With the cable TV industry reeling from forced rate reductions of 17%, Federal Communications Commission Chairman Reed Hundt told industry executives Tuesday that he foresees no further cuts.
"I know of no evidence to support a further reduction . . . and we are not looking for such evidence," Hundt said, seeking to ease concerns of cable executives.
Hundt said he has "sympathy and concern" for the plight of cable operators who complained that the rollbacks have handicapped them in the race to build the information superhighway. At the same time, he defended the rollbacks, arguing that the industry is extremely healthy and that the new regulations will help promote competition.
"I'm not here to eulogize at your wake," Hundt said.
Hundt also indicated that the FCC will not enact a so-called productivity offset that could have forced many cable company operators to scale back rates another 2%, largely wiping out increases they can pass along to subscribers because of inflation.
"This sort of offset is generally found in the regulations of a utility, but cable is not a utility," he said.
The cable industry has been vociferous in its complaints about the new rollbacks, claiming the cuts will cost it about $3 billion a year in cash flow. The reduction in cash flow will in turn prevent operators from borrowing money to invest the capital for the building of the broad-band, 500-channel TV system of the future that is supposed to offer customers a panoply of new home shopping services, movies on demand and video games.
The reaction among cable operators to Hundt's remarks was optimistic but cautious.
"This is good, but God is in the details," said Tim Boggs, a vice president at Time Warner Inc., the second-largest cable operator.
Indeed, Hundt offered few specifics about the kind of "refinement" the FCC has in mind for its implementation of the rate rollbacks mandated by Congress in 1992. He acknowledged, however, that the FCC is looking for "programming incentives" that would encourage operators to add channels while keeping some flexibility in pricing.
Cable TV stocks appeared to react favorably to the news.
Comcast Corp., the country's fourth-largest operator, saw its Class A stock jump $1.75 a share Tuesday to $17.125 in Nasdaq trading. Cable stock prices have been so depressed that Comcast last week reduced the price of a $200-million offering to finance its United Kingdom cable systems to a range of $14.50 to $15.50, down from the original asking price of $16 to $18 a share for 11.7 million shares. The company may pull the offering altogether, or may sell 8 million shares at $13 per share.