Cable Rates Cut Again : Consumers: The 7% reduction, the FCC’s second in less than a year, follows complaints that first rollback was ineffective.

Federal regulators voted unanimously Tuesday to order a new round of cable television rate cuts, slashing another 7% after a previous round of cuts partially backfired.

The government’s second attempt in less than a year to lower prices for the nation’s 58 million cable subscribers comes after consumers and economists criticized the Federal Communications Commission over the effectiveness of the first rate cut, which unexpectedly produced increases in monthly fees for millions of subscribers.

The new rules, which impose an overall 17% rate reduction--an additional 7% on top of last year’s 10% cut--could complicate ambitious plans announced by many cable companies, such as Tele-Communications Inc. and Time Warner Inc., to spend billions of dollars to replace their copper wires with higher-capacity fiber-optic cable.

Peggy M. Keegan, a vice president of the California Cable TV Assn., said the rollback could hamper the industry’s ability to compete against emerging competitors such as regional telephone companies and even newer providers that plan to deliver cable programming to consumers via satellite, microwave and other technologies.

But many consumer advocates praised the FCC’s decision.

“It looks like it’s a moderate victory for consumers,” said Bradley Stillman, legislative director for the Consumer Federation of America.

Susan Herman, general manager for the Los Angeles Department of Telecommunications, which regulates cable providers, said the FCC’s first attempt at rate regulation left too many loopholes.

Century Cable, for example, which serves parts of West Los Angeles, Sherman Oaks and Eagle Rock, used the new rules to reduce the number of channels on its basic service, choosing instead to offer several “a la carte” packages for which subscribers had to pay extra, Herman said, adding, “It was a way to charge consumers more for less.”

Century officials were unavailable for comment Tuesday.

Since Sept. 1, Los Angeles residents have seen their rates go up an average of 80 cents a month, while the number of channels provided fell, on average, from 44 to 42, Herman said. Lee Risner, city manager of La Habra, said he has received nearly 300 complaints about higher cable bills since September.

But things may be different this time.

“The FCC seems to have recognized that the rates they set the first time around were in essence too low, and made it too easy for cable companies to evade the intent of the law,” Herman said. “Consumers were really beginning to feel gouged.”

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Now it’s the cable operators’ turn to feel gouged. Says Marc Nathanson, head of Los Angeles-based Falcon Cable, the state’s largest independent cable operator: “It’s like rent control coming into your building.”

Nathanson, whose firm serves subscribers in Malibu and San Bernardino, said consumers may lose out in the long term as cable operators are forced to scale back plans to upgrade plants and provide expanded services such as multichannel pay-per-view and interactive entertainment, news and educational programming.

Like many other cable operators, Falcon is planning to upgrade its network with fiber optics that can squeeze 300 channels into the space once occupied by 50, at a cost of $300 to $600 per subscriber.

Nathanson blamed the “idiotically written bill” for the fact that rates went up for 30% of his customers. The original ruling prevented operators from charging for extra outlets and remote controls. As a result, most of the subscribers whose rates went down were those who had multiple televisions, and those whose went up were the ones who could least afford it, Nathanson said.

The FCC on Tuesday closed many loopholes that had allowed cable operators to boost monthly fees. But last-minute lobbying by cable operators won concessions for small cable operators. And reconfiguration of cable program packages may mean not all consumers will see a 7% drop once the latest price cut takes effect in May.

Nevertheless, FCC Chairman Reed E. Hundt, asserting that the government has finally “broken the back of cable price increases,” claimed the new rules will save consumers $3 billion a year and will be backed by tough enforcement measures against violators.

“This is the greatest consumer savings in the history of American business regulation,” Hundt said.

Despite the sweeping claim, the complex new cable rules could end up creating more confusion and delivering less than advertised.

About 10% of the nation’s 11,000 cable operators already charge prices below the new ceiling, so they can maintain their prices. And 3 million cable subscribers get service from small operators, who will not immediately face pricing restrictions.

