Banks send up red flag on new cable rate regs

Some of the nation’s top banks have fired off a letter to the FCC warning of bankruptcies and tighter credit in the cable industry unless cable rate regulation rules are modified.

The missive, spearheaded by New York-based Bank of New York and Charlotte, N.C.-based NationsBank, asked the FCC to reconsider rules that are expected to result in a rollback of cable TV prices by as much as 10%-15% nationwide.

The letter stated that new bank financing “will be inaccessible to most cable operators” until the effect of FCC rate rules become clearer. Moreover, rate cuts ordered by the FCC “threaten to place many cable system operators in default” of loan agreements since the loans were based on expected steady cash flow, according to the letter.

“While the strongest cable operators will have financing options, the smaller … operators will find all forms of capital elusive,” the letter predicted.

The bank letter comes as the cable industry is engaged in a full-court press to water down the impact of the FCC’s staggeringly complex rate regulation scheme. The banks that signed the letter claimed they have lending commitments of $ 17.1 billion to the cable industry.

Among the other banks that signed the letter are Bank of America, Citibank, the First National Bank of Boston, the First National Bank of Chicago, Mellon Bank and Morgan Guaranty Trust of New York.