CABLE SHOULD FEEL PRESSURE FROM POWELL ON DTV, FERREE SAYS

FCC Media Bureau Chief Kenneth Ferree told reporters Fri. that cable operators should feel pressure to comply with Chmn. Powell’s “voluntary” plan to speed nation’s digital transition. Asked if fact that cable had several pivotal rulemakings and AT&T Comcast merger pending before Commission should weigh on industry as it considered its response to plan, Ferree said: “That probably should be their assumption… I don’t think they do themselves any favor at the Commission by not being proactive players in the digital transition.” He also held out possibility that if any of industries affected -- cable, broadcasters, satellite providers, equipment manufacturers and retailers -- balked, Commission could adopt formal rulemaking procedures to make any and all parts of Powell’s plan mandatory. He hinted that lawmakers could become involved, leaving door open for Congress to take lead if industries didn’t step in line. Ferree said House Commerce Committee Chmn. Rep. Tauzin (R- La.) had been consulted on plan before it was released publicly. “I don’t know whether there’s another step after this where the Hill gets involved or we get involved and things stop being voluntary and start being mandatory, but we're hoping to get the industry to commit to this,” Ferree said.

NCTA spokesman said he didn’t want to comment on Ferree’s remarks specifically, but said NCTA would seek in coming weeks to speak with Powell to “get a more full understanding of what his expectations are.” Spokesman said several cable companies already had made progress in digital arena, pointing specifically to Comcast, Charter and Time Warner, which offers HDTV in 42 of markets it serves. “There have been actually some very aggressive and good-faith efforts over the last few months to begin to achieve a number of things that the chairman has talked about,” spokesman said. He said cable programmers such as HBO and Showtime already were offering their shows in HDTV.

Consumers Union spokesman said his group was “guardedly optimistic” about plan but wanted to see whether voluntary measures would “lead to real action across the industry. Up until this point, they [various industries] have been playing sort of a chicken match with each other to see who will go first,” spokesman said.

Ferree’s news conference came one day after Powell unveiled his DTV plan (CD April 5 p1), and Ferree warned that digital transition was going to go forward, with or without those who would stand in way: “The thing is a train, it’s a runaway train and you either get on it or you get run over.” Ferree said there were plenty of incentives for cable to get aboard, specifically that high-end TV products could help MSOs’ margins as they seek to sell digital tiers and compete with satellite and others who would enter market to compete to deliver multichannel video services. He said that cable industry currently was subject to fewer regulations than other telecom industries. “The cable industry is really sitting, in some sense, in a very good place right now as a regulatory matter and I think they want to preserve that place and the best way to do that is to be good actors essentially in the business and not be stonewalling a transition that the other industries involved are moving forward with,” he said.

Under plan, Powell called on cable to carry, at no cost, signals of up to 5 broadcast or other digital programming services. Ferree said Fri. that number 5 was not meant to be upper limit or cap. “We would love to see more than 5 and I think the language that was used was just inadvertent,” he said. He also said that people shouldn’t draw any conclusions from Powell’s plan on how Commission would approach dual digital must-carry fight between broadcast and cable, adding that full Commission would be required to vote on that.

Finally, Ferree said he wasn’t sure that cable was charging right price for its services. He was responding to FCC report that monthly bills for cable services and equipment increased average 7.5% (CD April 5 p6) in 12-month period ending July 1, 2001, while rate of inflation over same period was 2.7%. He said DBS charged comparable prices for similar packages of services, but said that didn’t make it any easier on consumers, himself included. Saying he didn’t watch much TV, Ferree said he was considering shutting off service. “My rates just went up and I'm not happy about it,” he said. “At some point… consumers just say, ‘This is not worth the money,’ and I'm actually close to that point.” NCTA spokesman said industry acknowledged pricing was issue for many consumers but that programming and labor costs continued to rise. “There are always efforts under way to try to keep our services affordable and attractive to consumers and it’s frequently an uphill challenge,” he said. Consumers Union spokesman said industry was engaged in price gouging because of lack of competition. He said satellite had failed to become true alternative for many consumers. “Unless the Bush Administration and Congress step in to put a lid on rates, consumers are probably going to see more of the same,” he said.