The Pay-TV Rebellion

WILDWOOD - The resort towns around here boast miles of sun-drenched beaches, a world-famous boardwalk, and more than 150 hotels that cater to a sports-loving Philadelphia clientele. In March, the website TripAdvisor ranked one of them, Wildwood Crest, a people's choice family destination, placing it third in a national survey.

For all the hospitality, there's one amenity that many of its visitors won't have this summer season - televised Phillies games.

Tired of increases in cable rates and new TV equipment that Comcast Corp. was requiring them to use, local officials say, 35 to 40 mom-and-pop Wildwood motels switched in the last year to satellite TV and dropped Comcast, long the dominant local pay-TV company. Those hotels rent about 1,500 rooms a day over the summer.

The head of the local motel association says another wave of motels is currently switching to satellite, or considering the switch, for the coming beach season.

"Comcast's fingernails went deeper and deeper into our operations with their boxes and their rates," said Steve Tecco, president of the Greater Wildwood Hotel and Motel Association and owner of the 56-room Armada by-the-Sea, which switched to satellite last year.

The first motel owners to switch were the ones with the most rooms and the most potential for savings - after a $6,000 initial investment in a satellite dish. Following on their heels this year, local officials say, are smaller hotels with fewer rooms.

Paresh Patel, of the 31-room Blue Water Motel, said Thursday that switching to satellite was a "no-brainer" after Comcast insisted this year that he pay for cable all year instead of just for the six-month summer-vacation season. In that case, he'd be paying Comcast when the Blue Water was closed for the winter. "It doesn't seem like they want to do business on the island," he said.

DirecTV, the nation's largest satellite-TV system, estimates that its share of the Wildwood motel market has soared to 20 percent of motel association members from just about zero. It is the nation's second-largest pay-TV company, with about 19 million subscribers.

Comcast, the nation's largest pay-TV company, with nearly 23 million subscribers, says that Wildwood hotel and motel owners benefited for years from a grandfathered local-rate structure and that the Philadelphia cable company was trying to bring consistency to rates on its system in the region.

The company also said it could not make exceptions for the motels when it was upgrading the cable-digital system last year.

"We've enjoyed the opportunity to serve Wildwood hotels and regret seeing some of them look at other options, but believe, over time, hoteliers will realize the loss of quality and reliability they had with Comcast," said Comcast spokesman Jeff Alexander.

"For as far back as a decade, association members have benefited from extremely favorable and flexible terms, and their current pricing is not only a good value, it's still below the average market pricing for similar services in other areas," Alexander said. "We hope to serve these hotels again in the future, if we are able to reach equitable, fair agreements."

The fight over pay-TV market share in Wildwood is part of a broader, unrelenting ground battle between the cable giant and its chief competitors: the old-line telephone companies diversifying into TV services and satellite-TV companies. Comcast will face a new threat in the future, most experts agree, in Netflix and Internet-based video sites.

Comcast lost more than 757,000 cable subscribers in 2010, and the new president of the cable division, Neil Smit, has said it was his goal to stop subscriber losses. The company seems to be making progress. It slowed the subscriber drain in the fourth quarter.

Revenue from motels is considered part of Comcast's business-services division, and motels are counted in Comcast's overall subscriber base under an industry formula.

Comcast said it believed it could stabilize its subscriber base through new products and more-attentive customer service.

The cable company has an added advantage over its satellite rivals in the Philadelphia area, including the Wildwood area: Comcast SportsNet channel, which holds rights to Phillies, Sixers, and Flyers games. If pay-TV customers want to watch the Phillies in the summer, they have to subscribe to Comcast or Verizon Communications Inc.'s FiOS TV service - a big plus in a sports town, or in towns where those sports fans vacation.

Wildwood motel owners say they would like to offer Phillies games. Yes, they said, there were complaints during the summer of the 2010 season from guests who couldn't watch the Phillies.

But, said James "Jimmy" Johnson, owner of the 48-room Imperial 500, "I'm renting rooms; I'm not running a sports bar. . . . With computers now, you can get a lot of games on your computer, or your phone."

Johnson and Tecco, taking a break from preparing their motels for opening day, said in a recent interview at the Imperial 500, a block from the beach, that they had wanted to stay with Comcast, but that the talks had broken down over several issues.

An electrician by training, Johnson said he was irritated that, after he had invested about $60,000 in sleek new flat-panel TVs for the Imperial, Comcast came to him and said he would have to put new digital boxes on those TVs. He did not want to do that because, he said, guests could walk off with them.

Comcast said the digital boxes were required because the company was converting its older analog cable-delivery system to an all-digital system, a process that is taking place all over the country.

As part of the conversion, Comcast also told Johnson he would have to use Comcast TV remote controls in his hotel rooms. Johnson said he did not want to be liable for the company's remotes and preferred less-expensive generic remotes.

"I go through remotes like you go through underwear," Johnson said.

The motel owner said that he proposed alternative solutions to Comcast, but that the company would not budge.

Alexander, the company spokesman, said: "Wildwood, like the remainder of the region, received significant technological enhancements . . . and we can't justify making exceptions in the delivery of those advanced services."

As the two sides were discussing these issues last year, Comcast was seeking to charge by the TV instead of by the room, Johnson said. The Imperial has two TVs in most of its rooms. Some rooms even have three TVs. Johnson estimated that his summer cable bill, under Comcast's proposed per-TV rate structure in early 2010, would soar to $10,000 a year from $4,300 - effectively $11.95 per TV instead of $7.25 per room, he said.

Johnson, walking along the fourth-floor balcony at the Imperial, said that the $6,000 initial investment in the satellite dish would pay off this summer and that he would begin his savings from the switch to satellite. He said he was paying $600 a month for satellite service that offered about 40 handpicked channels, though not Comcast SportsNet.

At the Blue Water, Paresh Patel said that Comcast this year proposed a monthly rate of $35 per TV, but that, when he called back, the company quickly agreed to a rate of $12 per TV. However, for the $12 rate, Patel had to agree to keep the Comcast service all year. He estimated that his cable costs would increase to $5,900, compared with last year's $1,500.

After the talks with Comcast, Patel scheduled a satellite-dish installer. He said he was investing $6,400 in the satellite dish and estimated he would pay $1,680 to DirecTV for TV service for the summer season - and would not have to pay during the winter months.

"I don't want to pay for something I will not be open for," Patel said. "This is the only company down here that is telling us we have to pay the whole year."