FCC Orders Rollback of Cable TV Fees

The Federal Communications Commission Thursday ordered the nation’s cable TV operators to roll back their rates, a move expected to save America’s 57 million cable households $1 billion a year.

Most customers should begin seeing a $1 to $3 reduction in their monthly cable bill by August, FCC officials said. Further price scrutiny by the FCC and new restrictions the agency has imposed on cable operators could lead to additional rate cuts later on.

The FCC move to clamp a lid on soaring cable rates marks a return to regulation for an industry that enjoys a monopoly in local markets but was deregulated in 1986.

“There were no perfect answers to this complex issue,” interim FCC Chairman James H. Quello said before voting to approve the new rate restrictions.

Overriding a veto by President George Bush, Congress last October ordered the FCC to lower cable rates, which have continued to rise since then. The FCC action Thursday will roll back rates to their Sept. 30, 1992, level--a reduction on average of 3% to 5%, agency officials said.

The cable industry attacked Thursday’s ruling, warning that big rate reductions could hamper companies’ ability to repay bank loans, invest in programming and offer advanced new services such as interactive cable systems that boast 500 channels or more.

Denver-based Tele-Communications Inc., the nation’s biggest cable operator, hinted at a possible legal challenge. Wall Street also took a dim view, pummeling shares in companies with large cable interests.

Lawmakers and consumer groups, meanwhile, complained that the FCC didn’t go far enough.

“It’s a step in the right direction, but we are disappointed that the rate reductions were not larger; we think rate reductions of 30% were justified,” said Gene Kimmelman, legislative director of the Consumer Federation of America, a Washington coalition of 240 consumer groups.

Rep. Edward J. Markey, the Massachusetts Democrat who chairs the powerful House subcommittee on telecommunications and finance, said he also would “like to have seen the FCC’s rate rollbacks go even further.”

Sen. Joseph I. Lieberman (D-Conn.), called the FCC’s action “a good first step” but added that “it cannot be the last step. The FCC’s own data shows that monopoly (cable) systems charged, on average, 27% more than systems with head-to-head competition.”

The FCC said the rate reduction will affect only “basic” cable service, such as retransmissions of local broadcast stations and public access. It won’t apply to pay-per-view channels that show professional boxing and other special events, or to premium channels such as HBO and Showtime.

That provision could allow cable companies to profitably reorganize the basic services they offer now, which often include CNN, MTV and other popular add-ons. By offering those separately, cable operators could reduce their regulated business to a bare-bones service.

Prices for the add-ons could then rise free of regulation, said Doug Webbink, the FCC chief of policy and rules in the agency’s Mass Media Bureau.

He added that the agency has already heard reports that the Disney Channel and some other popular cable programs have been offered on a pay-per-view basis.

Nevertheless, on Wall Street the FCC’s decision helped extend a financial slide that has sent cable stocks plunging more than 15% in the last two weeks. In Thursday’s trading, Time Warner Inc. slumped $1.625 to $33.125, Comcast Corp. lost $2.50 to $20.875 and Tele-Communications lost $2, to close at $20.50.

One reason might be that the FCC on Thursday also required that cable networks such as CNN, HBO and MTV make their programming available to cable competitors such as satellite and microwave broadcasters. The FCC’s action in this regard is expected to intensify the competition facing the 11,000 cable systems.

Eventually consumers could see still lower cable rates. The FCC on Thursday voted to limit cable company equipment charges to actual cost, for example, which could lower monthly charges for cable converter boxes and remote controls.

Cable operators were sharply critical. The FCC has “imposed heavy-handed regulation on programming services and new technology that was not contemplated by Congress,” said Bob Thomson, a senior vice president at Tele-Communications.

The National Cable Television Assn., a trade group, also voiced disapproval. “These rules will make it very difficult for us to satisfy the expectations of our subscribers for quality programming and service,” said NCTA President James P. Mooney.

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