The Wall Street Journal

As Congress starts debate on a sweeping bill to deregulate the cable industry, cable operators are arguing that potent new competitors make the old rate rules pointless. But in fact, widespread cable competition is still years away.

After years of monopoly control, the cable industry points to the arrival of new TV signals into the home via satellite dish, telephone line and wireless technology. ``It's simple,'' says Decker Anstrom, president of the National Cable Television Association. ``Consumers have a choice for TV that didn't exist before.'' The Senate is expected to begin debate as early as this week.

That argument is turning into a bitter fight on Capitol Hill, thanks to consumer advocates who say the industry's reports of competition are premature. Cable's newest competitor, direct-broadcast satellite services, reach only about 1 percent of cable's 60 million subscribers. And the industry's most formidable rivals, the seven regional telephone companies, say even their rosiest estimate doesn't have them offering widespread video services for two to three years.

``We've got to put the whole business together -- develop programming, package marketing and hire new people. It's a major business wrap-up. Things like this take time,'' says Don Evans, vice president of federal regulatory affairs at Nynex Corp.

The precise timetable for new cable competition is shaping up as a central issue in the complex debate over how to deregulate the industry. On the one hand, some analysts and academics argue that the current maze of regulations has done little to lower consumers' rates. Instead, they say, the laws have merely created an expensive bureaucratic swamp for cable companies, which simply pass the extra cost along to customers.

Consumer lobbyists counter that the cable industry could enjoy an extraordinary window with no competition and no rate restrictions.

``Is regulation ideal? No,'' says Gene Kimmelman, co-chair of Consumers Union, the nonprofit publisher of Consumer Reports magazine. ``We all agree competition is preferable. The debate is `What do we do before competition?'''

Already foes of cable are sounding dire warnings of soaring cable bills if Congress buys the ``new competition'' argument.

``Prices will go sky high, and customers will have no choice of what to buy. It'll be a total disaster,'' says grass-roots organizer Chuck Campbell, chairman of Citizens Against Paragon Cable in Elmira, N.Y.

The Consumer Federation of America points out that the cable industry was deregulated before, in 1986, and consumers were hit with the biggest rate boosts ever, roughly three times the rate of inflation. The increases were instrumental in leading Congress to reregulate the industry with the 1992 Cable Act.

Cable companies retort that during deregulation, they used their new freedom to create and market a wave of channels. They say that the deregulation era marked the crucial time of development for some of the nation's most popular cable channels, including CNN, the Discovery Channel and the Nashville Network.

Mr. Anstrom maintains that rates will rise with or without regulations, given the spiraling cost of programming and new hardware. But he says that the looming threat of imminent competition will keep cable operators honest.

``If I'm running a variety store, and I learn that Wal-Mart is buying a parcel of land and they'll open in 18 months, what am I going to do -- jack up my prices and alienate my customers? No way,'' Mr. Anstrom says.

It may be well over 18 months before the cable industry sees widespread new competition. The Baby Bell phone companies' antiquated copper wiring doesn't have nearly enough capacity for video signals. Bell Atlantic Corp., for one, anticipates it could spend up to five years upgrading its network for video.

Some telephone-company projects are trying to get an earlier start. Nynex and Bell Atlantic last week invested $100 million in CAI Wireless Systems Inc., a wireless TV firm serving 34,000 subscribers.

The cable industry points out that, with annual revenue of four times cable's $23 billion, local telephone companies pose the greatest threat. In the short term, the industry says, new tiny satellite dishes are getting cheaper and are expected to have three million subscribers by the end of 1996.

In the congressional debate, part of a broader package of telecommunications reform, cable operators want to loosen the definition of ``effective competition'' in the 1992 Cable Act. Currently a cable company can escape regulation if it has a rival that reaches at least 50 percent of the households in a market, with at least 15 percent subscribing.

But the industry is arguing that the mere presence of a big competitor with government permission to enter a market should be enough to relax the rules.

``The definition of effective competition for cable television is flawed and places the cable industry at a competitive disadvantage vis a vis the telephone companies,'' the industry's Mr. Anstrom told Congress. ``The new definitions should rely not on an arbitrary measure of market share, but rather on the ability of credible competitors to enter the television market and compete with cable operators.''

AP-WS-04-03-95 1038EDT

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