Metzenbaum Wants to Re-Regulate Cable Industry; Cites Soaring Rates

Cable television executives faced a buzz saw Wednesday from congressional, broadcast and consumer critics who said cable companies are reaping billions of dollars in profits at public expense.

Sen. Howard M. Metzenbaum (D-Ohio) led the attack at a congressional hearing, saying cable rates have risen an average of 32% nationally since Congress lifted virtually all regulations on cable operators in 1984.

“The government reports that the price consumers pay for cable service increased at a greater rate than any other commodity or service in the entire United States,” said Metzenbaum, chairman of the Senate Judiciary subcommittee on antitrust, monopolies and business rights.

Metzenbaum said what little authority the Federal Communications Commission has to regulate cable is “a joke,” and he introduced two bills that would allow city governments to regulate cable TV rates, require that cable programmers make their programs available to competing technologies such as satellites and wireless cable and prohibit a cable company from controlling more than 25% of the cable subscribers in the country.

Now a Major Industry

Edward O. Fritts, president of the National Assn. of Broadcasters, said cable companies now dominate the local TV marketplace.

“In 1984 when Congress passed the Cable Act, cable characterized itself as a struggling, infant industry,” Fritts said.

“That act, which in essence removed all regulatory oversight, has become the communications equivalent of anabolic steroids. Today, cable television operators enjoy an unregulated monopoly. Amazingly, only 32 of more than 8,000 cable systems have any direct competition,” Fritts said.

Fritts said cable TV is a $14-billion industry that is available to nearly 80 million U.S. homes. He said the five largest cable companies account for more than 40% of current subscribers.

Gene Kimmelman, executive director of the Consumer Federation of America, testified that competition in the cable market place could drive down prices by as much as 50%, with a savings to consumers of $6 billion.

Cable executives denied the monopoly allegations and said the American public had benefited tremendously from the introduction of cable TV since the early 1970s.

Gerald M. Levin, vice chairman of Time Inc., which owns Home Box Office and Cinemax, “strongly denied” the monopoly label and said cable was providing “more and better programming” by owning both the program suppliers and cable systems.

Levin also said cities reap billions of dollars in franchise fees from cable operators, and municipalities are free to give those franchises to other companies if they don’t like the existing cable service.

James Mooney, president of the National Cable Television Assn., said pre-1984 cable rates had been held artificially low by municipal regulation. The industry incurred huge construction costs in the 1980s while the number of channels increased greatly.

He said expensive cable systems were built in the 1980s and that cable underwent a “great construction” period that has ended--and that cable is still a good value compared to the cost of movie tickets, newspapers or videocassette rentals.

“More and more money is going into programming,” Mooney said, because cable operators “are taking part of their cash flow and plowing it back into new programming. . . . Additionally, the focus has also turned to improved customer service and upgrading and modernizing current plant and equipment.”

Another witness said cable companies are increasingly attractive investments that are being bought and resold at huge markups.

Thomas Volgy, mayor of Tucson, said the cable franchise holder there sold the company for $52 million in 1984. Eighteen months later the company was sold for $112 million, and 18 months after that the new owner turned down an offer of $155 million.

The subcommittee is studying the cable industry and the antitrust implications of the proposed merger of Time Inc. and Warner Communications. Time already owns the nation’s second-largest cable system.