Irate viewers pay price of cable law Reform falls short

firms raise rates

September 02, 1993|By David Zurawik | David Zurawik,Television Critic

Thousands of confused and angry subscribers have swamped area cable companies with phone calls about increased service rates as consumer groups vowed to step up pressure for more reform.

And that was only part of yesterday's tidal wave of response to new cable TV rates that just went into effect under the Cable TV Act of 1992.

The Federal Communications Commission said it would return to the drawing board in an attempt to close loopholes in the cable bill. And a congressional hearing was called to find out what went awry.

The act was intended to provide consumer relief, with an initial goal of a 10 percent rollback starting this month. Instead, it has resulted in higher charges for as many as 40 percent of all cable TV subscribers in the Baltimore area.

How did the new law wind up having opposite its intended effect for so many consumers?

That's the question thousands of area cable TV subscribers are asking as notices arrive in the mail from local systems informing them of new rates and channel changes, which became effective yesterday.

Comcast Cablevision reported receiving 16,000 calls Tuesday from its 250,000 subscribers in Baltimore, Harford and Howard Counties. Calls were running at the same rate as of late yesterday, according to David H. Nevins, a spokesman for Comcast. And some of Comcast's Baltimore-area subscribers have not yet received their notices of rate and channel changes.

An average number of calls a day for Comcast is 5,000 to 6,000. Previously, the most calls the cable operator had ever received in one day was 10,000.

In an effort to handle the influx, Comcast has more than tripled the number of customer service representatives working the day shift -- from the usual 30 per shift to the current 100.

"How are the calls running?" Mr. Nevins said yesterday. "It's amazing. We're doing everything we can to explain what's happening."

Experts say the explanation is simple: The cable industry simply outmaneuvered the Federal Communications Commission, which is charged with implementing the act.

"Nobody intended for anybody's cable bill to go up under the act," said Bradley Stillman, legislative counsel for the Consumer Federation of America, the driving force behind the legislative act.

"The fact that cable bills are going up says there's a problem with implementation of the act," Mr. Stillman said.

He blames the FCC for the higher bills, saying that it opened the door for cable operators to charge more by setting benchmark rates for programming services too high. Benchmark rates are levels that cable operators cannot exceed when determining monthly charges for various tiers of channels.

The goal of the act was to reduce cable rates for Basic and Basic Plus service in monopoly situations to the level of rates in those few markets where cable systems compete. Rates in competitive markets are about 30 percent lower than in monopoly situations.

But the FCC set its benchmark rates about 10 percent to 15 percent lower than in monopoly markets, Mr. Stillman said. The result is that some cable operators with relatively low rates for Basic or Basic Plus service were left with room to raise programming rates while still complying with the FCC-imposed limits.

L That's what happened with United Artists Cable in Baltimore.

Because the act and the corresponding FCC regulations attached to it are very specific about lowering rates cable operators can charge for equipment such as remote-control devices, United Artists had to lower such fees. For example, monthly charges for a remote control dropped from $2 a month to seven cents effective yesterday in the City of Baltimore.

But, because the FCC left room to maneuver on programming services, United was able to offset the loss on equipment by raising rates on its Basic Plus tier of programming services from $19.25 a month to $21.48 a month. This tier includes CNN, ESPN and MTV and is the most popular way to go for city subscribers.

Officials from United Artists of Baltimore did not return phone calls.

"That's the kind of loophole we're talking about," Mr. Stillman said. "Because there was no fire wall between equipment and programming services, the act brought equipment down to cost levels, but they boosted the other to offset it."

Many cable subscribers with the least expensive service wound up bearing the brunt of the increases. For example, Comcast Cablevision of Howard County raised its basic service rate from $7.95 to $9.47. The same pattern was followed in Baltimore County, where Comcast Cablevision raised its basic rate from $6.95 to $7.66.

"The higher bills are something we didn't anticipate entirely either," Florence Setzer, an economist with the FCC, said yesterday.

"The commission is recalculating its benchmarks," she said. "We're recalculating them and thinking about how they might be improved."

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