FCC Reins In Cable TV Rates
Move could mean one the largest savings for consumers in the history of regulation
AMERICA'S cable TV customers should have an extra $3 billion jingling in their pockets after the latest action by the Federal Communications Commission.
The FCC, responding to pressure from the public and Congress, voted 3-to-0 to reduce cable television rates by an average of 7 percent. That comes atop a 10 percent cut ordered last year.
Chairman Reed Hundt claimed the FCC action would bring about one of the largest savings for consumers in the history of regulation.
The commission's action was a delicate balancing act. The nation's 57 million cable customers have endured significant price increases in recent years. But the industry insists it needs the higher rates to pay for rapid expansion and greater services.
Cable TV firms, along with telephone companies, are expected to be major players in the coming ``information superhighway'' enthusiastically promoted by Vice President Albert Gore Jr.
Interactive television, which could give homes and businesses ready access to vast libraries of information, will be a fundamental link in the superhighway. But installing expanded TV services requires billions of dollars in new investment.
The National Cable Television Association claims its operating companies have already lost $2 billion since the first FCC pricing regulation went into effect in September 1993.
A study by the FCC found that its first order cut the average monthly bill for cable TV from $25.61 to $24.11, a drop of 5.9 percent. Those figures do not include premium services like HBO and Showtime, which are not regulated.
While most subscribers (67.6 percent) saw prices fall, 30.5 percent sustained price increases, despite the FCC action.
The new FCC order attempts to rectify that. It closes some loopholes, such as moving desirable programming from a regulated to an unregulated package to get around price controls.
FCC staffers worked throughout the Presidents' Day weekend, finishing the new rules at 3:30 a.m. on Tuesday just hours before the commission vote.
Chairman Hundt calls the final plan ``a brilliant balance'' between the needs of the industry and consumers.
Cable is ``a great engine of economic growth'' in the US, and the government doesn't want to stymie its expansion, he noted. But officials could not overlook the facts: Cable companies had increased prices two times faster than the rate of inflation from 1987 to 1992.
If Congress had not empowered the FCC to control prices through the Cable Act of 1992, prices would have climbed another 12 to 15 percent in the past two years instead of falling, Hundt says.
The Cable Act was passed over President Bush's veto - the only one of Mr. Bush's 36 vetoes to be overridden during his term of office.
The $3 billion-a-year estimate of savings comes from Hundt. It includes the rate reductions that flowed from the 1993 FCC order, the current price freeze that lasts until May 15, and the latest 1994 order that should take effect in May. Savings for each cable TV customer would be approximately $53 a year compared to unregulated rates, FCC officials say.
A Department of Commerce study indicates that the cable TV industry, which is growing at nearly 10 percent a year, will take in revenue of $28.8 billion in 1994. Of that, $14 billion comes from regulated services (basic and expanded cable TV).
Michael Katz, an FCC economist, says studies found that where cable TV firms had little or no competition, they were charging an average of 17 percent more than companies that faced stiff competition.
It was that study which led commissioners to order the latest 7 percent cut, although commissioner Andrew Barrett suggested that the total reduction of 17 percent (10 percent in September, 7 percent now) was ``a bit on the high side.''
Not every viewer will get a reduction, though FCC officials say up to 90 percent should. Some systems already are charging prices the FCC deems fair. Small systems, with fewer than 15,000 viewers, will be phased into the new regulations. Some of these firms are considered too weak financially to take an immediate cut.