Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: MONDAY, April 26, 1993 TAG: 9304260370
SECTION: EDITORIAL PAGE: A5 EDITION: METRO
SOURCE: BRIAN L. ROBERTS
DATELINE: LENGTH: Medium
If the FCC's decision stands, every cable operator whose rates are above something the commission is calling the "competitive benchmark" will have to reduce rates later this year. The cuts already ordered by the commission could exceed $2.2 billion in the first year alone, and the agency has indicated the cuts may not yet be done.
Some will argue that a 15 percent reduction will slash the fat from cable prices. But, in fact, it will cut much deeper - into the muscle and bone of some of America's fastest growing, most dynamic and most promising telecommunications companies.
About 30 years ago, my father founded the company that became Comcast. We have always been committed to quality service, which entails high costs. Despite our somewhat higher rates, our frequent customer surveys reinforce the fact that we are doing a good job and delivering good value.
In 1984, cable rates were largely deregulated, and our company really hit its stride. The growth and improvement of our business was driven by the expanded cash flow that deregulation made possible. Rather than padding our pockets with profits, we poured billions of dollars into acquiring new systems and improving old ones. Now, overnight, that cash flow could deteriorate.
At the same time that cable operators are being told to charge less, they are being required to deliver more. In addition to requiring rate regulation, last year's cable legislation imposed several new costs. We will have to comply with new federal customer-service standards, even if we already provide good service. We may be forced to pay local TV stations to retransmit their signals. We may have to pay "user fees" to the FCC for the privilege of being regulated.
By coupling forced rate reductions with these significant new costs, the FCC is putting the squeeze on us. Something has to give. A handful of large, diversified cable companies, especially those with large investments in programming, may not feel the hit. But the smaller, entrepreneurial company that has concentrated on building and operating local cable systems will bear the full force of the new rules. Many smaller cable operators already have seen their stocks plummet, and many may be in default of bank loans, hurting both lenders and operators.
The cable industry has planned to invest $14 billion in system upgrades over the next 10 years; my company alone was prepared to spend $1 billion. The industry also planned to nearly double its investment in basic cable network programming, from $1.5 billion last year to $2.7 billion by 1999. If the industry followed through on all of its plans, it could mean another 60,000 to 120,000 new American jobs over the next several years.
A lot of this could be put at risk as a result of the FCC's action.
Congress told the FCC to weed out the industry's bad apples; instead, the agency may have poisoned the tree. The House Energy and Commerce Committee, which reviewed the cable business in excruciating detail, found that "most cable operators have been responsible about rate increases" and that only a "minority of cable operators have abused their deregulated status and have unreasonably raised subscribers' rates." How can the FCC reconcile that finding with its decision to reregulate three-quarters of all cable systems?
Moreover, the new rules don't account for variations in costs, quality of service or investment plans among cable operators. They make no provision for qualitative differences based on customer satisfaction or other key factors.
Congress and the commission must reconsider the impact of these new rules on cable's innovation and technological momentum.
Brian L. Roberts is president of Comcast Corp., headquartered in Philadelphia. LA Times-Washington Post News Service
by CNB