News

Kennard Looks Into Cables Sunset

4/19/1998 8:00 PM Eastern

When he arrived in office in November, Federal Communications Commission chairmanWilliam Kennard could have averted his gaze from cable issues, knowing that after March31, 1999, his agency couldn't regulate most cable rates, anyway. But instead of saying,"To hell with it," Kennard plunged right into the debate. In a live and writteninterview with Multichannel News Washington editor Ted Hearn, Kennard voiced doubtsabout whether the FCC's rate rules were working and whether they were fair to consumers.An excerpted version of that interview follows:

MCN: Do you want Congress to lift the March 31,1999, sunset on cable regulation?

Kennard: I have been very clear that I don't see thepace of competition proceeding fast enough so that consumers will be protected from priceincreases come March 31, 1999. Basically, I see my role as the expert agency, as informingCongress about what's happening out in the marketplace. So it's my responsibility to tellCongress when I have been asked very directly by Congress, 'What do you think will happenMarch 31, 1999?'

If we're proceeding at this pace, we risk exposingconsumers to an unregulated marketplace on March 31, 1999. It's Congress' decision whetherthey want to extend the sunset. But I also think that it's important for the agency togive Congress some sense of confidence that if they do decide to extend the sunset, theycan rely on a regulatory regime that keeps rates in check.

MCN: Is it fair to say, though, that based on theway that things are trending now, you support retention of cable regulation beyond March31, 1999?

Kennard: No, I'm not prepared to say that. I'mprepared to say only that we're not trending fast enough in the direction of competition.

MCN: Even if Congress did remove the sunset, Rep. EdMarkey (D-Mass.), for instance, is wondering whether it would even matter, given the factthat the FCC has allowed regulated rates to keep rising. What's your response to thatargument?

Kennard: That's the reason why we need to do thisfocused inquiry and to give Congress, as I said a minute ago, some sense of confidencethat if they decide to extend the sunset, we will have a regulatory regime that'sprotecting consumers. Because right now, it is a legitimate question to ask whether ourrate regulations are doing enough to protect consumers from these skyrocketing programmingcosts.

MCN: Cable rates are outpacing inflationconsiderably, even though about 85 percent of subscribers are served by cable systems withrates that are regulated by your agency. Do you believe that there is something wrong withthe FCC rules?

Kennard: Cable rates are increasing at four timesthe rate of general inflation, and our most recent price survey indicates that those rateincreases are attributable in large part to the additional cost of programming that isbeing offered.

And when I talk to ... operators, public-interestadvocates, consumer groups and programmers themselves, everybody acknowledges that a largepart of the problem is the skyrocketing cost of programming, particularly sportsprogramming. What I have questioned is whether consumers should bear the brunt of theseprogramming increases.

The commission's rules permit cable operators to adjusttheir rates to reflect changes in actual costs, including programming costs, but our rulesare not intended to allow the unfettered recovery of costs that are not reasonable. SoI've directed the Cable Services Bureau here, as you probably know, to commence a veryfocused inquiry into the sources of these programming-cost increases and to questionwhether there should be some limitation on the unfettered pass-through of theseprogramming costs.

And I think that once we get a better understanding of thesources of these cost increases and how they're being passed through to consumers, we willbe able to determine whether any adjustments to the mechanism are necessary.

MCN: I believe that you issued those orders to theCable Services Bureau in January. When do you expect the bureau to return with some sortof recommendation, and when do you expect the commission to look into that?

Kennard: I hope to have something by the beginningof this summer, by June.

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