Responding to harsh criticism about a sharp rise in cable television rates, Federal Communications Commission chairman Reed Hundt told a House Judiciary Committee hearing that rates are going up because the industry is spending more on programming and infrastructure.
On Tuesday, Consumers Union and the Consumer Federation of America filed a petition blasting the FCC for inaction as the rates charged cable subscribers have skyrocketed under the new telecommunications law, and called on the agency to recalculate its formulas for granting rate increases. The groups said that nationwide, rates have risen 15 percent since early 1996.
In a hearing today, Hundt told a skeptical committee that the industry is paying more for programming. That, and the commission's policy of letting cable operators pass along facilities-improvement costs to subscribers, is chiefly responsible for the higher rates.
"It's pretty much the same as a 7-Eleven that has to pay more for its milk," Hundt said of programming costs. "So the retail price on the shelf for that milk goes up. You can't blame the 7-Eleven. You've got to go back to the farm where the milk was made. The milk processed there is really where the price increases are coming from."
On the facilities-cost issue, Hundt said giving the industry that allowance will lead to "a range of advanced services," including voice, video, and data, delivered over cable nets.
Long term, Hundt said, lower consumer prices really come down to realization of a well-worn mantra uttered in reference to nearly all telecommunications issues: "robust competition." Specifically, Hundt and the commission say that cable rates will stay high until direct-broadcast satellite services grow stronger.
