Clever, Those Cable Companies

In the seven years since Congress deregulated the cable-television industry, local governments and consumers have watched helplessly as cable operators charged ever-higher fees for such must-see programs as Bass Fishing Bonanza and You and Your Wok. Now, Washington is about to give localities new power to regulate rates. But the operators have already found a neat way to beat the system.

In May, the Federal Communications Commission is expected to give local governments more say on rate hikes. Under the 1984 Cable Act, governments can control rates only where "effective competition" from over-the-air channels doesn't exist. Under that standard, all but about 3% of the nation's 9,500 cable systems are exempt from oversight. The FCC plans to tighten the definition of "effective competition" to allow far more local rate regulation.

But there's a catch. The Cable Act covers only basic service, which it defines as any service that includes broadcast channels. Until now, most cable companies' basic service has included such nonbroadcast channels as ESPN, the popular sports channel, and Cable News Network. But now, operators around the country are "re-tiering" their offerings to exclude some of the most popular channels from the base package (table).

ROCK BOTTOM. Consider New York City. On Mar. 1, Manhattan's two cable systems, Paragon Cable Manhattan and Manhattan Cable Television, cut their minimum monthly charge from $18.95 to $14.95. But the lower rate excludes such popular offerings as ESPN, CNN, and MTV. To get those and other cable-only channels, you pay an extra $4. Your addition's right: Initially, the combined cost for what used to be basic service is unchanged. But the new FCC rules won't permit New York to block any hikes in the $4 surcharge later on.

The cable industry says re-tiering has little, if anything, to do with price controls. Decker Anstrom, executive vice-president of the National Cable Television Assn., says the industry is trying to offer consumers more options, including a rock-bottom package for low-income viewers. Counters William F. Squadron, New York City's commissioner of telecommunications and energy: "This is not about helping consumers. This is about making more money."

Squadron probably has a point. But unless Congress acts, cable operators will be happy to slip through the gaping hole they've found in the Cable Act.

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