Plugging In to the Cost of Cable TV : Entertainment: The Senate is expected to pass a bill allowing local governments to put price controls on basic service and setting growth limits on cable operators.

The U.S. Senate is about to come to the rescue of Carol Hahn.

The Los Feliz resident has seen her cable TV fee more than double since 1987. Her monthly cable bill is now higher than what she pays for gas, electricity or the telephone.

Century Cable TV last month slapped Hahn and other subscribers with a 14% increase, the sixth rate hike in five years.

“People on fixed incomes, like the elderly, cannot afford it,” she fumes. “I pay $24.20 now, but you can be sure by next fall it’s going to be near $27.00. It’s out of control.”

After three years of debate and political maneuvering, the U.S. Senate is expected this week to pass a new cable TV re-regulation bill that would allow local governments to put price controls on basic service and set growth limits on cable operators.

But thanks to savvy political lobbying by the broadcasting industry, the bill also contains provisions that could force local TV stations off cable systems, replacing such popular shows as “Murphy Brown” and “The Simpsons” with the Home Shopping Network or The Sci Fi Channel.

The bill, referred to as S. 12 in the cable industry, “invites a game of chicken between the cable operator and the broadcaster,” warns Decker Anstrom, executive vice president of the National Cable TV Assn. in Washington.

Cable re-regulation has been a volatile issue among legislators for several years, shortly after the industry was deregulated by Congress in 1987.

In the wake of deregulation, cable TV rates more than doubled in many cities across the country, drawing fire from critics who claimed that the industry was wielding its power as a virtual monopoly to gouge consumers with unfair hike rates.

Now, after years of delay caused by lobbying, many in the cable industry expect the Senate to pass a new re-regulation bill this week.

Even the normally reserved powerful cable TV lobby expects some kind of measure to be adopted. “It’s likely something very similar to S. 12 will pass the Senate,” Anstrom says.

There are two versions of the bill up for consideration, although either could be amended before voting takes place this week.

The original bill includes measures to set price controls on basic cable rates and, under some circumstances, higher tiers of service. To promote more competition, it would also forbid cable networks from denying their programming to rival services.

A substitute bill--which also has the tacit endorsement of the White House--proposes less stringent price controls and would not compel cable networks to sell their programming to other distributors.

No matter which variant is adopted, the cable industry says that new regulations will stifle continued investments in programming that subscribers have come to expect. Over the last several years, cable networks such as ESPN and TNT have made substantial expenditures for movies and sports events, the costs of which have been passed along to subscribers.

“The cable industry did not pocket the money it made since deregulation,” says Marc B. Nathanson, president of Falcon Cable Systems, a Los Angeles-based operator with 900,000 subscribers. “We put it into programming, channel expansion, new equipment. The cities are demanding we rebuild. That costs lots of money, and consumers pay for that.”

Anticipating re-regulation, about 60% of the cable operators across the country have shifted popular channels such as USA Network or The Discovery Channel into a higher-priced tier not subject to price controls. The less expensive basic tier encompasses the over-the-air channels.

But critics charge that the effect of re-tiering often has been higher rates for fewer channels.

In the City of Los Angeles, three of the 10 re-tiered franchises have higher rates but as many as 10 fewer channels for the most basic level of service. Four other franchises, while charging a minimum for stripped-down basic service, have doubled the cost for the same number of channels they offered before re-tiering.

“This is a perfect example of how cable operators are attempting to avoid regulation at the expense of the consumer,” says Susan Herman, general manager of the Los Angeles Department of Telecommunications. “It shows the need for local regulation to avoid such pricing abuses.”

The cable industry is especially upset about new regulations that could force cable systems to pay for carrying local broadcast stations.

Until now, cable systems have carried local over-the-air stations without charge. But they pay anywhere from 5 cents to 25 cents per subscriber to carry cable networks such as HBO or CNN.

