Cable increases generate static Rates rising four times faster than inflation

January 17, 1998|By Marcia Myers | Marcia Myers,SUN STAFF

Cable subscribers in Howard County a few weeks ago began paying $32.70 a month for basic cable TV -- 40 percent more than they paid five years ago. In Baltimore, Harford and Anne Arundel counties, around Maryland and across the country, the story is similar.

The cost to subscribe to cable television is rising at a pace four times faster than the inflation rate, raising eyebrows at the Federal Communications Commission and triggering questions that may reopen a contentious national debate over cable pricing.

"There is no competition, and we can't do anything about it," said John Maitland, a Columbia resident who heads that county's cable commission.

FCC Chairman William E. Kennard expressed similar frustration this week as he released a report on the issue to Congress. Expectations that the Telecommunications Act of 1996 would foster more competition have not materialized, he said.

The average rate for basic cable service nationally increased 8.5 percent during a 12-month period ending July 1997, according to the report.

That pattern is reflected in local rate increases.

Basic service by TCI of Baltimore went from $24.39 to $26.97 last July.

In November, rates in Howard County went up 10 percent for a similar package.

On Feb. 1, subscribers of Jones Communications in Anne Arundel County will begin paying more, too. Residents in the northern part of the county will see their monthly bills go from $25.39 to $26.93. In the Annapolis area, the rates will go from $25.09 to $26.41.

"It is clear that broad-based, widespread competition to the cable industry has not developed and is not imminent," Kennard said in a statement. Under the act, the FCC authority over cable rate increases will end March 31, 1999.

"There are actions we have taken, and some we can take in the interim, that can foster more competition," he said.

The FCC will look closely at whether current rules that largely prohibit satellite providers from carrying local broadcast signals are contributing to the competition problem. It also will investigate the high cost of programming.

The head of a leading cable organization said he hopes the commission does not "rush to judgment."

"The facts are clear: Cable faces an increasingly competitive marketplace and is delivering more to consumers than ever before," said Ecker Anstrom, president of the National Cable Television Association.

According to the NCTA, satellite subscriptions last year grew 46 percent, while cable had a 2 percent growth rate.

But satellite dishes, the most popular alternative to cable, are so expensive that they provide little competition, according to the FCC. Dishes cost at least $200 and $150 to $200 for installation, the report said.

The Consumers Union, a Washington-based group that publishes Consumer Reports, called for the FCC to impose an immediate freeze on cable rates.

Kennard's report "admitted what all consumers know," said Gene Kimmelman, co-director of the group. "There is virtually no competition in the cable industry." The group estimates that a rate freeze would save consumers about $1 billion a year. A freeze is considered unlikely, however.

Among the steps Kennard is taking is an FCC inquiry into the rising costs of cable programming, which cable companies say have made the increases necessary.

Guy Massaglia, general manager of Jones Communications in Anne Arundel County, says it is the primary explanation for rate increases sought by his company.

"It's hard to say if it will level off," Massaglia said. "This is predominantly driven by what customers want -- and what they want is more programs." Much of the demand is for more sports programs, and those can be particularly expensive, he said. "As long as we have runaway salaries in the sporting arenas, we'll see the costs stay high."

Critics note that many of the large cable companies, including Time-Warner and TCI, own the companies that produce those programs.

"They're crying about the cost?" said Jim O'Connor, cable administrator for Howard County. "They're the ones who are paying the sports figures so much money. So, don't pay them." O'Connor puts much of the blame on regulatory changes that have shifted responsibility for rate approval from local officials to the FCC.

"I call the FCC the economic development arm of the cable industry," he said. "It is not consumer friendly."

What makes sense is more accountability, he said. Cable companies used to come back to subscribers hat-in-hand to justify the need for a rate increase.

"Now they just say that the FCC says they can do it."

7)

Cable rate increases (basic service)

.. .. .. .. .. .. From .. ..To ..Date .. .. .. .. .Franchise

National average .26.57 .$28.83 .1997

Anne Arundel Co. .25.39 ..26.93 .Feb. 98 .Jones

.. .. .. .. .. .. .. .. .. .. .. .. .. .Communications*

.. .. .. .. .. .. 25.09 ..26.41..Feb. 98 .Jones Communications**

.. .. .. .. .. .. 23.90 ..25.50 .Oct. 96 . .. .. .. .Intermedia

Baltimore City .. 24.39 ..26.97 .July 97 .. .. .TCI of Baltimore

Baltimore Co. .. .30.79 ..33.49 .Nov. 97 .. .Comcast Cablevision

Howard Co. .. .. .29.60 ..32.70 .Nov. 97 .. .Comcast Cablevision

SOURCE: FCC and cable companies

*North Anne Arundel County

**South Anne Arundel County

Pub Date: 1/17/98

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