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Rates get rise out of critics

The cable industry's critics are again clamoring for the government to put a lid on subscription rates, thanks to new government numbers showing consumers' costs continue to rise faster than inflation.

The cable industry and, more important, their defenders in Washington say the hikes are justified since cable faces hot competition from direct satellite providers and absorbs much of the skyrocketing cost of programming and adding service.

"Customers are receiving more channels and better value for their dollar than ever before, plus opportunities for exciting new services, such as high-speed Internet access, cable telephony and other advanced services," says Robert Sachs, president of the National Cable Television Association.

According to the FCC's latest numbers, measuring price changes for the year ended July 1, 2000, average monthly rates climbed 5.8%. At cable franchises, holding monopolies in their local markets-the vast majority of the country's more than 31,000 systems-meant an increase from $32.25/ month to $34.11/month The Consumer Price Index during that time rose 3.7%.

Sachs insisted, however, that the real measure of cable price increases is the change in per-channel costs. According to the FCC, cable monopolies' per-channel increases were only 2.5%, well below inflation.

The new figures were released the week after consumer advocates and a divergent group of industry players, including AT&T and the local phone monopolies, marked the fifth anniversary of the 1996 Telecommunications Act by demanding a rewrite of the landmark legislation. The law ushered in sweeping deregulation, but its overall success in lowering prices and adding competitors to various sectors has been mixed.

FCC Chairman Michael Powell has rejected the notion that consumers aren't benefiting from competition simply because cable rates are rising. Powell's sentiments echo Republicans on Capitol Hill, who insist they have no plans to renew the FCC rate oversight.

The cable industry blames continuing price hikes on an increased cost of sports programming and on the need for more and better programming.

But consumer advocates jumped on the latest numbers as evidence that the FCC should resume regulating premium programming tiers. Congress took away that authority two years ago.

Gene Kimmelman, co-director of the Consumers Union's Washington office, notes that, in the small number of communities where more than two cable carriers compete (fewer than 500), rates are 20% lower (although those markets also saw rates rise 5.8%). Also, for basic programming tiers consisting of local channels, public access TV and one or two inexpensive broadcast superstations, prices climbed less than 2.5% because those prices are still regulated by local governments, he says.

"Obviously, this report shows it's time for Congress and the FCC to clamp down on cable monopolies and find new ways to jump-start competition," Kimmelman says.

But cable industry officials say only two things are obvious: Consumers are demanding more programming choices, and the additional programming isn't free.

Even though cable and other multichannel providers have added more than 4 million subcriptions in the past year, more than 70% chose satellite services. To stop market-share erosion, cable has to offer lineups of 70-plus, even 100-plus channels, industry executives say. In the past year, the average channel lineup offered by monopoly franchises rose from 52 to 54.8.