FCC extends freeze on cable revenues Move gives cities more time to study new law

THE BALTIMORE SUN

WASHINGTON -- Thousands of cable television systems across the country might escape new federal price regulations because many cities and towns around the country are afraid that enforcing the rules would create more problems than it solves.

Alarmed by the possibility that cable operators in many cities might be free to raise prices as high as they want, the Federal Communications Commission decided yesterday to extend a temporary revenue freeze on cable companies for three months to give cities more time to study the new regulations.

The problem is the latest of several recent signs that the new cable law is not delivering the consumer benefits that Congress envisioned in October 1992 when it passed the legislation over the veto of President George Bush. Last month, for example, a preliminary study by the FCC found that about a third of cable subscribers have seen their rates increase since the new pricing regulations went into place.

Under the federal law that took effect last spring, local governments were given the primary responsibility for regulating cable prices under guidelines established by the FCC. Cities and towns must first apply for certification from the FCC, which entails filling out a one-page form.

Yet so far, agency officials say only about half the 11,000 communities have sought certification. The problem is most widespread among small towns and cities, many experts said, because many fear the potential complexity and administrative burden will overwhelm their resources.

But other experts say the reluctance stems primarily from the cable companies, which have waged a concerted effort in many cities to persuade local officials against becoming regulators.

"Many of them are scared," said Barry Orton, a professor of telecommunications at the University of Wisconsin and a consultant to local cable authorities in that state. "Some fear it's going to cost them money. Some are against it on principle. And some have been talked out of it by cable companies."

As a group, officials from medium-size and large cities were among the staunchest advocates of the new law as it progressed through Congress. And most big cities have been quick to seek the FCC authority to regulate cable prices.

But local officials in some smaller municipalities apparently find the federal rules too burdensome. "Once you get tied up with the feds, you can end up running the cable system yourself," said Marvin Thompson, the president of the city council in Rice Lake, Wis., a town of 8,000 people. The council decided not to seek FCC certification for regulating cable. "We just decided we didn't know enough to make a decision," he said.

The reluctance of local governments marks the latest strange twist to the saga of cable rate regulation. In overriding Mr. Bush's veto, Congress passed what was seen as a tough law designed to address the consumer outcry over soaring cable prices, which were deregulated in 1987.

Since that year, cable rates have risen at more than twice the rate of inflation, in part because all but a handful of cable systems face no head-to-head competition.

But the new regulations have generated continuing controversy as the FCC has tried to codify Congress' intent. FCC officials initially predicted that the regulations would lead to a $1 billion annual rate reduction nationwide. Instead, prices for at least a third of all customers have gone up rather than down, and the biggest rate reductions have gone to relatively affluent customers who buy extra cable outlets and remote control devices. People who subscribe to the most basic packages of service have often seen prices go up.

Few people dispute that the new rate regulations are complicated. The rate rules alone are more than 400 pages long, and the rules on technical and programming issues run hundreds of pages more.

The FCC tried to simplify the rate rules by establishing a set of "benchmark" prices for different kinds of cable systems, a move designed to avoid the endless analyses used in telephone rate regulation to determine a company's costs and allow a reasonable profit.

But a city must still wade through a long list of calculations, juggling the number of channels and the prices for installations, extra outlets and remote control devices.

Beyond that, a cable company is allowed to appeal the benchmark prices by asking for a separate proceeding to explain its costs. While the FCC and the courts ultimately must decide such appeals, the city is responsible for seeing the case through the process.

"You've got to think about this in the context that there are a lot of very small towns and counties with limited resources who have always been very suspicious of the federal government," said William F. Squadron, the commissioner of telecommunications and energy for New York City. Mr. Squadron, who is also the president of the National Association of Telecommunication Officers and Administrators, added that many cable companies had worked hard to foster those concerns among local officials.

"We want to give local authorities and consumers enough time to trigger the regulatory process," said Maureen O'Connell, a legal adviser to the FCC's acting chairman, James H. Quello, who was joined in the vote by commissioner Ervin S. Duggan.

But commissioner Andrew Barrett issued a blistering dissent, saying the FCC should have also pushed back the date when cable operators were required to respond to consumer complaints in accordance with the new law. Mr. Barrett argued that the commission was effectively forcing both cable companies and municipalities to begin acting on rules that could still be full of flaws and need revision.

"This order," he wrote, "continues the litany of regulatory confusion."

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