FCC Claims Big Drop in Cable Subscriber Rates

A new Federal Communications Commission survey shows that cable television rates in the nation’s 25 largest cities have fallen 8.49% since August, leading agency Chairman Reed Hundt to declare, “Cable hyper-inflation is dead and gone.”

The FCC said its survey, which examined 43 cable systems in Los Angeles, San Diego, San Francisco and 22 other cities, found rates declined from an average of $25.17 a month to $23.50 as a result of new and controversial agency regulations.

But the study, which comes almost five months after the FCC ordered a 7% cut in cable rates on top of an earlier rollback that partially backfired, is unlikely to settle the dispute over the direction of cable charges. That’s because the survey looked only at systems in large cities and does not represent a true cross-section of the U.S. cable industry.

Many consumer groups had complained that after years of stiff fee increases and poor service, cable operators were still increasing rates by circumventing FCC regulations. Cable companies had allegedly changed their definitions of basic service and sharply increased charges for some pay services to counteract the mandatory cuts in basic service rates.

However, the second round of regulations, which cover pricing of equipment--converters and remote controls--as well as cable programming other than pay-per-view and premium channels, appears to have slowed efforts to reconfigure basic cable service, said Kathleen Wallman, deputy chief of the Cable Services Bureau.

“I’m not aware of much activity in that regard anymore,” Wallman said.

Cable operators, meanwhile, say the rate rollbacks, which the FCC predicted would save consumers $3 billion a year, are complicating the industry’s ambitious plans to spend billions of dollars to upgrade their systems with fiber-optic cable.

“As the cable industry has been saying all along, and as this report confirms, these regulations have teeth,” Decker Anstrom, president of the National Cable Television Assn., said in a statement Thursday. “They have reduced rates and have taken a real bite out of cable revenues.”

FCC Chairman Hundt, who praised cable operators for their “good-faith effort to comply with the regulations,” said in an interview that it is unlikely consumers will see further cable rate reductions in the near future. “There will be annual inflation increases” until the industry faces greater competition, he said.

The FCC calculated that if the industry had continued to increase rates at an annual pre-regulation rate of nearly 6%, subscribers’ average monthly bills would have been $26.59, rather than $23.50.

“As far as we can tell, all American cable subscribers have benefited to some degree,” Hundt said.

Under the FCC’s rules, however, not all systems are regulated in the same way. Small operators and those with low monthly rates are not required to move their rates down to the new regulated levels. Other systems can charge higher rates if they can demonstrate that they face unusual business costs.

In addition, a small number of systems surveyed are unregulated, either because they face effective competition from another program provider or because the municipality has not received FCC certification to administer the rate rules and no consumer complaint over rates has been filed with the FCC.

Although rates on unregulated systems increased only 3.53% on average since August, one system--Insight Cablevision of Phoenix--boosted its bargain $3.95-a-month basic cable rate to $9.15, a 132% jump.

In Los Angeles, Century Cable’s rates actually rose 7.76% since August, from $25.40 to $27.37. In San Diego, they fell 8.98% on Cox Cable systems and 5.48% on Time Warner systems.