FCC Is Asked to Freeze Rising Cable TV Rates

Alarmed at skyrocketing cable rates, two leading consumer groups on Tuesday asked the Federal Communications Commission to freeze cable TV prices and save subscribers $1 billion a year in monthly fees.

The 31-page petition by the Consumer Federation of American and Consumers Union, which publishes Consumer Reports, portends a new round of legal challenges to the cable industry, which controls more than 85% of the subscription television business.

The House Judiciary Committee plans to explore the issue today when it summons FCC Chairman Reed Hundt and several industry officials to Capitol Hill to answer tough questions on the state of competition in the industry.

Meanwhile, cable rivals, including regional Bell companies Ameritech Corp., BellSouth Corp. and direct-broadcast satellite operator DirecTV Inc., have filed or are preparing to file challenges against the industry with the FCC or in the courts.

“Consumers, in many cases, have a legitimate gripe,” said Rep. W.J. “Billy” Tauzin (R-La.), chairman of the House Commerce Subcommittee on Telecommunications. “The FCC has the current authority to issue a freeze on cable TV rates, and, in my opinion, the agency needs to exercise that authority in communities where people are truly getting gouged.”

The monthly rates of roughly 80% of the nation’s 65 million cable subscribers are controlled under complex rules passed by the FCC in 1994. But critics say the regulations are too generous, allowing cable operators to adjust rates for inflation, program acquisition costs and expansion of their capacity.

The FCC is examining recently obtained cable industry pricing data with an eye toward making changes, according to FCC Cable Services Bureau Chief Meredith J. Jones.

However, it appears unlikely that the FCC will act this year, according to an agency commissioner speaking anonymously. The commissioner said action on cable rates would probably await approval of a new FCC chairman and a slate of three other nominees, whose Senate confirmation hearings are scheduled to begin next week.

But Consumers Union and the Consumer Federation of America accused the industry of greed, saying cable prices have increased about 8.2% a year since February 1996, or about 50% faster than the FCC predicted when it implemented price controls.

“We are asking the FCC to scrap its current worthless regulation,” said Gene Kimmelman, co-director of the Washington office of Consumers Union. “Cable rates, since February 1996, are rising faster than they ever have in history.”

Despite the outcry from cable competitors and consumer groups, cable subscribers themselves don’t yet appear to be up in arms over rising rates.

The industry reports that cable’s lure remains strong, with the number of subscribers growing from 63.4 million in May 1996 to more than 65 million today. And FCC spokesman Morgan Broman said the agency has received just 375 formal complaints about cable rates in the last 18 months, compared with “thousands of complaints,” before Congress established more stringent complaint procedures in February 1996.

The rising cost of cable is further complicated, critics say, because competitors cannot get equal access to video programming. They say some cable operators are exploiting legal loopholes to strike exclusive programming deals.

Under these deals, cable companies deny rival satellite operators programming that they control. The FCC has warned that it would be concerned about such practices.

But that’s just what Comcast, the nation’s third-largest cable operator, plans to do next month, when it switches to a fiber-optic distribution network, instead of satellites, to launch a regional sports network. The network would be headlined by the Philadelphia 76ers basketball team and the Philadelphia Flyers hockey franchise, both of which Comcast owns.

DirecTV filed a complaint with the FCC on Tuesday alleging that Comcast “engaged in unfair methods of competition” by refusing to make “its new regional sports network available to DirecTV for distribution to its subscribers in the Philadelphia area.”

Comcast officials could not be reached for comment.

But the industry defends its practices by saying looming competition dictates that it act aggressively to upgrade its systems with fiber-optic cable and other costly technologies to better compete with new rivals such as satellite video operators, which can beam as many as 150 channels to viewers.

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Cable Costs

The Average monthly rate for basic cable TV service has more than doubled in the last 10 years.

1997*: $25.87

* Consumers Union estimate through August.

Sources: Consumers Union, Paul Kagan & Associates

Researched by JENNIFER OLDHAM / Los Angeles Times