FCC probes cable rates

Various 'remedies' discussed; action will likely come in '98

WASHINGTON — Soaring cable rates may have earned cablers kudos on Wall Street, but they have also stirred up a hornets’ nest in Washington, where the Federal Communications Commission has begun debating a host of “remedies” ranging from a “modified freeze” to new ownership restrictions.

At an unusual hearing, the five FCC commissioners heard testimony Thursday from consumer advocates, cable industry reps and cable competitors. The hearing focused on double-digit hikes in monthly cable bills and claims that concentration is allowing cablers to raise rates with impunity.

The Consumers Union’s Gene Kimmleman reported that subscriber fees are rising at four times the rate of inflation. Kimmleman, whose organization has formally petitioned the FCC to freeze rates, said the industry’s ability to raise rates is directly related to market power of companies like Time Warner and Tele-Communications Inc., which not only control collectively almost 50% of cable homes, but also a large percentage of cable’s programming.

Kimmleman said Time Warner and TCI’s market position gives them “the classic opportunity” to drive up the cost of programming, which they further exploit through their control of cable’s distribution system.

Commissioner Susan Ness seemed to follow Kimmleman’s line of thought during her own questioning of National Cable Television Assn. prexy Decker Anstrom. “Is it not the case that most of the cable systems today are owned by a handful of companies and a lot of the programming is vertically integrated?” asked Ness, adding, “And they have the market power to get their programming on the cable systems and the ability to pass through costs” to subscribers.

Anstrom countered that the cable industry is less concentrated than it was four years ago. According to Anstrom, 40% of cable programming is currently owned by cable system operators, as opposed to 60% four years ago. Anstrom also testified that the cable industry is well within the normal range of ownership concentration as defined by standards used by the Justice Dept.’s antitrust division.

Checking options

For his part, FCC chairman William Kennard said Thursday that he wanted to look at a variety of options, including a “modified rate freeze.” Kennard’s chief of staff John Nakahata said Thursday that a modified freeze could focus on those cable systems that hike rates to the most egregious levels. “The chairman wants to have a full range of options on the table including a potential modified freeze that focuses on bad actors,” said Nakahata.

Ness called a rate freeze “a last resort” but did not rule it out. In addition to Ness and Kennard, the third Democrat on the commission, Gloria Tristani, also said she wanted to take a look at a rate freeze as a possible solution to rising fees.

With Congress out of town, the FCC is not likely to take any action until the New Year. But Washington insiders will be watching proposed legislation by Rep. Ed Markey (D-Mass.) closely. The bill would temporarily freeze rates at their current levels. If the bill gains widespread support when Congress returns in January, it may give the FCC the political courage to move forward.

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