AT ISSUE : Lawmakers Take Up Cable Re-Regulation

From threats by New York City not to renew the franchise of the cable operator in Manhattan to complaints in Beverly Hills of a 90% increase in the monthly service fee in one 20-month period, the issue of cable regulation is gaining political momentum.

Viewers may want their MTV--and CNN, HBO and all the other cable networks that have made them the masters of an expanded video universe--but they’re bugged about the price increases and by a history of customer service that even cable executives acknowledge often has been short on politesse--and long on hold.

When Congress broadly deregulated cable television under the Cable Communications Policy Act of 1984, removing most of the ability of cities to set cable rates, the stated purpose of the act was “to promote competition in cable communications and minimize unnecessary regulation that would impose an undue e conomic burden on cable systems.”

From Dec. 1, 1986, the effective date of cable rate deregulation, to October, 1988, monthly rates for the lowest price basic service increased by 29%, according to a study by the General Accounting Office.

Lawmakers on Capitol Hill, responding to what they say are stacks of complaints from their constituents, have introduced more than a dozen bills to re-regulate cable. Both the Senate Commerce Committee and the House telecommunications subcommittee have been holding cable hearings in Washington. The Federal Communications Commission has been holding field hearings around the country as it studies how deregulation has affected competition and whether its rules should be changed to allow more than one cable system in a community.

Despite the activity, no one has yet settled on how cable should be governed. “There is increasing unhappiness in Congress with the bill that deregulated cable,” says Mike Connolly, spokesman for the House telecommunications committee. “But, while members of the subcommittee generally agree that something should be done about cable, the next question is, ‘What?’ ”

At issue is whether cable should be regulated by the government--and, beyond that, if it is regulated, how should it be regulated and by whom?

Pro

Those in favor of re-regulating cable contend that since the 1984 cable bill, cable has functioned like a virtual monopoly, raising its prices at will because nearly all systems have no head-to-head competition. Cities can negotiate for what they want in cable contracts but once the contract is awarded, critics argue, that’s the company with which they must deal, since it’s virtually impossible to take away a cable franchise.

Under the current system, franchising authorities are barred from regulating the rates of cable if there is “effective competition,” currently defined by the FCC as at least three over-the-air broadcast signals. According to FCC chairman Al Sikes, the regulatory agency is considering redefining that term.

“You do not have to have an advanced degree in economics to know that where there is no competition, there is no check on prices,” Sen. John C. Danforth (R-Mo.) stated when he introduced a tough cable bill in Congress last year, charging that cable is “now an unregulated monopoly.” His bill would put the cities back into the business of regulating cable rates.

Though cable started as a mom-and-pop operation, critics say its power--and programming leverage--is concentrated today in the hands of a few multiple-system operators (MSOs), large cable companies that operate local systems around the country. Danforth’s bill would limit the size of MSOs to 15% of the nation’s cable subscribers.

Con

Cable-industry executives argue that they have corrected any past abuses in customer service, and they say that rates have leveled off.

“For 14 years before deregulation, our rates were 72 points behind the Consumer Price Index,” says James Mooney, president of the National Cable Television Assn. “There was an upward spurt in cable rates in 1987 and 1988, but, since then, it’s within the inflation rate.”

To answer criticisms about service, the NCTA in February adopted advisory standards for dealing with customers. According to the guidelines, a customer’s call must be answered within 30 seconds, a customer should get a busy signal less than 3% of the time, and, if he’s running late, a repairman should call to reschedule an appointment at the customer’s convenience. Cable executives argue that deregulation allowed them to raise rates enough to improve their systems and invest heavily in new programming.

“In the past, municipalities and local governments were not able to handle rate regulation in a responsible manner,” contends Richard Aurelio, president of Time Warner’s New York City Cable Group, which is spending $200 million to rebuild the Manhattan systems. “No local politician likes to vote for rate increases--it’s a no-win situation. There were cities that would not vote for rate increases even to accommodate inflation; that’s why Congress took it away from them.”

The Outlook

With leaders in both the Senate and House subcommittees saying that they would like to move legislation soon and the FCC preparing its report, there is a possibility that a bill could be passed this year, although the extent of re-regulation and which agency would regulate have to be resolved.

“If this were just a question of two industries squaring off against each other, I don’t think any legislation would have a chance” of such quick passage, says Connolly of the House committee. “The real force behind this is consumers complaining to congressmen.”

The bill before Congress that is currently receiving the most attention is the draft bill prepared by the Senate Commerce Committee staff, which would reinstitute rate regulation, giving most of the regulatory authority to the Federal Communications Commission.

Ironically, cable may find an unexpected ally against re-regulation among its new competitors. Direct satellite broadcasting has been mentioned as a competitor to cable for many years, and the recently announced Sky Cable from Rupert Murdoch’s News Corp., NBC and other companies is an ambitious new venture utilizing this delivery technology. Sky Cable executives say that they will offer 108 channels by 1993.

How quickly such new ventures will spread is one point of debate in the current consideration of deregulation. Another is the possible entry of telephone companies into cable TV as competitors in the signal-delivery business.

But even with the prospect of new competitors in the future, the cable industry may not be able to forestall legislation.

“While competition is clearly the preferable choice,” Rep. Edward Markey (D-Mass.) said at a recent hearing, “until there is a truly competitive marketplace, some form of re-regulation is necessary to protect consumers.”

Even cable industry executives seem somewhat resigned to the eventual passage of some re-regulation legislation.

“There does appear as if there will be some degree of re-regulation,” concedes the NCTA’s Mooney. “The record of the cable industry is basically very positive, and what we’re urging is that (legislation) be rational and whatever is minimally necessary to achieve the purpose.”

The Resources

In addition to the lawmakers sponsoring bills in Congress, those who have called for the re-regulation of cable include the National Assn. of Broadcasters, which represents the major broadcast networks and hundreds of local TV and radio stations; the Consumer Federation of America, an advocacy group that claims more than 50 million members, and the National League of Cities, which represents 1,400 cities and 49 state municipal associations.

Opposition to re-regulation is led by the NCTA, which represents both cable operators and cable-programming networks.