Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: FRIDAY, November 11, 1994 TAG: 9411110044
SECTION: BUSINESS PAGE: A-11 EDITION: METRO
SOURCE: Associated Press
DATELINE: WASHINGTON LENGTH: Medium
The regulatory agency on Thursday adopted a plan that will allow cable systems to increase rates when they add channels to ``expanded basic services,'' which are regulated levels of service above the lowest-priced basic tier.
The channels include an array of cable networks from MTV and USA to CNN.
Under the plan, cable operators could charge up to $1.50 a month - or a total of $18 a year - over a two-year period, FCC officials said. In return, subscribers could get at least six new channels.
In the third year, operators may be permitted to charge slightly more - as much as $1.70 a month - for additional channels. But in the fourth year - 1998 - systems won't be permitted to charge for added channels, FCC Chairman Reed Hundt said in an interview.
Coming six months after the agency implemented a 7 percent rate cut, the action could erode some of the savings millions of cable subscribers expected, consumer advocates say.
Supporters said the plan would give an estimated 59 million households that subscribe to cable television more for their money and expand viewing choices.
Since rate regulation took effect last year, few channels have been added to the lineups of the nation's 11,000 cable systems. The cable industry says regulations have discouraged them from doing so.
The plan allows systems to charge subscribers for any channels they may have added to expanded basic services since May 15. But subscribers won't be billed for them until Jan. 1, said FCC attorney Paul D'Ari.
In May, the FCC implemented the second of two rate cuts, after determining that the first set of regulations hadn't worked as intended - some subscribers got rate increases. The first cut, implemented in September 1993, was 10 percent.
An FCC survey estimated that subscribers saved an average of $2.18 a month between August 1993 and July 1994 on charges for cable programs and equipment.
For the FCC, trying to protect subscriber savings while encouraging new services has been a contentious and politically charged process.
Two commissioners, Republicans Andrew Barrett and Rachelle Chong, voted against the plan, saying it didn't produce sufficient incentive for cable companies.
Existing rules, regarded as inadequate by the industry, have permitted cable system owners to increase rates periodically to cover a number of increases in business costs, including programming.
Systems have been permitted to charge an additional amount per channel, plus a 7.5 percent markup. The increases can be passed along to subscribers.
With the new product tier, cable subscribers will be able to buy new channels only if they want them.
By contrast, when additional channels are added to regulated services, consumers have to pay for them whether they want them or not - or they could terminate their cable service, said Commissioner Susan Ness. The plan's two components, she said, give both consumers and cable systems ``a lot of flexibility.''
by CNB