Tauzin Readies Rate Bill as FCC Delivers Mail

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Washington -- The Federal Communication Commission last
week put its probe of cable-programming costs into high gear, as Rep. Billy Tauzin (R-La.)
promised to unveil cable-regulation legislation next month.

The FCC sent a one-page letter and a two-page survey to the
top six cable operators: Tele-Communications Inc., Time Warner Cable, MediaOne, Comcast
Corp., Cablevision Systems Corp. and Cox Communications Inc.

The MSOs will have about a month to come up with answers to
the following questions:

• To what extent were rate increases attributable to
the FCC's 1994 going-forward rules, which allowed operators to add six channels and to
raise rates by $1.50 per month?

• To what extent and in what proportion were
programming-cost increases that were passed through to subscribers related to sports, news
and children's programming?

• From June 1994 to June 1997, how much of annual
revenue growth was attributable to advertising, home shopping commissions and
programmer-paid launch and marketing fees?

"We'd like this to be as much of a collaborative
process as possible," said Susan Fox, FCC chairman William Kennard's top cable
adviser. "We've been talking to the industry about it for some time."

Kennard ordered the Cable Services Bureau to launch the
programming-cost probe after the agency's annual cable-competition report found that
regulated cable rates rose 8.5 percent in 1997, and that cable operators had 87 percent
market share.

Kennard has said more than once that he is interested in
determining whether cable operators that own cable networks are exploiting FCC rules that
permit operators to collect programming-cost increases from subscribers.

As Kennard's look into programming issues got under way, he
gave an interview to the Washington Post in which he ruled out a rate freeze or
rate rollback, saying that he preferred to gather data to assist new legislative efforts
in Congress. Kennard had previously taken this position publicly.

Tauzin, chairman of the House Telecommunications
Subcommittee, told reporters that he plans to unveil a cable-regulation bill in June that
would delay deregulation beyond next March if certain market conditions existed.

Although FCC regulation of expanded basic is due to sunset
March 31, 1999, Tauzin said his bill would remove the sunset if subscribers cannot turn to
an alternative provider that bundles satellite programming with local-TV signals.

He said access to local-TV signals from a multichannel
competitor to cable would be a critical feature in the bill.

Tauzin, however, indicated that his bill would allow the
FCC to deregulate a cable operator if the operator is providing subscribers with the
opportunity to select from various programming packages.

"The biggest complaint that we hear from consumers on
cable is literally that they are forced to buy programming that they don't want in order
to get the programming that they want," Tauzin said. "When cable is the only
provider, that is simply unacceptable."

Tauzin and his staff declined to provide additional
details. Tauzin spokesman Ken Johnson would not indicate how many cable-programming
packages would be sufficient to obtain deregulation.

All Tauzin would say is that cable subscribers who cannot
turn to an alternative provider for local-broadcast and satellite networks must be given
wider choice.

"People ought to have better choice than [one
expanded-basic tier] if there is only going to be a monopoly provider of service,"
Tauzin said. "We will be addressing that specific point in the legislation."

Tauzin's approach seemed to be more flexible than two House
bills that have already been introduced.

Rep. Edward Markey (D-Mass.) has introduced a bill (H.R.
3258) that would continue FCC regulation beyond March 31, 1999, and Rep. Peter DeFazio's
(D-Ore.) bill (H.R. 2757) would order the FCC to freeze cable rates and to investigate the
causes of price hikes.

National Cable Television Association spokeswoman Torie
Clarke said that although she was unsure of the scope of Tauzin's bill, the NCTA opposed
additional legislation -- especially a bill that would expand FCC authority beyond March
31, 1999.

Tauzin said his bill would be released to coincide with
cable-rate hearings to be held in June by the Senate Commerce Committee, under chairman
John McCain (R-Ariz.). Tauzin added that McCain invited him to testify at the hearing.

A McCain aide said she was unaware of a date for the
hearing.

McCain told reporters last week that he was hoping to pass
a bill that would allow direct-broadcast satellite companies to provide dish-owners with
their local-TV stations.

Another priority, McCain said, was his bill (S. 1422),
which would void the Copyright Arbitration Royalty Panel's new 27-cent-per-subscriber,
per-month copyright fee that DBS companies must pay to sell superstations and
distant-network signals to their subscribers.

"I really believe that we should act on both,"
McCain said. "I hope that at minimum, we could move on CARP."

McCain has complained that the 27-cent rate is
substantially higher than what cable pays for the same signals, which makes DBS less
competitive.

"I hold no brief for satellite, but I'd like to have
them competitive, and I hope that there is enough pressure from cable subscribers who are
complaining bitterly that we would be motivated to act," McCain said.

While Tauzin wants to see cable operators offer subscribers
more programming packages, McCain said he was upset over published reports claiming that
cable operators are considering removing ESPN from expanded basic. Both ESPN and cable
operators have said that a story on that subject in The Wall Street Journal was
untrue.

"That's a remarkable thing when you think about
it," McCain said.

Some considered making ESPN a la carte a customer-friendly
move, because subscribers who don't want to watch it wouldn't have to pay for it in a tier
charge. But McCain seemed to disagree.

"It's just the way that they manipulate the prices and
the services when they are an unregulated monopoly," McCain said. "If somebody
else came to town and could offer them their service with [ESPN] in the package,
obviously, they wouldn't drop it."

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