By JEANNINE AVERSA

Associated Press Writer

WASHINGTON (AP) -- Federal regulators want to give one of the country's largest cable television companies a little flexibility in return for keeping rates low and making system improvements.

The plan, still subject to final approval, could be a model for resolving thousands of rate complaints, Federal Communications Commission officials said Monday.

Worked out between cable television regulators and Continental Cablevision, the nation's third largest cable company, the plan would resolve hundreds of pending rate disputes and would refund $9.5 million to more than 2 million people in 16 states, said Meredith Jones, chief of the FCC's Cable Services Bureau.

The refunds would go to subscribers of the most basic tiers and those above it, called expanded basic. These tiers include a variety of cable networks, such as USA, MTV, ESPN and TNT.

Continental would agree not to appeal the FCC's rate decision.

``This will save the FCC countless hours and means that rates will come into compliance much sooner and bring relief to customers faster,'' Jones said.

Cable rate regulation took effect for the first time in September 1993, and the FCC is still working to resolve consumer rate complaints.

Meanwhile, Congress is considering deregulating rates.

In new ammunition against that effort, the Consumer Federation of America unveiled the results of a survey Monday, saying that more than two-thirds of 675 cable subscribers polled support regulation of cable rates. Twenty-two percent said they didn't and 11 percent said they didn't know.

In addition, the poll said that 41 percent consider their rates too high, 24 percent much too high and 32 percent about right. The poll was conducted by Princeton, N.J.,-based Opinion Research Corp. through phone interviews the week of March 16. The margin of error is plus or minus three percentage points, said Bradley Stillman, the federation's legislative director.

Responding to the survey, the National Cable Television Association said the industry is sensitive to pricing and customer service issues because of strong new competition that is emerging from telephone companies and other services.

``It's those competitive forces that will protect consumers, far better than regulation,'' the association said.

Under the FCC rate proposal, Continental also agreed to create a basic level of service priced at 15 percent below the FCC's regulated levels for all its systems.

And the company agreed to invest $1.35 billion over the next six years to upgrade its systems.

In return, Continental gets a little more freedom to reconfigure and price its service, Jones said.

For instance, Continental would be permitted to take four channels out of existing regulated service and put them into an unregulated tier with new program services. However, the company would have to charge the same rate for those channels that were moved. In addition, the FCC is giving Continental more leeway in pricing when it adds channels to a regulated tier.

Nothing in the proposal would bar a customer from challenging future rate increases, Jones said.

As long as that's the case, the proposal would have the support of the consumer federation, Stillman said.

Continental Chairman Amos Hostetter called the proposal a ``win, win, win for consumers, regulatory authorities and Continental.''

AP-WS-04-03-95 1840EDT

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