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Federal Regulators to Order 7 Percent Cut in Cable Rates

By Paul Farhi
The Washington Post

Federal regulators will order cable television companies to reduce their rates by at least 7 percent Tuesday, sources said Monday, in the government's second attempt in 10 months to lower prices for the nation's 58 million cable households.

The Federal Communications Commission, whose original rules requiring price cuts last year created confusion and drew criticism, will announce the new reductions at a meeting Tuesday.

Last April, the FCC adopted rules to reduce cable programming charges up to 10 percent or more, and forced reductions in equipment prices as well. The reductions were supposed to lower the monthly bills of two-thirds of all subscribers and save as much as $1.5 billion a year.

Instead, the FCC found in a preliminary survey last fall that one-third of all cable customers saw their bills rise, as cable providers found loopholes that enabled them to raise some prices. Among other things, the rules allowed operators whose program prices were below government-mandated "benchmarks" to raise their prices up to a certain level to offset their reductions in equipment prices.

The 7 percent reduction that will be announced today could have a more comprehensive effect on prices, said a congressional source, because cable companies have no other ways to offset the rollback by raising other prices.

Rather than a blanket order, the FCC will adjust its benchmarks, the maximum price that cable operators can charge for each channel of programming. Because nearly all cable companies are at the benchmarks, virtually everyone will have to drop down 7 percent.

The FCC prices cover "basic" program packages, which include local broadcast stations, and "expanded basic" packages, which include popular cable-only channels such as MTV and CNN. They do not affect premium services such as HBO or pay-per-view.

Prices vary throughout the 11,000 cable systems in the United States, but a 7 percent reduction on a $20 monthly bill would amount a savings of $1.40. Sources said FCC Chairman Reed Hundt pressed for larger reductions than the 7 percent or more apparently agreed to, but was forced to compromise by commissioners James Quello and Andrew Barrett, the lone Republican among the three commissioners.

The FCC's new cut is seen by political observers as an acknowledgment that its first attempt did not result in the widespread reductions that Congress had in mind when it passed a new cable TV law in the fall of 1992.

Reconsideration of the cable rules was proposed by Hundt, a prep school classmate of Vice President Gore who was appointed FCC chairman in late November.