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Telcos Will Pay More for Their Video Content

According to Multichannel News, a new report from Citigroup Research indicated that cable-TV-content owners, including Time Warner Inc. and Cablevision Systems Corp., could actually benefit to the tune of $3.8 billion in incremental value from the entry of major telcos into the television space.

That benefit stems from the cable operators� network-content holdings and the fact that telcos entering with smaller subscriber counts will be paying more in programming fees, according to the report. The big winners will include The Walt Disney Co., Time Warner, Cablevision and Viacom Inc., with lesser benefits to players including Comcast Corp., News Corp. and Scripps Networks.

Citigroup estimated that most cable-network owners will see gains of 0.5-1.7 percent in their overall equity values because of the telcos� entry into video. In the near term, incumbent cable operators will have the better position in programming fees, particularly as players consolidate -- such as the melding of Adelphia Communications Corp. systems into Comcast and Time Warner Cable -- and add more subscribers to their already substantial bases. While incumbent cable providers will pay on average an estimated $227 per subscriber in programming fees for 2006, new telco entrants will pay $268, a $41 difference.

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