Cable Bureau Starts Rate-Review Process

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Washington -- About one-dozen Federal CommunicationsCommission officials held a series of meetings last week as the first step in carrying outFCC chairman William Kennard's call for a probe of rising cable rates.Two weeks ago,Kennard called on the bureau to investigate whether cable-rate increases are cost-based orthe result of price gouging that requires a response from the agency.A Cable ServicesBureau source said no decisions were made in connection with methods for obtainingprogramming-cost information, either from cable operators or programmers.One option, thesource said, is to collect programming-cost data from operators when the FCC receives avalid rate complaint from a local franchising authority.Alarmed by last year's 8.5percent average increase in cable rates and cable's 87 percent market share, Kennardused the release of the FCC's annual cable-competition report to declare that cablemarkets are uncompetitive.On March 31, 1999, the FCC's authority to regulateupper-tier cable rates legally sunsets, prompting Kennard to warn Congress that marketconditions may warrant an extension.Although Kennard ordered the cable bureau to launch abroad inquiry and to report back quickly, he failed to communicate to the other four FCCcommissioners his ideas about the scope of the project.'He made his statements on thevideo-competition report on his own, and the decisions that the commission made werereflected in the video-competition report,' a top FCC staff member said.

While some FCC aides said the agency planned to keep thecable-rate issue on the front burner, others said the agency had to cope with numerousnoncable issues, including long-distance-phone competition, universal-phone-servicepolicies and digital TV channel allotments.However, Cable Services Bureau chief MeredithJones, who has announced that she is leaving the FCC, began the process by convening ameeting of senior bureau lawyers and economists.'People are huddled in conferencetrying to figure out what the process ought to be,' a cable bureau officialsaid.Kennard asked the bureau to determine the source of cable-rate increases as a generalmatter. Specifically, he wants to review whether programming-ownership patterns in theindustry are leading to higher prices and whether the bundling of programming into largemultichannel tiers is prompting consumers to pay for programming services that theydon't necessarily want.FCC sources said the bureau could recommend several options,including having the FCC send letters to operators and programmers seeking costinformation as the first step toward a formal rulemaking.Kennard indicated that even ifcable rates are cost-based, he would consider supporting policies that require operatorsto offset programming increases with advertising revenue, home shopping commissions andnew-network-launch fees.

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