very much. I look forward to the information.
I would first like to underscore the concern raised by my colleague Councilman Nutter. I'm a City Councilwoman at large, and as he is, am terribly interested in the bottom-line yield of your negotiations with Disney. And I need to understand why there is the week-to-week extensions, because it's still a tentative agreement, correct?
No, there is no tentative agreement. There is a bid and an asked, and we're very far apart as far as what is deemed fair. I 241 10/31/00 PUBLIC PROPERTY, BILL 000452 guess the Disney people are here and Councilman Nutter and Councilwoman, you can give them the same admonition that you gave us.
So it is not tentative, it's a week-to-week arrangement?
It is at the whim of the Disney Company at this point in time. Without an agreement, without a final agreement, they can tell us at any time to take the channel off, and under law, we would have to take it off.
Thank you, sir. Back to this -- I missed your opening comments around pricing, so let me ask straight- forwardly: Currently, what is the suburban price for cable?
In Montgomery County, the price for basic cable service, which does not 242 10/31/00 PUBLIC PROPERTY, BILL 000452 include a converter charge or an optional programming guide, is generally in the 33 to $35 range depending upon the channel lineup that you live -- the area where you live.
What is the equivalent for that same package that you just described in Philadelphia, what is the price?
I would suggest that that same package, without equipment and without the guide, is approximately 34 to $36 in the City of Philadelphia.
Even with that small margin of difference, why is it not equal?
Because in the City of Philadelphia, you have certain construction costs, so you have certain capital investments that represent a large infrastructure investment that Comcast has made in the City of Philadelphia. Operating costs in the City of Philadelphia are 243 10/31/00 PUBLIC PROPERTY, BILL 000452 somewhat higher than in suburban systems. We pay our employees who tender to the City $1.5 million for wage taxes. The operating environment in the City of Philadelphia is also a somewhat higher cost; it is a high transaction market. There's a large rental base in the City of Philadelphia, so installation and disconnect activity, turn activity of customers moving from one spot to another is a lot higher than what see typically in a suburban marketplace. There are any number of cost factors as to why operating in the City of Philadelphia is a higher-cost operating environment than those environments that we encounter in other markets.
In your opening comments, you made it clear, you stated that, and I quote, competition is a good thing. Let's say that this body does what we need to do on our end to ensure that there exists a level playing field, help me, persuade me on why we should not then say that choice is a good thing for our constituents, and we, therefore embrace a like competitor in the area?
We think you should that. 244 10/31/00 PUBLIC PROPERTY, BILL 000452 We think you should embrace competition. We think that you should ensure a level playing field. We have no problems with competition. We compete both here in the City of Philadelphia and we compete nationally in hundreds of communities like Philadelphia. Here in Philadelphia, we compete with other operators, with other multichannel video operators, companies like Popvision companies like Wilco Electronics, companies such as DirecTV and Dish Network. We also compete with companies called Viking Communications, who will come in and take an apartment complex and microwave a package of video signals in there. There are any number of potential competitors here in the City of Philadelphia that we definitely take into account when we look at our pricing structure and think what the market will bear for cable services.
I would also like to say that here in the City of Philadelphia, cable penetration is only about 52 percent, meaning that 245 10/31/00 PUBLIC PROPERTY, BILL 000452 only slightly more than half of the residents of the City of Philadelphia take cable services. That's not exactly what you would call, when you think about Microsoft owning 90 percent of the personal computer software market, 52 percent of people subscribing would hardly be indicative of controlling the marketplace.
Why is it useful for you to share that information, the statement that you just made?
Because I think it's significant in that it shows that people do have a choice here in Philadelphia. They choose Popvision on a daily basis, they choose Direct TV, they choose the Dish Network. They don't necessarily have to choose Comcast. And most significantly here in Philadelphia, with a robust broadcast marketplace, with 3, 6, 10, 17, 29, 57, and any number of off-air signals available, one can just put up an antenna and get great entertainment. So there are options, there is competition, and we have to fight for every customer we get and we have to fight hard to 246 10/31/00 PUBLIC PROPERTY, BILL 000452 provide them with great service and great entertainment value to keep them.