FCC Orders Rollback of Cable TV Fees

WASHINGTON —  The Federal Communications Commission on Thursday ordered the nation’s cable TV operators to roll back their rates, a move expected to save America’s 57 million cable households $1 billion a year.

Most customers should begin seeing a $1 to $3 reduction in their monthly cable bill by August, FCC officials said. Further price scrutiny by the FCC and new restrictions the agency has imposed on cable operators could lead to additional rate cuts later on.

The FCC move to clamp a lid on soaring cable rates marks a return to regulation for an industry that enjoys a monopoly in local markets but was deregulated in 1986.

“There were no perfect answers to this complex issue,” interim FCC Chairman James H. Quello said before voting to approve the new rate restrictions.

Overriding a veto by President George Bush, Congress last October ordered the FCC to lower cable rates, which have continued to rise since then. The FCC action Thursday will roll back rates to their Sept. 30, 1992, level--a reduction on average of 3% to 5%, agency officials said.

The cable industry attacked Thursday’s ruling, warning that big rate reductions could hamper companies’ ability to repay bank loans, invest in programming and offer advanced new services such as interactive cable systems that boast 500 channels or more.

Local cable operators were less strident, saying that they won’t know the effect of the new rule until the FCC publishes details later this month. They have no illusions, though, that they’ll like it.

“A lot of us are preparing for the worst,” said Mark Mangiola, executive vice president of Paragon Cable in Huntington Beach.

Sen. Joseph I. Lieberman (D-Conn.), called the FCC’s action “a good first step” but added that “it cannot be the last step.”

The FCC said the rate reduction will affect only “basic” cable service, such as retransmissions of local broadcast stations and public access. It won’t apply to pay-per-view channels that show professional boxing and other special events, or to premium channels.

That provision could allow cable companies to profitably reorganize the basic services they offer now, which often include CNN, MTV and other popular add-ons. By offering those separately, cable operators could reduce their regulated business to a bare-bones service.

Prices for the add-ons could then rise free of regulation, said Doug Webbink, the FCC chief of policy and rules in the agency’s Mass Media Bureau.

Local cable operators worried more about facing a likely crush of telephone calls from customers confused about news reports on the FCC’s overall rules.

“Because the guidelines won’t be out in detail for a few weeks, it’s hard to speculate what the impact on our market will be,” said Donald Granger, regional vice president and general manager for MultiVision Cable in Anaheim. “It’s just too early for us to say what’s really going to happen.”

The tone of the FCC press release and the expected details of the new rule will be “onerous for cable operators,” said Susan Ritchie, a spokeswoman for Times Mirror Cable Television in Irvine. The company, a sister company of the Los Angeles Times, operates as Dimension Cable Services.

Ritchie pointed out that any rollback in rates won’t be automatic and probably will vary from company to company. Rate structures will be based on a formula that hasn’t been released yet by the FCC, she said.

“Customers should not expect any immediate changes in rates,” she said.

Operators are hoping that the FCC’s rate formula will take into account the wide range of costs in various markets.

In Orange County, for instance, Paragon Cable includes in its rate a charge of $2.41 a month per customer--a total of $2.6 million a year from all its customers--to pay county taxes. In Los Angeles, executive Mangiola said, the company’s assessment for county taxes is only 35 cents a month.

Also, he said, each city charges several fees, including utility taxes ranging in Southern California from 2% to 10% of gross revenue.

“The formula has to take into account the cost of doing business in different geographic areas, even within the same state,” he said.

The agency’s final report is expected to be 150 to 200 pages long and complicated enough to keep lawyers and cable operators busy for a while deciphering it.

“If it’s confusing for us, it’ll be even more confusing for our customers,” Granger said. “But until we get the actual guidelines, we’ll just have to keep our eyes open and manage as usual.”

Times staff writer James S. Granelli contributed to this report.

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