FCC Gives Cities New Power Over Cable-TV Rates

The Federal Communications Commission on Thursday adopted regulations that would give local cities and towns greater authority in controlling cable-TV rates, but most cable systems in Southern California and major metropolitan areas would not be affected.

Skyrocketing monthly fees and a flood of complaints about poor service have spurred both the FCC and Congress to take another look at 4-year-old legislation that freed the cable industry from local rate regulation.

Now, 97% of the nation’s 9,600 cable-TV systems are exempt from any kind of price controls. But under new rules backed by the Bush Administration and voted unanimously by the FCC, local governments would be able to control the prices charged by about 60% of the cable systems in the country.

The rules would allow only cable-TV systems facing competition from at least six over-the-air broadcast stations to avoid regulation from local city councils or franchising authorities. Virtually all the cable systems in Southern California, where there are more than a dozen over-the-air TV signals, would continue to be free from any rate regulation.

“The FCC effectively has done nothing,” said Susan Herman, general manager of the Los Angeles Department of Telecommunications. “These new rules have no teeth and provide no protection for consumers from escalating cable rates.”

The cable industry has lobbied against any reregulation of local rates on the ground that it needs to pass along the costs of upgrading the systems and improving the quality of programming that subscribers want.

“Without the ability to increase rates at will or based on market conditions--and subject to market forces--a cable system either would not be able to justify adding a new service or may be forced to drop” one if it becomes too expensive, said William R. Cullen, senior vice president of United Artists Cable Corp., which operates systems totaling 165,000 cable subscribers in Los Angeles.

Previously, cable-TV systems were only subject to local rate regulation if they faced competition from three over-the-air stations. Such a standard exempted the overwhelming majority of cable systems across the country from local price controls.

In the city of Los Angeles--which oversees about 500,000 cable subscribers in 13 different franchises--cable rates have soared 94% since deregulation went into effect in January, 1987, Herman said. The price of basic service without a converter increased to an average of $20.42 per month from $10.54.

That survey, prepared by the Assn. of Telecommunications Officers & Advisers, an affiliate of the National League of Cities, showed that 59% of cable-TV operators raised rates 10% or more in 1990 and that one in four cut back the number of channels in its basic service.

In anticipation of the FCC’s action on Thursday, the cable industry for more than a year has been moving to restructure how it offers packages of channels to local subscribers. The 1984 Cable Act, which set the stage for deregulation of the industry two years later, restricted the FCC to regulating only the lowest tier of basic service, which primarily includes local, over-the-air TV stations.

As a result, cable companies have been “retiering” packages of channels that have removed such popular cable networks as ESPN, USA Network, CNN and the Discovery Channel from basic service and into a new “expanded basic” tier, which is not subject to regulation. The FCC’s decision “does nothing to prevent cable companies from gouging consumers by overcharging for the most popular cable programming,” said Gene Kimmelman, legislative director for the Consumer Federation of America.

The cable companies say they have retiered because the programming services have increased their wholesale rates to the cable operator, which pass along the increase to the subscribers.

But Timothy A. Boggs, vice president of public affairs for Time Warner Inc., which is the second-largest operator of cable-TV systems in the country, said cable rates rose suddenly because they were kept artificially low before deregulation in 1987.