Barney Frank’s Quixotic Bid To Lower Cable Rates

Erik Wemple

Driven by consumer outrage, new proposal is latest act in regulatory song-and-dance

Like any good Massachusetts Democrat, Rep. Barney Frank knows that all politics are local–especially when it comes to regulating cable-service providers.

On Jan. 16 the city council of Fall River, a town of 85,000 in southeastern Massachusetts that happens to be in Frank’s district, passed a resolution condemning escalating cable rates. “[M]any complaints have been received from the residents of the City of Fall River, regarding cable television rate increases that seem to occur much too often,” reads a portion of the resolution, which notes that “deregulation has not resulted in increased cable competition or reduced cable rates.”

The resolution came in response to rate hikes by the local cable company, AT&T Broadband, that pushed the price for the company’s standard 66-channel service from $31.12 to $34.18 per month.

Fall River’s politicos, therefore, called for federal reregulation of cable rates.

On May 15 Frank took up Fall River’s cause, announcing at the city’s government center a bill that would empower the Federal Communications Commission to scale back local cable rate hikes. “The unregulated cable TV industry has pushed cable rates up at almost three times the rate of inflation,” Frank said. “The bill I am introducing today will give consumers a fighting chance against unfair cable increases.”

Frank calls the Fall River resolution the “precipitating event” for his bill. Yet whatever the circumstances, Frank’s legislation adds another round to the seesawing, decades-long fight in Washington over how the cable industry sets prices.

Federal intervention over communications pricing began during the Depression, and it’s taken an especially erratic course over the past decade, culminating with the deregulatory Telecommunications Act of 1996 (see accompanying chart). In a press statement, Frank said he was “proud” to note that he had voted against the act.

Frank’s proposal would simply return the industry to the status quo of before 1996–back when the FCC used its discretion to review rates in response to complaints from the public. Under his legislation, Frank stressed, the commission wouldn’t morph into a version of the Central Pricing Committee.

“This is not rate-setting,” he says. The liberal lawmaker pointed out that in the six years before the 1996 act, the FCC ruled on more than 18,000 complaints and ordered nearly $100 million in refunds to 40 million cable subscribers.

The reality, however, is that Frank may be among the few congressmen with such nostalgia for rate regulation. Thus far, the bill’s only cosponsor is Rep. James McGovern, D-Mass., who shares representation of Fall River with Frank. Championing lower cable prices via legislation is a no-lose proposition for Frank, who may well be content to let the bill flounder. “I haven’t asked for any cosponsorship. I will circulate [the bill] now,” he says.

The congressman will have to impress many colleagues before House Energy and Commerce Committee chairman Billy Tauzin, R-La., moves on the bill. “The chairman doesn’t have any intention at this time of pursuing this legislation,” says Ken Johnson, a spokesman for Tauzin. As Commerce Committee chairman, Tauzin can bottle up any bill affecting cable-service providers. As for Frank, he doesn’t even sit on the committee.

The National Cable & Telecommunications Association declined to comment on the legislation. However, AT&T Broadband, in a statement, stepped in to articulate one likely industry position on Frank’s proposal:

“Imposing costly federal regulations on the cable TV industry does not address the root causes of cable service price increases. Cable service prices reflect the costs we pay for programming, and these programming costs are increasing year over year. Cable industry re-regulation would turn the 1996 Telecommunications Act on its face and compromise AT&T Broadband’s $2 billion private upgrade investment in its New England cable systems.”

So for the time being, Frank, McGovern and their allies in the consumer lobby will form the Washington vanguard pushing for rate regulation. Christopher Murray, an analyst with Consumers Union, says intervention by the FCC is the only way to manage a noncompetitive industry. “Cable is a monopoly,” he says. “People have shown they’re reluctant to give up their TVs, and cable companies have taken advantage of that.”

Frank suspects that communities everywhere are tiring of rate-hike notices and will tell their representatives about it. “If most of the public is satisfied, the bill won’t go anywhere,” he says. “If there’s significant public dissatisfaction, members will hear from their constituents and something might happen.”

Frank himself heard from locals like Al Alves, a Fall River city councilman and the proprietor of Tabacaria Acoriana restaurant, where he has two TV sets hooked up to cable. “They’re killing us,” says Alves of rate hikes promulgated by AT&T Broadband.

Those hikes, says Alves, take a particular toll on the elderly, who constitute more than a third of his city’s population. “For a large number of them, cable is not a luxury,” says Alves. “Cable is the only entertainment they have.” Over the past year, says Alves, he has received 50 constituent complaints about cable costs.

AT&T Broadband, scoffs Alves, offers only a “bogus” discount program for seniors. “They take a couple of bucks off the bill.” (In response, AT&T Broadband spokeswoman Jennifer Khoury notes that the Fall River senior discount reduces the 21-channel broadcast cable service from $8.06 to $7.25 per month.)

Alves will channel his disgust over cable prices as the chairman of a Fall River advisory committee on the renewal of the city’s cable contract. “Last time, the contract was for 10 years, but public opinion is very much against that this time. We’ll see if we can have some competition here,” says Alves.

The Fall River experience demonstrates once again that everyday Americans often judge the quality of cable competition strictly with their pocketbooks, eschewing some of the more esoteric concepts advanced by deregulationists in Washington.

In his first press conference, for example, FCC chairman Michael Powell said that high-quality and diverse programming lineups reflect robust competition in the sector. “Rate increases are not in and of themselves a reason” to reregulate cable, said Powell.

On the same topic, Alves says, “I pay 90 bucks at the restaurant … and 52 at home.”

Since the 1996 deregulation, cable prices nationwide have shot up 34%–nearly three times the rate of inflation, according to data supplied by the Bureau of Labor Statistics. And with each rate increase, consumers show less patience with the standard, two-pronged defense from the industry–namely, that programming costs are forcing the hikes, and that consumers can always opt for DBS services. Frank, for one, says cable operators are too willing to pass programming costs along to consumers. “[They] will have to go back and say, `We can no longer pay you what you want,'” says the lawmaker.

However the cost containment happens, even the staunchest opponents of rate regulation concede something must be done to protect the consumer. “Congress will be faced with the ugly prospect of reregulating cable if we don’t do something down the road to jumpstart competition in broadband,” says Johnson, Tauzin’s spokesman. “The only thing worse than a monopoly is an unregulated monopoly.”

COPYRIGHT 2001 Copyright by Media Central Inc., A PRIMEDIA Company. All rights reserved.

COPYRIGHT 2003 Gale Group

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