Cable Operators Complain Rules Will Stifle Growth: As the Federal Communications Commission Moves to Force Rate Cuts under the 1992 Cable Act, the Industry Calls the New Rules Ponderous and Punitive and Says They Will Prevent System Upgrades

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As the Federal Communications Commission moves to force rate cuts under the 1992 Cable Ad, the industry calls the new rules ponderous and punitive and says they will prevent system upgrades.

Fortified by bagels and coffee from the breakfast buffet, more than 4,000 attendees of May's National Cable Television Association convention in New Orleans filed into a cavernous exhibition hall. On stage was a home entertainment center equipped with the latest in interactive, cable-delivered technologies -- a cozy place in which a few modest pieces of furniture surrounded a television that had been wired for hundreds of channels and was connected to a computer that could receive volumes of high-speed data in the blink of an eye.

But the conventioneers weren't there to watch television -- they were there to fight for their future. And they exploded into applause as NCTA President Decker Anstrom took the stage to excoriate the Federal Communications Commission, which he and his audience believe is pursuing policies that strike at the heart of the cable industry's ability to acquire and provide new technologies for the home of the near future.

"You have a right to your frustration and your anger!" he told the crowd. "What Washington did to this industry was nothing less than a political caning. We have already initiated the fight on the FCC's most recent ruling in federal court." The audience roared its approval.

Anstrom was referring to a revised mandate on cable system rate regulation the FCC issued at the end of March. By virtue of the 1992 Cable Act, the FCC claims statutory authority to regulate the amount cable systems charge home subscribers for cable services.

The industry's virtually unanimous opinion is that the new edicts are misguided, ponderous and punitive, since they are likely to hamper the ability of many operators to get financing to upgrade their systems so they can compete on the fast-approaching "information superhighway."

The FCC's revised rules require cable operators to cut their rates by as much as 17 percent of the amount they charged per month for basic services in 1992. The exact amount would be dictated by a complicated formula that takes into account previous rates, government inflation guides, programming costs, taxes and local franchise fees, among other variables.

The FCC rules were implemented as a mandated follow-up to the Cable Act, which is widely hated in try. The only override of a Bush veto, the act's passage came during an election year when constituents -- frustrated by what they regarded as slow service and frequent rate hikes during eight deregulated years -- went to Congress for relief. After the act was passed, several industry representatives publicly admitted that the trade lacked an "ambassador" with a strong public profile to rally public support when it was needed most. Now, with the party that passed the Cable Act occupying the White House, as well as new threats from competing telephone companies and direct broadcast satellite services, the industry believes it is under attack.

Most cable systems will need to roll back their prices by mid-July, except for "small operators" (independent cable operators with a subscriber base under 15,000), which will be allowed to cap rates at March 31, 1994, levels until the FCC completes a separate study Large and small systems with "relatively low prices" (as defined by a complicated formula) also will be permitted to cap their rates at the March 31 levels, and systems that might be put out of business by the new rates will be able to take advantage of a variety of "hardship" provisions.

The FCC vociferously defends the new rules and the 1992 Cable Act that spawned them. Speaking before the NCTA delegates, FCC Chairman Reed Hundt noted that "the public's deep and emotional reliance on cable was a key reason for the 1992 Cable Act." As many in the crowd fidgeted, he argued that "the problems in quality of service and the size of price increases for basic and enhanced basic from 1986 to 1992 are too familiar for me to revisit with you. …