In addition, the new rules apply only to cable systems not subject to effective competition. Currently only a handful of communities, including about 12 in California, have effective competition in the form of two or more cable systems serving the same area.

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But emerging competitors, such as Hughes Aircraft Co.’s new direct-broadcast satellite system, could be operating in many communities soon.

What’s more, like the previous rules, the new regulations cover only basic cable, a level that ordinarily includes local broadcast channels and public access and government channels. The regulation of basic rates would be handled by local officials after they request, as Los Angeles has done, permission from the FCC. Prices for premium channels and pay-per-view events remain unregulated.

Sandy Wilson, acting head of the FCC’s cable services bureau, said the agency will apply its new pricing rules to non-premium cable channels such as CNN and MTV. And, she said, the agency will order sanctions against cable operators that reconfigure their program packages not to “enhance customer choice” but “to evade pricing regulation.”

Upset by escalating rates and poor service, Congress passed a cable act in 1992 with the intent of mandating service improvements, lower prices and more competition. When the FCC announced a rollback of cable rates last April--mandated by the act--the agency said its goal was to cut cable bills an average of 10% and save consumers $1 billion a year.

In the 10 months following those cuts, the nation’s 25 largest cable operators reported to the FCC that the average regulated revenue per subscriber declined to $24.11 per month from $25.61, a drop of 5.9%.

Still, the FCC survey of these 25 cable operators found that 30.5% of their subscribers received increases in their regulated cable fee.

Financial markets on Tuesday appeared little affected by the FCC’s decision, largely because, analysts said, investors had anticipated the rate cut. Analysts said the rate cuts will cost cable companies about $600 million a year in revenue. Cable revenues have already dropped by about $2 billion since the rate rules were imposed last fall.

Shiver reported from Washington, Harmon from Los Angeles. Staff writer Anne Michaud in Orange County also contributed to this report.

The Cost of Cable

Here’s how the previous round of FCC-ordered cuts affected Los Angeles franchises. Figures are for basic service only; individual rates may have increased for additional channels and services.

Rate Rate before after Net Percent Company Sept. 1 Sept. 1 change change Cablevision (West Valley) $26.15 $22.43 -$3.72 -14.23% King (Sylmar) 22.52 20.63 -1.89 -8.39 United (Van Nuys) 19.40 22.07 +1.23 +13.76 King (Sunland) 22.52 20.63 -1.89 -8.39 Falcon (Malibu) 31.93 31.92 -0.01 -0.03 Century (West L.A., 25.40 24.67 -0.73 -2.87 Sherman Oaks, Eagle Rock) Continental (Hollywood) 23.35 22.04 -1.31 -5.61 Continental (Westchester) 20.95 22.61 +1.66 +7.92 Continental (South-Central) 23.00 20.86 -2.14 -9.30 Buenavision (Boyle Heights) 18.90 21.90 +3.00 +15.87 Copley/Colony (Harbor) 24.94 19.20 -5.74 -23.02 Times Mirror (Rolling Hills) 22.58 22.04 -0.54 -2.39 Average 23.75 22.88 -0.87 -3.66

Source: City of Los Angeles, Department of Telecommunications

Cable Rules

Here’s what the FCC action would do:

* Continue a previously announced freeze on cable rates until mid-May, when the rules approved Tuesday would take effect. However, the freeze is being contested in court by the cable industry.

* Reduce basic cable rates by about $3 billion a year by rolling back cable rates as much as 17% below the levels of Sept. 30, 1992.

* Continue a certification process under which local jurisdictions can request authority to regulate basic cable rates or relinquish the authority to the Federal Communications Commission.

* Expand the definition of “small cable operator” from those serving 1,000 or fewer subscribers to those serving 15,000 or fewer. These operators would not immediately be subject to the new rules but would be phased into compliance over time.

* Revise the FCC’s treatment of cable operators that reconfigure programming into “a la carte” cable channels. The agency wants to ensure that the marketing of channels in this fashion is designed to enhance subscriber choice rather than evade rate regulation.