Hyde Wants FCC to Probe Cable-Rate Hikes

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Washington-On the heels of near-double-digit rate hikes in his Chicago-area district, House Judiciary Committee chairman Henry Hyde (R-Ill.) wants federal regulators to study whether cable rates should be reregulated.

"When I suggested extending regulation a couple of years ago, the cable industry expressed vehement opposition to that idea and extended many promises of good behavior," Hyde said last Tuesday. "I am now wondering whether we made a mistake in deregulating this industry."

Hyde said he was sending a letter to Federal Communications Commission chairman William Kennard asking for advice, as it appears that satellite carriers and cable overbuilders are helpless in checking rising cable rates.

"Something has to be done to restrain these increases," Hyde said at a hearing on legislation that would force open cable systems to competing Internet-service providers. "I just think we are victimized by a monopoly and we've got to look at that. There is not effective competition."

Congress deregulated nonbasic cable rates effective March 31, 1996. According to the National Cable Television Association, the industry responded by spending $36 billion on system upgrades to add channels, improve picture quality and provide new services such as high-speed Internet access.

In his July 19 letter to Kennard, Hyde asked the FCC to probe whether cable's justification for raising rates was valid and to study the state of competition in his district, which includes the northeast corner of Du Page County and a portion of Cook County near O'Hare International Airport.

Hyde complained about cable rates moments before Kennard was to testify on the unrelated legislation (H.R. 1686 and H.R. 1685). Although cable deregulation may have been premature, Kennard said, competition, rather than price regulation of cable rates, was the best antidote.

"It is clear to me that if there were more competition to the cable industry, these rates would be moderated, constrained, or perhaps even would go down," Kennard said. "So the ultimate answer here is competition."

Kennard said a new law Congress passed last year should help. The law permitted direct-broadcast satellite carriers to provide dish owners with their local broadcast signals for the first time. The DBS industry has about 13 million subscribers, compared with 68 million cable subscribers.

"That will give a little more of a competitive boost to that industry, which appears to be the best prospect of providing real competition to the cable industry. But we still have a problem," said Kennard, who once commented that prior FCC chairman Reed Hundt was too soft on the cable industry by allowing operators to pass along all programming increases to subscribers.

Cable rates in his area, Hyde said, have gone up 10 percent at the same time the Midwest is seeing some of the highest increases at the gas pump. Some of his constituents, he added, are furious with their cable operator, AT & T Broadband.

Last Saturday, the MSO imposed a 9.5 percent increase on 60 percent of its 1.6 million Chicago-area subscribers, with the monthly rate rising to $32.40 from $29.59, according to a recent Chicago Sun-Times article Hyde attached to his letter to Kennard.

In testimony before Hyde's panel, AT & T Corp. vice president for federal governmental affairs Lee Cali said the rate hikes were necessary to cover the cost of popular local sports programming and system improvements.

But Hyde said the hit on subscribers was too much, and he complained that cable customers should not have to bear the cost of inflated player salaries.

"Do we just let the agents and athletes run the whole cable business and the whole entertainment business?" Hyde said. "May I suggest you go after the beer companies and not the subscribers?"

Although the FCC has no authority to regulate nonbasic-tier cable rates, the agency continues to track cable prices in an annual survey for Congress.

The most recent survey, released June 15, found that cable operators that do not face head-to-head competition from other systems raised rates 5.8 percent during the 12-month survey period ending July 1, 1999.

The FCC noted that the 5.8 percent increase was lower than the prior year's increase of 6.9 percent, and 50 percent of the increase in 1999 was attributable to higher programming costs.

The survey calculated rates for basic, expanded basic and equipment. Although overall cable rates outpaced inflation, the FCC found that channel additions meant that subscribers got more programming in exchange for higher rates.

The FCC survey said cable operators charged the same amount in 1998 and 1999 on a per-channel basis: 65 cents per month.

"If you look across the industry, on average, on a per-channel cost, [rates] really are about flat or, in some cases, declining," Cali said NCTA spokesman David Beckwith said AT & T Broadband's Chicago increase was above average, but Hyde and his staff would eventually put the situation in perspective. "The last two FCC reports on cable prices showed the rate of increase coming down. We think that trend is going to continue," Beckwith said.

He added that Hyde's comments were a surprise "because we have not had as many calls dealing with cable rates this year as we have in past years."

In 1998, Hyde prepared a draft bill calling for continued cable regulation beyond the March 31, 1999, sunset, but the measure was never introduced.

Hyde has been Judiciary Committee chairman since January 1995. Under House rules, he must step down next year if Republicans retain control of the House. Despite the loss of power, the 76-year-old Hyde is running for re-election.

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