Cable rates changing, but don't check your bill yet

May 16, 1994|By New York Times News Service

WASHINGTON -- As the newest federal effort to reduce cable television prices nominally takes effect this week, government regulators are struggling to navigate between two rather contradictory goals: bringing lower prices to consumers and encouraging a cornucopia of new electronic services.

Most consumers will not see any change on their bills until July, because the uncertainty about the new rules is so great that the Federal Communications Commission has given cable companies two months to figure out the regulations and reset their prices.

For the moment, the most notable change is the growing confusion about what cable rates will be. The rules are supposed to cut monthly cable bills as much as 17 percent, and most experts say they are confident that prices for many cable television services will decline. But the average bill is likely to drop much less than 17 percent, they say, and some bills may well go up.

"It's not really math as I knew it," said Barry Rosenblum, president of Time Warner Cable of New York City. "It's so complicated that you can't pick a single factor that gives you an indication of what the rates will be. Until you have every piece of the puzzle, you can't know what the answer will be."

In the meantime, the FCC is issuing a steady stream of "clarifications" about particular issues, and top officials are meeting with cable industry executives to discuss policy changes that would offer more incentive to invest in new channels and technology.

"We have to find the right balance," Reed E. Hundt, the FCC chairman, said. "We want to encourage new channels but also make sure that basic and enhanced service is not priced at an unreasonably high level."

The uncertainty partly reflects the inherent difficulty of regulating cable television prices, a problem that has bedeviled regulators for almost two years. An initial attempt at rate regulation, adopted in April 1993, led to unexpected price increases for many customers and was overhauled Feb. 22.

But the difficulties also result from the competing goals at work. Mr. Hundt, an enthusiastic proponent of the so-called information highway, had come under industry criticism for imposing lower prices at the expense of future networks.

Since the new rules were adopted, several big cable and telephone companies have called off proposed alliances, saying the regulations would reduce the capital available for investment in advanced networks. The biggest of those deals would have been a merger between Bell Atlantic Corp. and Tele-Communications Inc.

Last week, the National Cable Television Association challenged the new regulations in the U.S. Court of Appeals for the District of Columbia, although the action does not stop the rules from taking effect.

In recent weeks, Mr. Hundt and senior commission lawyers have been looking for ways to refine the rules. They have been listening to cable executives and weighing different proposals to encourage investment in new network capacity and extra cable channels.

Under the new rules, cable companies are generally required to reduce the prices for all but their premium and pay-per-view channels by 17 percent from their levels in September 1992, when Congress passed the law imposing new regulations on cable television.

But that general reduction does not affect several components of an average monthly bill, including the franchise fees that cable operators pay to municipalities or the price for premium channels and pay-per-view programs sold individually.

In addition, the precise prices will be determined by formulas that weigh factors like the number of channels on a system and even the wealth of the city being served. Cable companies may also raise prices to account for inflation.

The regulations also include a general framework for encouraging new services. For example, a cable operator that adds new channels to its basic package of programming may increase the price of that package by the cost of that service and an additional markup of 7.5 percent.

But FCC officials say they do not want to give cable operators the chance to raise prices significantly by adding services that customers do not want.

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