The Tech - Online EditionMIT's oldest and largest
newspaper & the first
newspaper published
on the web
Boston Weather: 41.0°F | Light Rain

FCC Orders Cable Operators to Roll Back Rates to Fall Level

By Jube Shiver Jr.
Los Angeles Times

WASHINGTON

The Federal Communications Commission ordered the nation's cable TV operators Thursday to roll back their rates, a move expected to save America's 57 million cable households $1 billion a year.

Most customers should begin seeing a $1 to $3 reduction in their monthly cable bill by August, FCC officials said. Further price scrutiny by the FCC and new restrictions that the agency has imposed on cable operators could lead to additional rate cuts later on.

The FCC move to clamp a lid on soaring cable rates marks a return to regulation for an industry that enjoys a monopoly in local markets but was deregulated in 1986.

"There were no perfect answers to this complex issue," interim FCC Chairman James H. Quello said before voting to approve the new rate restrictions.

Overriding a veto by then-President Bush, Congress last October ordered the FCC to lower cable rates, which have continued to rise since then. The FCC action Thursday will roll back rates to their Sept. 30 level, a reduction on average of 3 percent to 5 percent, agency officials said.

The cable industry attacked Thursday's ruling, warning that big rate reductions could hamper companies' ability to repay bank loans, invest in programming and offer advanced new services such as interactive cable systems that boast 500 channels or more.

Denver-based Tele-Communications Inc., the nation's biggest cable operator, hinted at a possible legal challenge. Wall Street also took a dim view, pummeling shares in companies with large cable interests.

Lawmakers and consumer groups, meanwhile, complained that the FCC didn't go far enough.

"It's a step in the right direction, but we are disappointed that the rate reductions were not larger; we think rate reductions of 30 percent were justified," said Gene Kimmelman, legislative director of the Consumer Federation of America, a Washington coalition of 240 consumer groups.

Rep. Edward J. Markey, D-Mass., who chairs the powerful House Subcommittee on Telecommunications and Finance, said he also would "like to have seen the FCC's rate rollbacks go even further."

Sen. Joseph I. Lieberman, D-Conn., called the FCC's action "a good first step" but added that "it cannot be the last step. The FCC's own data shows that monopoly (cable) systems charged, on average, 27 percent more than systems with head-to-head competition."

The FCC said the rate reduction will affect only "basic" cable service, such as retransmissions of local broadcast stations and public access. It will not apply to pay-per-view channels that show professional boxing and other special events, nor to premium channels such as Home Box Office and Showtime.

That provision could allow cable companies to profitably unbundle the basic services they offer now, which often include Cable News Network and Music Television, or MTV, and other popular add-ons. By offering those separately, cable operators could reduce their regulated business to a barebones service.

Prices for the unbundled add-ons could then rise free of regulation, said Doug Webbink, the FCC chief of policy and rules in the agency's Mass Media Bureau.