News

Pittsburgh Weighs Fee Cut To Offset AT&T Rate Hike

5/23/1999 8:00 PM Eastern

The city of Pittsburgh is weighing a novel remedy to
cable-price inflation: It may slash its own franchise fee so consumers won't feel the
bite of the latest round of price hikes by AT&T Broadband & Internet Services
(formerly Tele-Communications Inc.).

The plan was hatched by Councilman Jim Ferlo, who believes
the price increases are unjustified. Ferlo asked city staff to examine whether the hikes
can be offset with a commensurate cut in Pittsburgh's 5 percent franchise fee.

The proposal is "based on a simple principle: Cable
continues to raise rates with little or no concern with the public's ability to pay
them," Ferlo aide Yarone Zober said.

Rate rage is not new to Pittsburgh. The city has wielded
its regulatory authority in the past, ordering the local system -- which does business as
TCI of Pennsylvania -- to roll back basic rates.

However, the operator appealed the local ruling to the
Federal Communications Commission, arguing that its rate computations were fair. Further,
the system rolled out the disputed rates pending the FCC ruling.

System executives explained that they believe they will
ultimately save consumers money, because the operator is entitled to interest on funds if
they are held in reserve pending an FCC ruling.

Franchise fees are amounts over which the city truly has
authority, Zober noted.

But isn't that rewarding the operator for raising
rates? Zober said he didn't think so, noting that the real victim will be the
city's cable bureau or public-access corporation.

"Obviously, there'll have to be some cuts
somewhere," he said.

AT&T Broadband raised rates throughout the cluster. In
the city of Pittsburgh, prices for basic plus expanded basic -- taken by most subscribers
-- went up 3.5 percent, or $1.04 per month. And the set-top rental charge rose by 29
cents.

The operator did trim some charges, such as those for
installation and service.

Rate hikes throughout the cluster added fuel to the
critical fire raised by opponents of AT&T Corp.'s latest planned acquisition of
MediaOne Group Inc.

As an upcoming local phone provider, AT&T would
directly compete against Bell Atlantic Corp. and other local-exchange carriers, just as
Bell Atlantic will compete for long-distance customers once it is allowed into that
business.

Bell Atlantic president James Cullen declared in a press
release last week that rate hikes in western Pennsylvania signaled that AT&T had
broken its promise to approach deregulation responsibly.

Hikes of as much as 25 percent in the region are
"funding AT&T's acquisition binge," Cullen said.

Dan Garfinkel, spokesman for TCI of Pennsylvania, said only
about 1.5 percent of homes in the cluster (about 6,900) got notice of a 25 percent rate
increase. That system, in Greenburg, was vastly upgraded, and 24 channels were added.

In the rest of the cluster, rate increases were in the
single digits.

Federal guidelines allow for larger rate increases to
accelerate return on rebuild investments.

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