Cable on Defensive : Rates, Uneven Service Anger Many

Cable mogul Ted Turner was the star guest at a party hosted by the Southern California Cable TV Assn. last year when he was asked to give a little after-dinner pep talk. Such moments are by custom reserved for the warm glow of self-congratulations.

“Los Angeles has the worst cable service I ever saw,” Turner announced to the stunned party, explaining that he watched TV at fiancee Jane Fonda’s Westside home. “I don’t know who the cable company is, but the picture’s lousy.”

The next day, Century Cable--the company serving West Los Angeles--dispatched three trucks and a dozen repairmen to fix the problem, which was due to old wiring in Fonda’s home.

For the less than rich and famous, though, such problems are not so easily resolved. Both the public and lawmakers are growing restive over the cable industry’s high prices and sometimes-shoddy service.

Indeed, the cable industry, which just concluded its annual trade show in Anaheim, is caught in an uncomfortable paradox: Profits are fatter than ever after a decade of surging growth, but the future is clouded by the possibility that a new round of regulations will once again cap how much can be charged for basic service.

In the five years since the industry was deregulated, cable TV rates have doubled and tripled in many parts of the country. In the city of Los Angeles, for example, where nine cable operators across 14 franchises have a total of 500,000 subscribers, cable rates have soared 107% since deregulation.

And the growing cadre of consumer groups and public officials who favor new rules have other complaints as well. “Not only is it a question of rates,” says Sylvia M. Siegel, a Marin County-based consumer activist who founded Consumer Cable Cop to keep tabs on the state’s $1.3-billion cable industry. “But it’s the arrogance and failure to observe good business practices.”

Nationwide, cable rates for the lowest-priced basic service have jumped 61% since January, 1987, according to the General Accounting Office. A survey released this summer by the National League of Cities reported that 59% of local cable systems hiked rates 10% or more in 1990, while one in four cut the number of channels offered as basic service.

Fueling the fires of discontent in Southern California was a decision two weeks ago by Century Cable, which serves Sherman Oaks, Eagle Rock and parts of West Los Angeles, to hike its rates for basic service 14% to $24.20 per month.

Mayor Tom Bradley, along with Councilman Zev Yaroslavsky, announced that the city’s Telecommunications Commission would hold public hearings in mid-December about the rate hikes and service issues.

Bradley proclaimed the rate hike “simply outrageous,” especially since it came on the heels of the cable lobby’s successful fight against a city proposal to levy a 10% tax on cable companies. The industry had threatened to pass the tax along to subscribers.

Bill Rosendahl, a former political aide in the Carter White House who runs Century Cable, says operating costs have risen substantially due to a $50-million investment in plant and hiring. “Improved customer service costs money,” he explains.

The cable industry is clearly on the defensive, despite the fact that it has ridden through the recession--which has battered most media businesses--largely unscathed. A bill that would impose new regulations on cable TV is expected to be debated in the U.S. Senate early next year, and three similar measures are under consideration in the House.

At the Anaheim convention, which attracted 10,000, the cable industry said broadcasters, phone companies and public interest groups are the ones pushing re-regulation.

“The longer this debate over cable re-regulation goes on and the closer it gets to Election Day, the more Draconian could be the outcome,” said William R. Cullen, senior vice chairman of United Artists Cable and chairman of the California Cable TV Assn.

Cable companies face a new threat from their long-time nemeses, the telephone companies, who have made significant inroads in changing laws that bar them from the TV business.

Cable operators argue that deregulation has allowed them to make the investments in programming and equipment that subscribers demand.

“There is a misunderstanding that is affecting the cable industry in Washington and locally,” maintains Marc Nathanson, chairman of Los Angeles-based Falcon Cable TV.

Nathanson says popular cable networks such as ESPN, which paid $450 million for a Sunday night NFL package, or TNT, which paid $275 million for a four-year NBA contract, are passing along increased costs to local cable system operators, who in turn hike rates.

To counter growing hostility, the cable industry has dispatched two of its most powerful and persuasive executives--Tele-Communications Inc.’s John Malone and Turner--to meet with editorial boards of newspapers around the country to press the case against re-regulation.

Similar high-level lobbying has been going on all year in Congress, state capitols and county supervisors’ offices. And the National Cable TV Assn. is spending $10 million on an image-building campaign.

But most cable executives accept re-regulation as a given. The crucial question is how strict the new rules will be.

Soaring Cable Rates

Since cable deregulation went into effect in January, 1987, average basic cable TV rates among the 14 cable TV franchises in the city of Low Angeles have jumped 107%.

Source: Office of Telecommunications

Orange County Cable Companies

Company: Basic Rate

Cablevision of Orange: $19.90

Century Cable: $16.45

Comcast Cablevision: $22.45

Continental Cablevision: $22.95

Copley/Colony: $21.95

Dimension Cable: $21.77

Multivision Cable: $23.25

Paragon Cable: $23.95

Community Cablevision: $24.45

Source: Office of Telecommunications