To FCC's embarrassment, cable rates seem higher New regulations may need review

September 18, 1993|By New York Times News Service

WASHINGTON -- Six months after the Federal Communications Commission promised cable TV customers $1 billion in annual rate rollbacks, the agency confirmed yesterday what many consumers have argued: Cable rates actually seem to be rising.

"It's obvious there's a problem, but we'll have to find out the extent of it," said James H. Quello, the acting chairman of the commission. Amid a torrent of complaints from angry consumers and members of Congress, the FCC announced that it would start a detailed survey of the prices charged by the 25 biggest cable companies.

The FCC is giving the companies just two weeks to respond, and Mr. Quello acknowledged that the results might force his agency to rewrite the foot-high stack of rules it just finished painstakingly drawing up.

The announcement amounts to a big embarrassment for FCC officials, who until now strongly denied there was any problem. Indeed, in recent weeks Mr. Quello and other officials have issued several blunt statements insisting that any price increases for some customers were more than offset by declines for others.

The new rate regulations, which took effect Sept. 1, were issued in response to legislation Congress passed in October to rein in price increases and force cable companies to improve their service.

Since the cable TV industry was deregulated in 1986, cable prices had been climbing at more than twice the rate of inflation -- in part because all but a handful of systems enjoy monopoly franchises.

The new rules set up a complicated system of "benchmark" prices, and FCC officials had predicted that they would force rate reductions of more than 10 percent for about two-thirds of all cable systems.

But it has not necessarily worked that way, as consumers have been discovering in the past few weeks. Virtually reversing what the FCC had intended in writing the new rules, prices for basic and expanded services have gone up at many companies, while the cost for options like additional outlets have gone down.

As consumers started to receive the new price lists by mail, they started flooding members of Congress with complaints. Aides to Rep. Edward J. Markey, D-Mass., who led the House fight to reregulate cable, said they had been getting 50 to 75 calls a day from consumers in the last few weeks.

Even before yesterday's FCC announcement, Mr. Markey had scheduled a hearing on the matter for Sept. 28.

Mr. Markey and Rep. Christopher Shays, R-Conn., have been circulating a "Dear Colleague" letter in the House demanding that the FCC revisit its rules. Nearly 100 lawmakers have signed the letter so far.

Congressional staff members said the FCC's new rate survey was, if anything, overdue.

"What this survey shows is that the FCC is at least having second thoughts that this is not working out the way they thought it would," said Gerry Waldron, senior counsel to the House Energy and Commerce Committee's Subcommittee on Telecommunications. "The survey itself will tell us the extent of the problem."

Mr. Quello recently got his own taste of consumer anger. As a guest on a call-in radio program in Detroit this month, he faced a barrage of complaints from residents who were mystified by, and upset about, cable prices.

Officials of Time Warner, the nation's second-biggest cable operator, after Tele-Communications Inc., said they would cooperate with the FCC's inquiry.

"We think it is perfectly appropriate for the FCC to gather information about how we are complying with the statute, and JTC we will pledge our full cooperation," said Tim Boggs, a lobbyist for the company in Washington.

But it might be hard to determine where rates really stand for the nation's customers. For one thing, the regulations play out differently for each of the nation's 11,000 cable franchises, and the customers of one system may get rate cuts while prices go up for those in an adjacent town.

The public's anger over cable prices had led Congress to pass the cable bill last year over President George Bush's veto. But the law set out a complicated approach to lowering prices.

The FCC was directed to issue and enforce price guidelines that would lead cable operators to charge rates comparable with those in the handful of markets with real competition.

To do this, the FCC came up with a staggering collection of benchmark prices, which varied depending on the number of channels offered and the number of customers for a cable system.

But these benchmarks were total prices for all of the services the companies could offer. As a result, many companies found they could stay within the guidelines by dropping their highest prices for the fanciest level of service while raising the charges for more basic service.

Figuring out the net consumer savings requires calculating how many customers receive the different levels of services.

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