Critics leap on cable TV rates memo

November 17, 1993|By Michael Dresser | Michael Dresser,Staff Writer

After months of complaining that the cable television operators have been getting away with murder in their pricing policies, the industry's critics in Congress have been handed what they call a "smoking gun."

In a memo in August, a top executive of Tele-Communications Inc. told local managers to ignore customers' objections and jack up rates on various cable television services before a new cable TV regulation law went into effect.

"The best news of all is we can blame it on the government now. Let's take advantage of it!" said the memo from Barry Marshall, chief operating officer of TCI Cable Management Corp., to local managers of the nation's largest cable television company.

TCI's critics wasted no time in taking advantage of the memo, which was published yesterday in the Washington Post.

"It just confirms what many of us have been saying about the cable industry for years," said Rep. Rick Boucher, D-Va. "There it is -- the smoking gun."

Sen. Howard M. Metzenbaum, D-Ohio, read the memo aloud at a hearing of his antitrust subcommittee yesterday, citing it as evidence that Congress should pass legislation tightening cable regulation.

In his memo, Mr. Marshall estimated that higher "transaction charges" could help TCI recoup almost half of what it would lose through rate rollbacks mandated in the 1992 TV Cable Act.

"We cannot be disuaded [sic] from the charges simply because customers object. It will take awhile, but they'll get used to it,"Mr. Marshall wrote. Transaction charges include those for service upgrades and downgrades, as well as VCR and cable hookups.

Rep. Edward J. Markey, D-Mass., widely considered the most influential figure in telecommunications policy in the House, urged members of the Federal Communications Commission to consider the memo as they choose their targets for inquiries into compliance with the law.

James H. Quello, chairman of the FCC, appeared ready to do just that.

"This unfortunate statement by TCI management typifies the attitude of cable companies engaging in creative pricing and rate increases to evade the intent of Congress and the FCC," Mr. Quello said.

He added that the commission might have to close loopholes in the law, which was crafted to lower cable rates but has had the opposite effect for many consumers.

The memo's publication came at a particularly sensitive time for TCI, on the heels of the announcement last month that it would link up with Bell Atlantic Corp. in the largest telecommunications merger to date. The Justice Department is in the process of weighing the antitrust implications of the deal.

"I think it's very relevant to the issue of whether they should be permitted to merge with Bell Atlantic and under what conditions," saidBradley Stillman, legislative counsel for the Consumer Federation of America. "It's really this massive company thumbing its nose at Congress, and they make no bones about it."

But Rep. Michael G. Oxley, R-Ohio, said the memo shouldn't have any bearing on the decision about the merger. He said the memo pointed up the inadequacies in the 1992 cable law.

"They were just galloping through these gaping loopholes in the bill. It's the American way," said Mr. Oxley, who has co-written with Mr. Boucher legislation that would let telephone companies and cable networks compete against each other.

In an interview Monday in the Washington Post, Mr. Marshall was unapologetic, saying he was "being candid about the facts of life in an internal memo."

But yesterday, a TCI spokeswoman said Mr. Marshall would not be available to comment.

"TCI has not engaged in a pattern of blaming either the FCC or Congress for increases, if any, in prices for unregulated services transactions," the company said in a prepared statement.

"The tone of one portion of the memo was regrettable, and TCI has extended its apologies to the FCC," the statement added.

Steve Main, TCI's director of government affairs, said he did not know whether transaction charges had been raised at the company's United Artists Entertainment system in Baltimore or at any of its seven other cable companies in Maryland.

"Some of our systems did adjust our rates and started charging for things the FCC rates regulators said we could and should charge for," he said.

Mr. Marshall's memo will likely prompt Senator Metzenbaum's committee to turn up the heat on TCI Chief Executive John Malone to testify before the panel, which has been negotiating with the reclusive cable mogul to schedule an appearance.

Senators of both parties have been eager to have a shot at Mr. Malone over allegations of monopolistic practices, and the memo was like a bull's eye painted on the executive's chest.

Mr. Metzenbaum, "without a doubt," would want to ask Mr. Malone about it, a spokeswoman for the senator said.

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