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FCC ready to get tough on cable TV Study shows need for tighter rules on prices, agency says


WASHINGTON -- Taking a tougher stance toward business than it has in years, the Federal Communications Commission is preparing new rules on cable television prices that are likely to jolt the industry.

In recent months, the agency has found in collecting information from hundreds of cable operators that cable systems with competitors charge about 48 cents a channel per month, while those that have monopolies charge 65 cents. Systems with fewer than 1,000 subscribers charge even more.

After a bruising battle over cable prices in Congress last year, a coalition of Democrats and moderate Republicans managed to override a veto by President George Bush and pushed through a bill that reimposes rate regulation for the first time since 1986.

The law requires the commission to draft relatively tough guidelines under which local governments would be allowed to set "reasonable prices" for the basic package of service. Beyond that, customers and local authorities could ask the FCC to roll back "unreasonable prices."

But the law offers wide room for interpretation, and the cable industry has been feverishly trying to limit its losses. At the same time, consumer groups and local government officials are seeking stronger rules.

Now it appears, three weeks before the April 3 deadline imposed by Congress, that the cable industry will wind up unhappy. FCC officials say they have not decided precisely how to regulate the various tiers of cable service but the outcome probably will be closer to the proposals of consumer groups than to those of the industry.

"We're working toward something that the cable industry will probably squawk about," said an FCC official, who spoke on condition of anonymity.

FCC officials say they have accumulated new cable price data that could help them set tough benchmarks for "reasonable prices."

Rising cable rates proved to be an explosive issue in Congress last fall, and they represent a big pocketbook issue for the 58 million Americans who subscribe to the cable systems. Prices for the most popular tiers of programming have climbed more than twice as fast as the rate of inflation in recent years, in part because most cable systems have had exclusive franchises and freedom from regulation.

The National Cable Television Association has argued that Congress intended to impose tight regulation on only a bare-bones package of services consisting of little more than local television channels.

Under the industry's proposal, the cable packages offering most of the other channels -- from CNN and Nickelodeon to sports channels such as ESPN -- would be left almost completely unregulated.

Furthermore, under that proposal, the FCC would assume that the prices charged by at least 95 percent of all systems for these expanded packages were reasonable. Only the 5 percent of systems that are most expensive would be considered unreasonable, and the companies offering those systems would be given a chance to justify their rates.

James P. Mooney, president of the trade association, described the situation in stark terms.

"The lifeblood of our industry is at stake," he said. "At some point, this has to go beyond political pot-shotting to the grown-up regulatory stage, and that is happening now. The government has to get down to serious analysis."

Consumer groups and local governments have argued that the FCC essentially should roll back prices for most services by about 30 percent. They argue that the rollbacks would bring prices into line with what they would be if the cable operators faced direct competition.

FCC officials say their decision almost certainly will end up between the results sought by the industry and by consumers, but they leave little doubt that they are tilting toward tighter regulation.

"There won't be a perfect answer," said James H. Quello, acting chairman of the FCC. But he added, "There's no doubt the intent of Congress was clearly lower rates and better service for customers."

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