Cable TV rates soar despite controls Competition to drive rates down never materialized

Monopolies

July 25, 1998|By KNIGHT RIDDER/TRIBUNE

WASHINGTON -- The cost of watching cable television has soared at four times the rate of inflation in the last two years, despite federal controls meant to harness media monopolies.

With those controls to be lifted next year -- making another price increase nearly certain -- lawmakers want to figure out how they can head off further cost increases while encouraging competition.

"I'm hoping the outcry will rise again," said Rep. Peter A. DeFazio, the Oregon Democrat who is to testify Tuesday before the Senate commerce committee about his bill to freeze cable rates until the government can study why the promised competition never materialized.

Republican Rep. W. J. "Billy" Tauzin of Louisiana will testify in a different vein. "The practice of many cable operators of offering a single basic package and saying, 'Take it or leave it,' is not acceptable," Tauzin said through a spokesman.

He plans to introduce legislation next week that would require cable companies to offer several basic packages at various prices, giving consumers more choice.

Anticipating energetic cable competition from telephone companies, Congress voted two years ago to release the cable industry from price shackles by March 31, 1999. But widespread competition has not developed, and most cable companies continue to have monopolies.

Cable operators link ever-higher rates to increases in the cost of programming, particularly for professional sports. The Federal Communications Commission accepted this explanation 80 percent of the time when it reviewed rate-increase disputes in the last two years.

But consumer groups don't buy it.

"These cable guys own a lot of the programming," said Kathy McShea, spokeswoman for Consumers Union, a nonprofit public interest organization that publishes Consumer Reports.

Cable distributor Time Warner, for example, fully or partly owns TNT, TBS, Cartoon Network, CNN, Action Pay-Per-View, Court TV, E! Entertainment, Cinemax, HBO and BET, McShea said.

"It's downright abusive," she said. "Cable companies have been raising their rates at twice the rate of programming costs and there is no end in sight. We don't see any restraint from the industry."

While people complain mightily about cable costs, they have not pulled the plug on ESPN, HBO and other offerings to express their displeasure. That's partly because for many people cable has become a lifeline service, similar to having a telephone or electricity, consumer advocates say.

Consumers, though irked by rising costs, won't unplug cable until they can hook into something that gives them comparable service.

"Complaining about cable is a national sport. Nobody likes a monopoly operator," said Morgan Broman, a spokesman for the Cable Services Bureau with the Federal Communications Commission. "Yet we haven't really seen a mass exodus away from cable. Actually, the number of subscribers is growing."

Of the 100 million households with televisions, 67 million subscribe to cable, FCC records show. On average, consumers pay about $26.50 each month for expanded basic cable service.

During the past two years, TV watchers have seen increases in their cable bills of 7 to 9 percent -- a rate four times that of inflation -- FCC studies show.

In communities with competing cable companies, people pay 10 to 20 percent less than in areas where cable has a monopoly. But only about 80 U.S. communities have cable competition.

Competition, for the most part, has come in two forms: wireless ** television and direct broadcast satellite. Each has its limitations.

To receive wireless, people must erect antennas atop their houses to catch signals from larger antennas in their neighborhoods. Because the antennas must be within the line of sight of the large antennas, it does not work well in cities or hilly terrain.

Direct broadcast satellite requires a bigger initial cost than cable, carries a monthly fee similar to cable and often cannot deliver local broadcast stations.

Cable companies say enough competition exists to keep prices in check.

Pub Date: 7/25/98

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