Press Release September 23, 1997	Contact: Gene Kimmelman or Kathleen McShea, mcshka@consumer.org (202) 462-6262 Consumers Union Washington D.C. Office

Consumers Demand Cable Rate Freeze
Plan to Promote Competition Would Net $1 Billion in Savings

WASHINGTON -- Consumers Union (CU) and the Consumer Federation of America (CFA) today filed a rulemaking petition at the Federal Communications Commission (FCC) charging the agency with failure to follow Congress' directives to keep cable rates reasonable and promote competition.

The petition asks the agency to use its power under the 1992 Cable Act and 1996 Telecom Act to take a 4-prong attack against the giant cable industry: 1) an emergency cable rate freeze; 2) total overhaul of FCC rules defining reasonable rates; 3) tougher limits on ownership of cable systems and programing; and 4) more effective rules for distribution of programming to potential competitors.

"Contrary to Congress' wishes, cable rates are rising faster than ever before since passage of the 1996 Telecom Act,' said Gene Kimmelman, CU's Washington Co-Director. "Rather than promoting competitive alternatives to cable, the end result of the Telecom Act is cable TV rates rising more than three-times faster than inflation. Federal officials have broken their promise to hold down rates and deliver competition."

CU and CFA base their rulemaking request on the following findings:

• Rates are sky-high. Since passage of the Telecom Act in February of 1996, Bureau of Labor Statistics (BLS) data show a 5.6 percent/year real dollar (factoring out inflation) increase. Regulated cable rates have risen 8.2 percent/year.
  
• It's worse than ever. When the FCC used its power to freeze cable rates in April 1993, the inflation-adjusted rate hikes were lower than consumers are being hit with today (4.3 percent/year, then vs. 5.6 percent/year, now).
  
• The FCC has the Power. Under current law Congress directed the FCC to regulate cable rates to ensure "reasonable" prices for all large cable systems until March 1999. However, the relaxed standards instituted in the fall of 1994 have allowed rates to rise about as much as when cable was an unregulated monopoly. When cable was not regulated (between 1986 and April 1993) BLS data show real-dollar rate increases of 4.3 percent/year. With relaxed standards, cable rate increases are nearly the same, rising 3.6 percent/year.
  
• Consumers are being shortchanged. The FCC's current regulations, which permit monopoly-like rate increases, are not working as the Commission intended. Cable rates are rising 50 percent faster than the FCC's predictions three years ago. Cable TV subscribers are now paying 4 percent higher rates than the Commission said would be "reasonable". This means consumers are being hit with more than $500 million in excessive cable charges over the next year.
  
• Monopoly prices. By inflating charges for popular regulated channels, consumers -- and satellite or other competitors -- are forced to pay monopolistic prices to cable companies whose practices are protected by FCC regulation. The FCC inappropriately allows these excessive charges for popular programming networks to be passed along to consumers --which is exactly what the largest cable companies are doing. These companies, including TCI and Time Warner, raised rates for basic and expanded basic programing 19 percent in 1995, at a time when premium channels and broadcast network channels raised their programming prices only 2 percent.
  
• •Where's the Leadership? To date, the FCC has failed to assert its authority to police concentration of ownership to either limit the cable cartel or promote new competition. Failure to impose strict cable system and program ownership rules, as called for in the 1992 law, has slowed and potentially undermined the development of competition. A small cartel now controls ownership of cable systems and popular cable programming, and this concentration thwarts the development of competition. Tele-Communications Inc. (TCI) owns a major stake in cable systems serving about one-third of all subscribers and dozens of popular cable programming networks, and Time Warner owns systems serving 19 percent of subscribers and many of the most popular programing networks. A few cable magnates are using mergers (like Time Warner/Turner) and joint ventures to develop a stranglehold on television program distribution. Through cartel-like behavior, they blocked Rupert Murdoch's $3 billion satellite venture to compete with cable and have now enlisted Murdoch as an ally to block other potential competitors.

"Simply by freezing cable rates, the FCC could save consumers more than $1 billion over the next year. Unless the Commission breaks open the cartel of cable companies that thwart competition, consumers will face a new era of Robber Barons that control the media and inflate prices," Kimmelman concluded.

The Consumer Federation of America is a non-profit association of 240 pro-consumer groups, with a combined membership of 50 million, founded in 1968 to advance the consumer interest through advocacy and education.