Rep. Frank Proposes Cable-Regulation Bill

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Washington— Claiming competition hasn't stopped cable operators from raising rates, Rep. Barney Frank (D-Mass.) last week introduced a bill to revive the Federal Communications Commission's authority to regulate retail cable prices.

The one-page bill would erase a provision in the Telecommunications Act of 1996 that barred the FCC from capping expanded basic-cable rates after March 31, 1999. It would restore the agency's role 90 days after the measure becomes law.

Frank called the telecom law a failure, in part because cable rates have risen three times faster than the rate of inflation over the last five years.

In an interview, Frank said he decided to move in response to a cable-rate resolution passed several months ago by the city council of Fall River, Mass., an industrial city in his district.

Cable-industry sources speculated that the bill was Frank's reaction to an effort to migrate New England Sports Network — the cable home of the Boston Red Sox and Boston Bruins — from a la carte carriage to expanded basic.

"That's not true at all," Frank said, adding that as many cable subscribers in his state applauded NESN's move as opposed it.

The bill, Frank said, would not give the FCC carte blanche
to regulate all cable operators, only those that charge rates that appear to be excessive and that generate consumer complaints.

"They can go ad hoc," he said. "If, in fact, there is in a particular area significant competition from some form of direct broadcasting, they don't have to act on it."

Frank said he wasn't convinced that direct-broadcast satellite providers are offering effective competition to cable.

"Not yet," he said. "If and when it happens, good."

Cable operators have complained that their rates reflect their costs, particularly the swelling price tag for sports programming.

National Cable & Telecommunications Association spokesman David Beckwith said Frank's effort was unjustified because it fails to account for pressure from rising programming costs.

"Regulating cable rates does not get at the root cause of this problem," Beckwith said.

Cable operators have invested $45 billion since 1996 to outfit their systems for digital video, high-speed Internet access and local phone service, according to the NCTA.

"Cable customers have voted their approval by opting for more than 15 million units of these new services since deregulation," Beckwith said. "A step backward to regulation would only serve to slow the deployment of broadband services."

Frank said he understands that sports programming costs put operators in a bind, but claimed that FCC regulation might give them grounds to resist their suppliers' demands.

"I have acknowledged in conversations with people that higher salaries for athletes are one of the things that are a cost pressure on the cable industry," Frank said. "The problem, of course, is that they now have no incentive to resist that. Having an FCC complaint process at some point might give somebody somewhere the ability to resist this."

NEEDS PUBLIC SUPPORT

Frank, elected in 1980, serves on the House Banking Committee and the Financial Services Committee. His cable bill would likely be referred to the House Energy and Commerce Committee, under chairman Rep. Billy Tauzin (R-La.)

"Yeah, to the people who did this in the first place," said Frank, adding that the bill's hope in Congress "depends entirely on whether or not there is any significant public dissatisfaction" with cable rates.

Tauzin spokesman Ken Johnson said there was no immediate risk to cable in the Commerce Committee, but over time, the mood could change.

"The chairman has no intention of taking up the issue of cable deregulation at this time," said Tauzin spokesman Ken Johnson. "Unfortunately, it's a prospect we may have to face down the road if we don't do something to jump-start competition in the broadband market."

Congress regulated cable rates for both programming and equipment in 1992. The FCC was charged with ensuring that basic rates were reasonable and expanded basic rates were not unreasonable. Local government regulated the basic tier, as directed by the FCC, and the federal agency policed expanded basic-tier rates on its own.

The FCC capped cable rates and ordered cable operators to refund money to subscribers who complained to the agency that they were charged at rates higher that those allowed under its price caps. In 1993 and 1994, the FCC cut cable rates a combined 17 percent from September 1992 levels.

Annual FCC surveys have shown cable rates rising slightly faster than inflation in the aggregate. But on a per-channel basis and adjusted for inflation, cable rates have actually declined, according to agency data for the 12-month period ending June 30, 2000.

Frank dismissed per-channel data as meaningless to cable subscribers who can't purchase channels one by one.

"The key is per-channel, which you don't have any option about. Forcing people to buy more channels they don't want is costing them more money," Frank said. "Quality improvement, which you don't have the ability to deny, does not mitigate to you the problem of price increase."

Frank, who voted against the 1996 deregulation law, introduced his bill May 15 with a single co-sponsor: fellow Massachusetts Democratic Rep. Jim McGovern. The bill won quick endorsement from the Consumers Union.

"Consumers Union has resisted the idea of reregulation of cable because there has been little support for it on Capitol Hill," said CU spokesman David Butler. "If a member of Congress is willing to reregulate, we are not going to stand in the way of doing it."

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