SENATE ANTITRUST PANEL FAULTS CABLE ON RATES, PROGRAM ACCESS

Subcommittee Chmn. DeWine (R-Ohio) led questioning of cable, DBS, overbuild and consumer group officials, asking why cable prices still were climbing at 3 times general inflation rate in face of greater DBS penetration and aggressive wiring efforts by such overbuilders as RCN Corp. in some markets. He expressed doubts about consumer benefits of cable deregulation and wondered whether renewed rate regulation was needed. “Deregulation appears to have done little to halt the trend of increasing cable rates,” he said, and “it is clear that we did not anticipate such extensive and ongoing rate inflation when we passed the Telecommunications Act.” As result, he said, “we now must ask: Can consumers expect to see cable rates decrease any time soon or will they continue to increase, increase and increase?”

Ranking Democrat Kohl (Wis.) denounced high cable bills and called for tougher program rules and other measures to spur competition. Arguing that “the competitive situation in the cable industry is far from ideal,” Kohl urged that Congress consider extending FCC’s current program access rules beyond their scheduled expiration next year and “closing loopholes that permit certain exclusive deals.” He also called on Congress to “consider building access legislation that will open the bottleneck blocking the ‘last mile’ into the home.” Finally, he said, Congress should “explore the lack of competition” in cable set-top box market and adopt plan of action for “unleashing competition.”

Sen. Specter (R-Pa.) faulted cable operators for boosting rates steeply, providing poor customer service and thwarting competitors by denying them long-term access to its local sports programming in its Philadelphia home market. Expressing “enormous concern” that RCN had backed out of city of Philadelphia because of Comcast’s actions, he said federal govt. might have to intervene to resolve problem. “We'd prefer not to get involved but that requires a modicum of good faith and negotiations between the parties,” he said.

Criticizing Comcast for declining to attend hearing, Specter said he planned to write letter to Comcast’s president and hold another hearing in Philadelphia. He also lashed out at AT&T and AOL Time Warner for not appearing as invited. Apparently threatening to subpoena companies to testify, Specter said panel should “consider other methods beyond invitations to get answers.” Without going that far, DeWine agreed that Comcast and possibly other invited MSOs had better attend future hearings: “We would expect that people would not have scheduling problems 2 times in a row.”

Comcast spokeswoman said Pres. Brian Roberts didn’t appear at hearing because his “schedule did not permit him to be there today.” But she said officials would try to attend future hearings if timing was right. She also said MSO executives already had met with Specter to discuss RCN’s complaints and would continue to do so. “We've been in a dialog to help him understand the competitive market,” she said. “We will, of course, continue to provide him with information.”

Representing cable at hearing, NCTA and Charter Communications executives defended industry’s record on price increases, blaming most of them on expensive plant upgrades and soaring programming costs, particularly for sports rights. “We're experiencing a 24% increase in programming costs this year,” Charter Pres. Jerry Kent said. “Our margins are absolutely decreasing… Until we get sports inflation under control, it’s going to be hard for us to not increase our rates.”

Cable officials also argued that in spite of overall rate increases, cable prices actually had stabilized on per-channel basis because MSOs kept adding more programming choices to their lineups. “Cable customers today are receiving more channels and better value for their dollar than ever before,” NCTA Pres. Robert Sachs said, noting that latest annual FCC survey showed cable operators added average of 3 channels apiece. He said there should be “reduced pressure on cable rates” as cable operators added digital, video-on-demand (VoD) and other new revenue- generating services.

DirecTV’s Eddy Hartenstein said DirecTV had been hampered by its inability to use Comcast’s local sports programming in Philadelphia. Contending that “other cable operators are contemplating similar strategies to attempt to evade the program access law,” he urged FCC to extend rules past 2002 and Congress to tighten law so that terrestrially delivered programming was covered as well as satellite-delivered programming. “It’s not a price issue,” he said. “We said: ‘Name the price.’ There is no price.”

Hartenstein also asked Congress to lift full must-carry requirements scheduled to be start for DBS providers Jan. 1. If law isn’t changed, he said, DirecTV won’t be able to offer local network stations in any markets beyond 41 that it currently serves. But without must-carry obligations, he said, DirecTV could extend local-into-local service to 80 markets, covering 79%- 80% of U.S. households. He said 43% of all DirecTV customers now were buying local-channel packages, with take rate as high as 66% in some markets.

RCN Vice Chmn. Robert Currey also sought extended and tougher program access rules to protect cable overbuilders and other competitors. In Philadelphia market, he said, Comcast has offered RCN only 3-month rotating contract for MSO’s local sports channel rather than standard long-term deal. He also repeated earlier charges that Comcast so thwarted RCN’s efforts to gain cable franchise in Philadelphia proper that company finally gave up after more than 2 years. As result, he said, Detroit’s mayor called up RCN and invited company to take on Comcast in his city.