Cable rates surged 8.2 pct in 2002--FCC study

NEW YORK, July 8 (Reuters) - Cable bills rose 8.2 percent in 2002, outpacing inflation, according to a Federal Communications Commission (News - Websites) survey released on Tuesday. The study, while no surprise to consumers who have complained about the price increases in their monthly cable bills, puts a nominal figure on the rate hikes.

The report comes amid growing tension between cable operators and sports programmers. Operators have been blaming high cable bills on the rising costs operators are forced to pay for programming.

Several operators including Cox Communications Inc. (NYSE:COX - News) and Mediacom Communications Inc. (NasdaqNM:MCCC - News) have testified in Washington hearings against Walt Disney Co. (NYSE:DIS - News)-owned ESPN's annual 20 percent rate hikes.

The survey of cable rates during a 12-month period ending July 2002 found that rates for services and equipment increased 8.2 percent on average to $40.11 per month.

The FCC study found that rates jumped at a higher rate than the Consumer Price Index rise of 1.5 percent during the same period.

However, the study also found that on a per channel basis, the cost to consumer actually dropped by 0.2 percent, as operators added more channels.

Senate Commerce Committee chairman John McCain chastised cable operators for raising rates during a rough patch in the economy.

McCain also said his committee plans to continue to "focus" on the issue in the coming months.

"The cable industry has risen to new heights in their apparent willingness and ability to gouge the American consumer," said McCain in a prepared statement. "These increases defy logic."

Cable industry representatives defended the price hikes, which they said helped offset the high cost of new equipment meant to offer high speed Internet services and advanced video products.

Cable "operators invested more than $15 billion in system upgrades ... while incurring greater than inflationary increases in personnel and programming," said Rob Stoddard, a spokesman at the National Cable & Telecommunications Association in a statement. "These investments have resulted in more technically reliable systems ... and the launch of new cable services."

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It is in the breaking news sidebar!

Along with help from a few lobbyist, including Dick Armey.

Comcast beefs up lobbying as cable issues loom in D.C.

By LARA JAKES JORDAN
Associated Press Writer

WASHINGTON — Comcast, the nation's largest cable provider, is hiring some of the most politically connected lobbyists in the capital — just as a series of major cable policy decisions loom on the horizon.

Over the last four months, Philadelphia-based Comcast has hired away an adviser to Senate Democratic Leader Tom Daschle, the former chief of staff to former House Republican Leader Dick Armey, and the counsel to House Energy and Commerce Chairman Billy Tauzin, R-La., whose committee has jurisdiction over broadcast, cable and satellite issues.

Additionally, the sister-in-law of White House chief of staff Andrew Card serves as a Comcast consultant.

Comcast executives said the recent hiring boom is simply an effort to pump up the company's image since it became the nation's No. 1 cable provider in November with its $29 billion acquisition of AT&T Broadband. Yet they acknowledge the company will be stepping up its role — and responsibilities — as Washington grapples with regulating new technology and business operations in the cable industry.

"There aren't any major, major issues looming that I think are of crisis proportions," said Comcast Vice President Kerry Knott, who worked for Armey for 14 years and lobbied for Microsoft before joining Comcast in March to head up its Washington office.

Consumer watchdogs, however, say it's no coincidence that Comcast's lobbying office is getting a boost just as Congress, federal courts and the Federal Communications Commission take up issues that could have a significant impact on the cable industry — and its top provider.

"There's just a huge number of battles, and they've gone out and beefed up their team," said Jeff Chester of the Center for Digital Democracy in Washington. "The fact that they've reached in and gotten aides of powerful lawmakers and interest groups should alarm the public and consumers who are concerned about poor service, high cable rates and the lack of competition.

"Comcast is a very powerful — too powerful — monopoly," Chester said.

The pending issues include:

Hiking the FCC's current 30 percent cap on nationwide ownership of cable operators by a single company to as high as 45 percent. Comcast claims it owns 28.1 percent of the nation's cable operators; a recent study by the Center for Public Integrity estimated its share at 31.4 percent.

Curbing cable bills that have surged about 50 percent since 1996. Congress is examining whether the rate hikes are the result of stymied competition among cable providers. But cable companies say the price spike is caused by higher programming costs passed along from networks, especially sports channels. Comcast's rates, company officials said, have risen by 2 cents per channel over the last four years.

Regulating cable companies under the same standards used for telephone companies in providing high-speed Internet service. The 9th Circuit Court of Appeals is reviewing an FCC ruling that exempted cable companies from the regulations — saving them, some believe, from a major surge in costs. Comcast serves 3.3 million high-speed Internet customers — about 13 percent of the nationwide market.
By the end of the month, Comcast will have five full-time lobbyists in Washington, plus outside consultant Lorine D. Card, sister-in-law of the White House chief of staff. Before the merger, Comcast had one Washington lobbyist.

The rest of the lobbying staff include: Daschle adviser and fund-raiser Melissa Maxfield; Tauzin counsel Jessica Wallace; veteran lobbyist Brian Kelly, who had worked for Walt Disney Co., the National Association of Broadcasters and the Electronics Industries Association; and Jim Coltharp, who for six years single-handedly held down the fort at Comcast's lobbying shop.

Comcast's chief rival, AOL Time Warner, staffs six lobbyists in Washington who work on policy issues for all the company's divisions — and not just cable, a spokeswoman said. The nation's No. 3 cable provider, St. Louis-based Charter Communications, has no Washington-based lobbyists, relying instead on industry representatives at the National Cable and Telecommunications Association.

As they watch Comcast with a wary eye, even some of the company's adversaries can't help but grudgingly admire its Washington strategy.

"They're going be smooth, they're going to be effective," said Andrew Jay Schwartzman, president of the Washington-based Media Access Project, which is challenging parts of the AT&T acquisition in court. "They're going to play both sides of the game. They're obviously spending big bucks to hire very well-connected people."

"These are very tough customers, and they are very formidable for us," Schwartzman said.

But Coltharp says it's about time the company started staffing up the office.

"I spent six years wondering, 'When am I going to get help?"' he said. "I was doing everything I could do to dance as fast as I could. And I finally get help and they think we're taking over."

"We see a lot of things coming on the horizon," Knott said, "that we think it makes a lot more sense to start building a team now, and getting to know these members of Congress, and introducing them to our industry well in advance of any major crises."

After the acquisition, Comcast jumped from the nation's third largest cable provider to the No. 1 spot. It serves more than 21 million customers in 41 states.

Cable "is now the preferred media platform of a significant majority of Americans," FCC Chairman Michael K. Powell said recently — yet the industry is regulated much more loosely than its telephone and broadcast TV counterparts.

Copyright © July 06, 2003, Pocono Record
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