ANAHEIM — Cable’s willingness to slap subscribers with double-digit rate hikes may be fueling the industry’s popularity on Wall Street, but unless caution is exercised immediately, Congress may not be able to resist taking another swipe at rate regulation, Time Warner vice chairman Ted Turner warned Wednesday.
“The greatest threat in the near term is some sort of rate re-regulation,” said Turner during an appearance at this week’s Western Cable Show confab.
With several major MSOs, including Turner’s own Time Warner, raising rates, Turner encouraged the industry to roll out new services carefully to ensure that consumers see the correlation between their rising rates and fancy new services such as digital channels and high-speed Internet access. “That’s the way we can forestall rate re-regulation,” said Turner.
Echoing Turner at a separate panel, Federal Communications Commission commissioner Susan Ness noted that in some cases fee increases have already caught the attention of Congress. “Congress is in an election year and is hearing from consumers that rates are way too high,” said Ness, adding that subscriber fee hikes are running in some cases three times the rate of inflation.
Congressional rhetoric about cable rates should not be taken lightly, said Ness, who compared Congressional jawboning to early warnings of an impending regulatory “tornado.” “This is a very strong word of caution,” said Ness.
Petition before FCC
Ness also noted that the FCC is currently weighing a petition filed by the Consumers Unions which asks the commission to freeze cable rates at their current levels.
Although the FCC regulated rates during 1993 and 1994, it failed to stem the tide of subscriber fee increases that continue to rise above the consumer price index. Many of those rate increases are the result of “social contracts” that former FCC chairman Reed Hundt entered into with several of the largest cable companies.
Under the contracts, the cable companies agreed to provide new services in return for permission to raise rates. After finishing cable rebuilds with expanded channel capacity in many of their systems, MSOs such as Time Warner and TCI are raising rates by more than 10%.
Like Turner, Ness encouraged cablers to remind their consumers that the increased rates are directly related to enhanced services. “The question is whether the public sees the value added,” said Ness.
But Ness added that it is not enough for cablers to explain their rate increases by pointing out that they are allowed under current FCC rules. “That will not provide you with cover,” Ness said.