McCain & Co. Blast Rate Hikes

Timing is everything, which is why it was unfortunate that the Federal Communications Commission had to release its latest report on cable rate hikes in the midst of a media-focused session of Congress. The FCC analysis showed an increase of over 8% in rates nationally, giving Sen. John McCain, chairman of the Commerce Committee, the opportunity to take a swing at the industry. “The cable industry raised its rates an astounding 8.2% during the 12-month period ending July 1, 2002. By comparison, the Consumer Price Index increased 1.5%. This means that cable rates increased an unbelievable 5 1/2 times faster than inflation. The cable industry has risen to new heights in their apparent willingness and ability to gouge the American consumer,” he said. “The measured period marked a tragic decline in our nation’s economy, and yet the cable industry somehow found the ability to increase its rates,” he added, noting the impact on fixed-income retirees. “These increases defy logic.” Contrary to a published report that McCain will not hold hearings on this, Senate staffers said that McCain is merely waiting until the fall, when a report he requested by the GAO will be completed. At that time, anticipating an even worse analysis of the cable rate hikes, McCain and others will contemplate legislation, perhaps mandating tier pricing. Such price structuring has already been proposed and discussed in positive terms by McCain and other senators. Meanwhile, the National Cable & Telecommunications Association (NCTA) has said repeatedly that the cost hikes are worth it because of the system upgrades to digital, new channels and new services. In May, a GAO staffer presented a report to McCain’s committee blasting the FCC’s methods of analyzing price hikes, infrastructure, equipment and cable programming costs. The GAO also decried the way in which the FCC reviewed the availability and impact of competition on cable rates. In light of the GAO statements, Commissioner Jonathan Adelstein dissented from the FCC report last week, saying the FCC “fails to conduct the full analysis it has performed in previous years, even as questions about the reliability of our data mount… Regretfully, this year’s report omits statistical analyses conducted in previous years. Specifically, [Congress] directs the commission to publish statistical reports on the average rates for basic cable service, other cable programming and cable equipment, and to compare those rates in areas that are subject to effective competition with the rates in areas not subject to such competition.” He added that he hoped the FCC’s “information collection and analysis could be strengthened.” Adelstein’s statement indicated that by FCC measures, general programming costs had jumped 17%. He said, “Conducting even minimal audits would likely lead to a more accurate assessment of the cost factors underlying cable rate increases.” An FCC staffer said that because the law mandates the release date for the annual report, the FCC didn’t have time to address the problems raised by the GAO and Adelstein. Those issues will be reviewed this fall, said the staffer.