NCTA Vows Rate Fight; FCC Eyes New Rules

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Washington -- National Cable Television Association
president Decker Anstrom last week said the industry is ready to fight attempts that are
under way to keep operators price-regulated and new efforts to compel greater a la carte
packaging.

Anstrom's timing was impeccable: Just as he was
speaking, the Federal Communications Commission was firming up plans to hold down cable
rates with a tightening of regulations.

'I want to be blunt here,' Anstrom said in a
speech to Washington cable lobbyists and executives. 'Reregulation of cable would be
a colossal mistake -- nothing less -- and we will oppose reregulation with all of our
energy.'

While Anstrom was bracing the industry for a clash with
proponents of what he called 'discredited, intrusive governmental
micromanagement,' the FCC quietly began its effort to tighten enforcement of its
rules in eight rate cases involving Tele-Communications Inc.

If the TCI orders are indicative of the FCC's general
direction, it appears that the agency is going to take a close look at requiring operators
that receive money from programmers -- in the form of home shopping commissions, launch
fees and marketing support -- to deduct some of that money from overall external cost
increases.

Current FCC policies require offsets on a
channel-by-channel basis; that policy could be headed for the dust bin.

'What we are saying now is that we think that times
have changed,' an FCC source said.

The FCC is also at work on a plan that would require
operators to offset programming-cost increases and other expenses with advertising
revenue.

An FCC source said the agency was 'targeting areas
where we can make a dent.'

FCC sources said the agency has not settled on a plan to
verify cable-operator claims that cable-rate increases -- up 8.5 percent, according to a
1997 FCC price survey -- have largely been attributable to programming-cost increases.

FCC sources said the agency is seeking to obtain useful
information that is not a burden on the operator or programmer to produce. The agency also
wants the focus to be reasonable in order to assure that the industry will comply with,
rather than resist, the FCC's demands.

'We have to get a fairly focused methodology to get
the information that the commission and Congress ultimately can review,' an FCC
source said. 'Is the industry going to cooperate and give it to us?'

Just two months ago, Anstrom called in reporters to
predict, albeit with some caution, smooth sailing for cable operators in 1998 toward the
March 31, 1999, deregulation of large cable operators.

Since then, in the wake of reports showing rapidly rising
cable rates by an industry with 87 percent market share, the atmosphere has changed,
forcing Anstrom to challenge the pro-regulation forces head-on.

Anstrom is facing a double threat: two House bills designed
to keep cable regulated, and an aggressive new FCC chairman in William Kennard, who is
signaling that more stringent regulations are on the way in the next few months.

'We have to move on this really quickly,' an FCC
source said.

Asked what he meant by 'reregulation,' Anstrom
said he had in mind efforts in Congress and at the FCC.

'We would oppose anything that would change the
current rate-regulation rules that the FCC has in place right now, and we would firmly
oppose any extension of the March 1999 date,' Anstrom said.

Anstrom also used the speech to extol the industry's
achievements in education, technology and public affairs, which critics ignore to harp on
rates. He took swipes at the Baby Bells for their litigious approach to the
Telecommunications Act of 1996, and he chastised cable critics for refusing to see a
connection between the $18 billion National Football League television contract and higher
cable rates.

At an FCC forum in December, Anstrom told the agency that
unbundling tiers and expanding a la carte offerings to expand consumer choice was worth
exploring.

But last week, Anstrom sent a clear message to FCC
commissioners hoping for industry support on a la carte: Forget it.

'We would adamantly oppose any effort by the
government to mandate how we package and market our services -- including the so-called a
la carte idea.'

Sources familiar with Kennard's thinking said the
chairman was still hoping that Anstrom will forward the FCC some ideas that expand
consumer choice in buying cable-programming services.

On Capitol Hill, an aide to Rep. Edward Markey (D-Mass.)
said the introduction of a bill to lift the March 31, 1999, sunset was imminent.

'We don't have a specific date, but it will occur
in a couple of weeks,' said Markey aide Colin Crowell.

Sources close to Rep. Peter DeFazio (D-Ore.), whose bill
(HR 2757) would freeze cable rates, said dozens of lawmakers who returned last week for
the 1998 session sought information on the bill.

The FCC adopted the channel-by-channel offset rule to help
home shopping channels. If an operator had to use home shopping commissions to offset
other programming costs, the theory goes, operators would not have an incentive to carry
those kinds of networks.

'I think that would be a tremendous disincentive to
carry any shopping channels,' said Washington cable attorney Steven Horvitz of Cole,
Raywid & Braverman.

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