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FCC May Pave Way for More Local Regulation of Cable TV Rates

December 13, 1990

WASHINGTON (AP) _ The Federal Communications Commission today proposed new rules that may give back to some cities the right to regulate basic cable television rates.

The FCC, acknowledging that cable TV is no longer the infant industry that Congress deregulated in 1984, offered several new ways that could make it tougher for cable TV systems to escape local price restraints.

The commission voted 5-0 for proposals to redefine what constitutes ″effective competition″ for a cable TV system.

Systems currently may avoid rate regulation of their ″basic tier″ of service if they have effective competition, which the FCC currently defines as three over-the-air broadcast stations covering the cable system’s community.

The commission proposed three new ways that a cable system could avoid rate regulation of its ″basic tier″ of service:

-That there be six unduplicated over-the-air channels available and that the cable system be subscribed to by less than 50 percent of the TV households in the community.

-That there be one other multichannel service provider in the community, such as microwave cable or direct broadcast satellites, that are available to 50 percent of the homes of cable and are actually being subscribed to by 10 percent of those homes.

-If the cable system offers a minimum level of service and programs at a reasonable price that is comparable to communities in which there is effective competition. This so-called clause is favored by a number of FCC commissioners and is expected to possibly prevail over the other two proposals when the FCC finally adopts its new rules sometime next year.

FCC Chairman Alfred Sikes wants to encourage competition from other cable systems and satellite broadcasters, saying competition, not regulation, will help guarantee continued growth in the cable industry and hold prices down for subscribers.

Sikes said the new proposals would ″give some measure of consumer protection ... and some assurance of fairness″ to the cable TV industry.

National Cable Television Association President James Mooney, however, said the FCC proposals could have a negative impact on the health of the cable industry.

″However moderate the intentions of the FCC this proposal raises the prospect of the government inhibiting the future development of cable programming by crimping its economic life blood,″ Mooney said.

Cable systems today aren’t totally free from regulation: they pay hundreds of millions of dollars in franchising fees annually and are required to provide community access channels and make certain other public service commitments.

But critics claim cable systems have raised prices inordinately, while at the same time providing poor service to subscribers.

The House in September adopted legislation that would have given the FCC power to regulate basic cable services, but the measure stalled in the waning days of the Congress and did not pass the Senate.

A White House veto threat held up a Senate measure that included provisions restricting the ability of cable programmers to hold exclusive rights to programs.

Members of Congress who view cable TV as an ″unregulated monopoly,″ such as Sen. Al Gore, D-Tenn., have promised an even tougher bill next year.

Prior to enactment of the 1984 Cable Act, most local cable franchising authorities were allowed to regulate the prices cable TV systems charged for their basic tiers, which usually were made up of broadcast stations.

But the act removed local regulation, except in communities where a cable TV system was not subject to effective competition. The act does allow regulated cable systems to raise rates for basic service 5 percent annually without approval of local franchising authorities. The FCC’s three-signal standard lifted rate regulation from 97 percent of the nation’s cable TV systems, according to the Senate Commerce Committee.

In the wake of deregulation, cable TV prices soared. The congressional General Accounting Office found that rates for basic service climbed 29 percent on average between December 1986 and October 1988 - four times the rate of inflation. At the same time, the average number of basic channels offered increased from 24 to 30 on the lowest-priced basic tier.

The GAO found this year that prices climbed another 10 percent in 1989, or twice the inflation rate.

The cable industry said it was only playing catchup after years of local regulation that held prices artificially low.

Cable TV has experienced dramatic growth in the past decade. In 1980, about 4,225 cable TV systems had nearly 17.7 million basic subscribers, or 22.6 percent of all TV households, according to the National Cable Television Association. By the end of 1989, there were 9,050 cable systems with 52.6 million basic subscribers, and cable was in 57.1 percent of all TV households.

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