Even as TCI was gloomily predicting that cable reregulation would cost the company up to $ 160 million in annual revenues, consumer groups Wednesday asked the FCC to allow all cable customers immediately to begin withholding 15% from their monthly bills.
The consumer petition is based on the Federal Communications Commission’s April decision to roll back cable rates as much as $ 1 billion to $ 1.5 billion, or 10% to 15% nationwide. After wrangling between the agency and Congress, the new rules take effect Sept. 1.
TCI officials made their announcement via a satellite hookup to D.C. Barney Schotters, senior veepee of finance for the Denver-based company, called the $ 140 million to $ 160 million revenue loss “significant but not lethal.”
In a meeting Monday with Wall Street analysts, Schotters said TCI wouldn’t be hurt as badly as some other cablers.
TCI’s total revenue last year was $ 4.1 billion, according to Schotters. The loss in revenues would amount to almost 4% of the company’s total.
Company exec Barry Marshall said TCI will “do everything in our power” to recover the loss, including offering deep discounts on the price of HBO and other premium cable channels to lure new subscribers to make up the difference, as well as expanding the company’s pay-per-view offerings and moving more aggressively toward a la carte program pricing. (Prices for premium and PPV channels are not regulated by the FCC.)
Bradley Stillman, legislative counsel for the Consumer Federation of America, told the FCC, “Unless the FCC acts immediately, consumers are going to lose up to $ 200 million between now and Sept. 1 from cable service overcharges. The proposal … put forth would bring cable subscribers the rate relief they are entitled to.”
Under the proposal, cable customers could immediately begin deducting 15% from the monthly price of their bill, excluding the price for pay channels such as HBO and pay-per-view. The discounts would remain in effect until the FCC rate rules take effect. Subscribers who withhold the coin would be required to write on their check or payment stub “15% withheld pending FCC action.”
Under the proposal, cable companies would be barred from assessing late fees or from terminating service to customers who take the 15% discounts.
Cable rebates being formulated by the FCC are not expected to show up on customer bills until next year, in part because of a complex “benchmark” pricing scheme that requires each cable system in the nation to determine the monthly price that may be charged.
The consumer group petition states that if a company’s rates do not drop as much as expected after the FCC rules take effect, then cable customers withholding 15% of their payments will be held liable for returning the money.
Most Telecommunications Inc. customers will begin seeing lower bills when new rate rules take effect Sept. 1, company officials said.
About 75% of all TCI cable systems will be forced to roll back cable rates.
TCI management declined to speculate on the amount of rate rebates; however, there is speculation the reduction will be in the $ 1-per-month range for the typical TCI customer.
Schotters said TCI reported a $ 52 million profit in the first quarter of 1993, the first such profit in four years. Given the loss in revs forecast Wednesday, it’s questionable whether TCI will be profitable for all of 1993, Schotters said.
Snipe at CBS
In a dig at CBS, which fought vigorously for passage of the 1992 Cable Act, TCI vice prez of government affairs Bob Thomson said a drop of $ 160 million would amount to “twice the reported profit of CBS in 1992.”
TCI officials also reported that about half of the approximately 18,000 TV stations carried on TCI cable systems have opted for “must-carry” protection ensuring continued carriage of the station.
TCI has entered into a retransmission consent deal with only about 150 of the 9,000 TV stations that have invoked retrans, according to Thomson.
TCI exex reiterated their pledge not to make direct cash payments to TV stations for their signal.