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Wary Pa. Lawmakers Want Merger Study

5/09/1999 8:00 PM Eastern

Consternation over the impact of cable's mega-mergers
has prompted the Pennsylvania legislature to convene a state hearing on the
industry's finances.

Pennsylvania General Assembly Resolution 64 requires a
complete study of all matters relating to cable-television franchise fees, taxes, rates,
service quality and competition.

The impact of the study is not clear. This year, federal
law decreased local authorities' cable-regulatory rights, eliminating tier rates and
programming from local oversight, but state and city officials can still examine customer
service and related costs of equipment.

"There's nothing they can do but generate bad
press. There is no sentiment in the state to become a regulator of cable TV,"
Pennsylvania Cable Telecommunications Association president Bill Cologie said.

"We definitely have options, but I don't want to share them at this point,"
said Rep. Karl Boyes (R-Erie), author of the resolution.

But Boyes, who has a background in economics, said he is
concerned about the consolidation in the cable industry and the fallout from the high
cost-per-subscriber prices of those acquisitions.

Pennsylvania is dominated by AT&T Broadband &
Internet Services, which recently swallowed up Tele-Communications Inc., and by Adelphia
Communications Corp., which is buying Century Communications Corp.

Advisers to cities have opined that the AT&T-TCI merger
may not result in grossly higher rates because AT&T will save so much by offering
telephony services over the cable operator's plant.

But they expressed doubt that operators involved in other
deals will make enough from the launch of products like Internet access to service debt
and keep shareholders happy without cable-rate increases.

Boyes noted that operators vowed not to hike rates when
regulation faced a sunset this year.

"Operators volunteered not to gouge, but … I have
no outside trust in the system. There's no real competition. The only real answer is
to disconnect, and that's an unsatisfactory resolution," he said.

He related that his mother-in-law, faced with rising
consumer costs and shrinking Medicare coverage, recently dropped cable. "Senior
citizens need [cable] as an outlet, something to keep their minds active," he added.

The resolution, signed by 71 legislators, noted that cable
rates have increased by 8.1 percent over the past 10 years, which is in excess of the
consumer price index for the same period. Cable companies have proven "unresponsive
to customer concerns and needs," it added.

The resolution requires the Consumer-Affairs Committee of
the state House of Representatives to form a 12-member bipartisan committee to examine the
cable industry.

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