Cable Operators Say

CABLE OPERATORS SAY the Federal Communications Commission has hobbled them badly by ordering the industry to cut basic rates 7%. They complain that the FCC action has killed their cash-flow projections. And that, they say, has hurt development of the Information Superhighway by helping scuttle two of the year's biggest deals: the Bell Atlantic-Tele-Communications merger and the joint venture proposed between Southwestern Bell and Cox Enterprises.

IN REALITY, the FCC's ruling isn't that bad for the cable industry. It doesn't regulate a big growth area, pay-per-view. And it has features aimed at spurring investment. Under the old setup, if a cable operator wanted to add a new channel, the operator could only charge the average price of all channels. That encouraged cable operators to add cheap, low-quality channels, assuming they added them at all. Under the new scheme, cable operators can pass through the full cost of a new channel, plus a 7.5% profit. The upshot: Operators can add more and better channels, not to mention more profitable ones.

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