Cable TV programming costs accounted for 28.2 percent of
rate hikes among the top six MSOs last year, but sports programming costs weren't a
factor in rising rates, according to details from the long-awaited programming cost study
that leaked out of the Federal Communications Commission last week.
The official report is expected to come out today. FCC
sources said last week that the study won't address whether the rate hikes were
necessary to offset the programming fee increases.
Although on one hand the report's conclusion that
programming accounts for almost a third of operators' costs backs up a long-held
industry contention, its reported suggestion that rising sports costs aren't a factor
in the mix refutes the cable party line.
But an FCC source confirmed that the study, which covers
the period July 1, 1996, to July 1, 1997, didn't account for "some of those
giant deals" that erupted in the fall of 1997, including the multibillion-dollar
National Football League package.
A Comcast Corp. spokesman said the company provided the FCC
with some data beyond that date in hopes of alerting the agency to changing economics. But
otherwise, he said, the company was "not surprised" by the report. "The
facts are the facts," he said.
A Time Warner Cable spokesman declined to comment
specifically on the report, but said the MSO hasn't passed through all of the
programming costs in its rates, and plans to hold rate hikes this year to 4.9 percent for
The National Cable Television Association, which has been
complaining about rising sports costs for years, said it would be "premature" to
comment on the report before the FCC releases the official text.
Stephen Effros, president of the Cable Telecommunications
Association (CATA), said it was difficult to evaluate the report's finding on sports
costs without seeing the specific language that will be available this week.
"Sports costs are part of that one-third [of
programming costs]," he noted. "So I don't understand what they're
In one of his first actions as FCC chairman, William
Kennard initiated the programming cost study in May, partly in response to cable rate
hikes that scraped as high as 10 percent in 1997. At the time, Kennard had said one of the
report's main objectives was determining whether operators that owned networks were
passing their own rising license fees through to subscribers -- an accusation that had
come from consumer groups. Interestingly, the report found no evidence that is the case,
FCC sources confirmed. "Basically, we found that people weren't jacking up their
own programming rates and passing them through," said a FCC staffer.
Effros said that assuming the official report this week
coincides with its reported findings, it could strengthen the cable industry's
position as it lobbies to keep the March 1999 deregulation date on track.