Ferree: FCC to Probe Programming Costs - Multichannel

Ferree: FCC to Probe Programming Costs

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A new team of economists recently formed by Federal Communications Commission
Media Bureau chief Kenneth Ferree is planning to examine the factors
contributing to rising cable rates.

"That's the kind of thing we can do an in-depth study on that question alone.
You can posit: Are cable rates driven by programming-cost increases? In fact,
one of the papers will be directed at exactly that kind of question: What goes
into cable-rate increases?" Ferree told reporters Tuesday.

Last week, the FCC reported that nominal cable rates rose 8.2% for the
12-month period ending June 30, 2002. However, the same report showed that
per-channel rates, adjusted for inflation, declined slightly.

Ferree said the cable study would be part of a new emphasis on independent
research at the agency. The FCC is often criticized for producing reports based
on data supplied by companies it regulates. Critics have questioned whether the
company-supplied data are accurate.

"We would ultimately like to do a lot more of our own factual development and
rely less on industry information," Ferree said. "I am not impugning the
character of the industry information."

On various policy matters affecting cable -- system ownership, dual
must-carry, cable-modem service -- Ferree did not reveal any startling news.

Regarding the pending News Corp. merger with Hughes Electronics Corp., he
said it was too early to form any judgments except that the deal raised new
questions about vertical integration, or common ownership of programming and
distribution assets.

"There are new and novel issues that need to be examined here. That's all I'd
say. Again, we're a long way from drawing any conclusions about whether any of
these things present problems or not," Ferree said. "We've got to know the facts
before even we start to make those kinds of judgments."

On a digital-TV matter, Ferree said he did not believe that either CBS or
Comcast Corp. was violating FCC chairman Michael Powell's digital-TV-transition
plan in connection with their HDTV-carriage dispute.

Comcast told the FCC recently that it was carrying just one CBS station
because the network had demanded compensation for the HDTV feed, which, in
Comcast's view, was inconsistent with Powell's plan.

"I don't think what CBS is doing is inconsistent with the Powell plan.
However, nor do I think that Comcast's election not to have that as one of their
five HD signals is inconsistent either," Ferree said.

Ferree said he did not think the Powell plan forbade broadcasters from
seeking payment for their HDTV signals. The National Cable &
Telecommunications Association has issued statements indicating disagreement
with Ferree on that point, noting that the Powell plan said for cable to carry
up to five HDTV signals "at no cost."

"That wasn't about a charge from the broadcasters. I believe it was no extra
cost to the consumer," Ferree said. "My recollection is that we were not
thinking about it in that sense -- that the broadcaster would not be able to ask
for compensation for carriage."

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