But local broadcasters, which have been losing viewers to cable and the emerging Fox fourth network, are looking for new sources of income to offset declining advertising revenues.

The efforts by broadcasters to secure a “dual revenue stream” from both subscribers and advertising has surfaced in an obscure but radical provision in the cable bill known as “retransmission consent” and “must carry.”

“Broadcasters have been subsidizing the cable industry,” argues Jay Kriegel, executive vice president of CBS. “They get more than 50% of its product for free.”

Retransmission consent would allow broadcasters to negotiate a fee from a local cable operator for carriage of the broadcaster’s signal. If the broadcaster chose not to negotiate, then the cable operator “must carry” the signal without charge.

The risk of the provision lies in the first option when a broadcaster chooses to seek payment. If a deal is not struck, then carriage of the signal would be dropped, leaving the operator to substitute with whatever programming was available.

The cable industry, which has waged a high-profile media blitz against retransmission consent, says the scheme will only jack up the cost of basic rates because it will have to pass along the higher costs to subscribers.

Although a U.S. Appeals Court ruled in 1985 that cable operators were not required to carry broadcast signals, nevertheless only a few systems have actually dropped TV stations from their channel lineup.

In a bill loaded with hidden agendas, one of the biggest are provisions that would forbid cable networks from selling their programming to competing and emerging video services such as satellite broadcasters or other “wireless cable” services.

Most of the popular cable networks--including HBO, CNN, Showtime, Nickelodeon, and MTV--are controlled by cable operators through myriad interlocking ownership interests among companies such as Tele-Communications Inc., Time Warner and Viacom.

The cable industry, knowing how popular many of these channels are, want to maintain program exclusivity. Also, giving competitors access to programming could trigger costly rate wars.

The programming access provisions were knocked out of the substitute cable re-regulation bill floated late last week. The cable industry has assigned the highest priority to defeating it, perhaps as a trade-off for retransmission and must-carry.

“That’s the biggest win,” observes one network lobbyist, who asked to remain anonymous. “If the phone companies are allowed into cable, then (TCI Chief Executive) John Malone doesn’t have to sell them any programming.”

Re-regulating Cable TV

The Cable Television Consumer Protection Act of 1991 (SB 12) would provide a host of new regulations for the cable TV industry. But the proposed legislation also would offer some help for broadcasters, who would be able to charge cable systems for the rights to carry their signal. Among the major provisions of the bill:

Permit cities to set “basic” cable rates for local systems not facing competition. If fewer than 30% of a cable system’s subscribers buy only the “basic tier,” then rates for the next tier can be regulated.

Allow broadcasters “retransmission consent” to negotiate a payment or other arrangement from local cable systems for carriage of local signals.

If broadcasters do not seek “retransmission consent,” it would then guarantee “must-carry” status on local cable systems and favored channel position.

Mandate the Federal Communications Commission to set a national limit on the number of subscribers a cable system operator can control. In addition, the FCC would set a cap on the number of channel positions a cable TV network can occupy on a cable system.

Forbid cable TV networks from denying access to their programming to competitors such as direct-broadcast satellites, phone companies that own cable TV systems and other “wireless cable” services.

Mandate that the FCC set national customer service standards

A less stringent cable re-regulation bill has been proposed by Sen. Robert Packwood (R-Ore.), which is backed by the White House and has received bipartisan support from Sen. John Kerry (D-Mass.). It differs from the original version of SB 12 in that it would:

Delete portions that require cable networks to sell their programming to competing services.

Prohibit rate regulation of any package above the “basic tier.”

Permit local telephone companies to own cable TV systems in their service area in communities of up to 10,000 residents, which would cover about one-third of the country. Phone companies can now only own cable TV systems in communities of fewer than 2,500 residents.

Remove the FCC’s restrictions on the networks and station group owners from owning more than 12 TV stations, 12 AM radio stations and 12 FM radio stations.

Source: Senate Commerce Committee and California Cable TV Assn.