Washington -- The Federal Communications Commission is
close to launching a probe of cable-operator programming costs as the first step in a
possible crackdown on cable-rate increases, FCC sources said.
At the behest of FCC chairman William Kennard, the
commission's Cable Services Bureau is crafting a plan designed to develop data not
only on programming costs, but also on advertising revenue, home shopping commissions and
launch fees paid by new programmers.
"We are very close to formulating what I would call a
work plan -- what we are going to ask," an FCC source said, adding that the
commission expects the cooperation of cable operators. "We have no reason to believe
that they won't cooperate."
Washington cable attorneys, who asked not to be identified,
said they could not be sure that cable operators would comply with the FCC's request
for information. However, Tele-Communications Inc. president and chief operating officer
Leo J. Hindery Jr. is on record as saying that he would share programming-cost information
with FCC officials.
As soon as the FCC has its questions lined up, it expects
to send notices to cable operators asking for the information. An FCC official compared
the process to the system used to conduct its annual cable-price survey.
Kennard asked for the data after the FCC found that cable
rates rose 8.5 percent in 1997 and incumbent cable operators held 87 percent market share.
Kennard is interested in whether ad money and programmer
payments to cable operators should be used to offset programming-cost increases as a way
of keeping cable-rate hikes in line with inflation.
An FCC source said Kennard wants to find some means of
"putting less upward pressure on rates."
Cable-industry leaders, including National Cable Television
Association president Decker Anstrom and Cox Communications Inc. president and CEO James
Robbins, have voiced their opposition to any offset plan.
Kennard decided to take a closer look at cable costs based
on his concern that cable operators would remain dominant a year from now, when the
FCC's authority to regulate the retail prices of networks such as Cable News Network,
Discovery Channel and USA Network expires.
Because time is running short, the FCC hopes to collect the
"One of our concerns is that if we have to go through
a lengthy process to get the information, it will take too much time," an FCC source
said. "We have no interest in either burdening the industry or in taking a great deal
of time to do this."
The FCC hopes that the 1998 data can be compared with 1992
data. Five years ago, the FCC declined to force cable operators to subtract advertising
revenue from external cost increases. The agency also adopted a rule on home shopping
commissions that was favorable to operators.
"We are trying to structure how do we get real data on
matters like advertising, commissions and launch fees -- how has it changed since
1992?" an FCC source said.
FCC sources said they could not be precise about the
timing, but they expected the agency to release its plan shortly.
"The [Cable Services Bureau is] getting their plan
figured out, and they are moving forward," an FCC source said.