Rate increases OK'd for cable TV

November 11, 1994|By Michael Dresser | Michael Dresser,Sun Staff Writer

The Federal Communications Commission granted the much-bruised cable television industry a measure of relief yesterday as it voted to let companies collect up to $1.50 more a month over the next two years in return for adding six new channels.

The decision is good news for consumers who are eager to have a greater choice of channels within their "expanded basic" service, the most popular package of broadcast and nonpremium cable channels.

For consumers who have all the channels they want and aren't interested in new ones, it will mean higher bills for unwanted services.

In allowing the rate increase, the FCC was attempting to strike a balance between its mandate to control rate increases and its desire to encourage the introduction of new cable programming. Cable operators have contended that price regulation imposed in the wake of the 1992 Cable Act had removed any economic incentive to add new channels.

The cable industry, while continuing to deplore "micromanagement," greeted the regulators' decision with grudging approval. Rob Stoddard, a spokesman for the cable Telecommunications Association, said greater relief is necessary to allow the cable companies to prepare for growing competition from telephone companies and others.

"The new rules go part of the way in helping us respond to that, but not nearly enough," he said. "Many cable companies still feel hogtied in their efforts to react to this rising consumer demand."

Joe Waz, vice president for external affairs at Comcast Corp. in Philadelphia, said the incentives provided in the decision would likely encourage its systems to add new programming.

"There's a huge backlog of networks that want to get on to cable -- 40 or more at the last cable show," he said.

Comcast's reaction is important to Baltimore viewers because the company owns three systems in the area: in Baltimore, Harford and Howard counties.

Under the previous rules, cable operators were permitted to recover their increased costs, plus a 7.5 percent markup, when they added new channels.

Yesterday the FCC ruled that was not a sufficient incentive to add channels or future capacity.

Under the new formula, cable operators will be permitted to add 20 cents to the expanded basic package for each of the new channels it offers, up to a ceiling of $1.20. The cable systems also will be allowed to pass along up to 30 cents per subscriber to cover the license fees it pays to programmers.

The license fees will be counted separately to eliminate any incentive to add no-cost or low-cost channels while charging the full markup, the FCC said.

Commissioner Andrew Barrett, a Republican, dissented, saying the measure didn't produce sufficient incentive for cable companies.

The commission came down hard on the cable industry last January, after studies showed that many operators used various ploys to escape the effects of an earlier round of rate-cutting.

More recently, the FCC and Chairman Reed Hundt have been making conciliatory gestures toward the industry.

While yesterday's decision did little to ease the industry's "continuing frustration" under price regulation, it was welcome news compared with earlier FCC actions.

Mr. Stoddard said the industry got "half a loaf" yesterday.

"The commission does deserve some praise in this," he said. "They were trying to split the baby here. They recognize the consumer and the political pressures in the marketplace."

The industry did not welcome another provision of the order dealing with channels offered on an individual basis.

The FCC, determining that some cable operators have evaded an exemption on price regulation for such offerings by making unrealistic "a la carte" offers, asserted that it could regulate such offerings to make sure they are what they purport to be.

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