Will Cost of Cable TV, Calls to Mom, Go Up?

Congress moves to deregulate telecommunication services

CLEARER color TV. Cheaper long-distance phone charges. A $7 hike in monthly cable bills.

You'd think with the potential benefits and costs from telecommunications reform, Americans might be reacting raucously to the legislation now before Congress. Or that they might at least paying attention. Instead, the most sweeping overhaul of telecommunications law in decades has drawn mostly voter yawns.

"Members of Congress aren't receiving bags full of mail on this," says Paul Karoff, a spokesman for AT&T. "And yet we're talking about legislation that's likely to have a bigger impact on the economy and ... on every American household than any legislation they pass this year."

The decisions Congress makes in the coming weeks - the Senate is expected to vote as early as this week, and the House will take up the bill shortly - will hit every consumer: from what they pay for local phone service to who supplies their TV signal.

Essentially, Congress wants to replace decades of regulation, aimed at keeping telecommunications costs low, with unprecedented competition. Although House and Senate versions differ, both would significantly loosen the regulatory reins. Consumers could see an explosion of new services from a deregulated telecommun- ications sector.

Will competition appear?

But reform also carries big risks. If competition doesn't emerge quickly, the established players could take advantage and boost consumer rates dramatically. The result: among other things, a voter backlash in 1996. "Congress is going to be blamed for increased telephone bills and cable bills," warns Bradley Stillman of the Consumer Federation of America in Washington, D.C.

The consumer impact of telecommunications reform is fiercely debated. Take cable TV. Although both House and Senate bills contain some limits on rate increases, most observers believe cable operators will raise their rates after passage. How much of a rate hike is likely remains unclear.

Mr. Stillman estimates the average consumer will pay $5 to $7 more a month for cable service. Even if Congress allows new players such as the 'Baby Bells' to enter the business, it will take a few years before their systems reach many consumers. Cable's only current competitor - direct-broadcast satellites - is a fast-growing but still tiny speck on the horizon. Their customer base of 1 million pales in comparison with the more than 60 million cable consumers, he says.

Is competition innate?

The cable industry disagrees. "The competition is here and we know more is coming," says Rich D'Amato, a spokesman for the National Cable Television Association in Washington. "If we raise our rates $5 a month and our customers don't perceive added value, we're hurting ourselves."

Peter Huber of the Manhattan Institute for Policy Research in New York, also downplays looming rate hikes in cable service. "You have this kind of brooding competitive presence all through the cable industry today, and that is a powerful discipline."

In any case, current federal regulation of cable TV rates hasn't worked, argues Thomas Hazlett, director of the telecommunications policy program at the University of California at Davis. Although regulation has slowed rate hikes, the growth in cable viewership and subscribers has also fallen off - a clear indication, he says, that cable operators have gotten around rate rules by downgrading the quality of their basic package. "The bottom line is that consumers have actually lost," he says, "because even with the lower cost, the quality has gone down even more."

If the consumer impact of telecommunications reform seems murky in cable television, it is downright undecipherable in telephone service. For example, most believe the reforms would boost the basic rate for residential phone service. But what would the consumer's total bill look like? Consumer-advocate Stillman thinks it will go up. Larry Clinton, associate vice president of the United States Telephone Association, argues that it will stay roughly the same, because in-state toll calls that show up on local bills will probably go down, thanks to competition.

The amount of actual competition is another topic of fierce debate. The regional Bells, which offer local service to most of the US, point to the growing number of small companies now offering local service to businesses and to the prospect of long-distance companies and cable TV operators entering the arena. This, they say, is evidence of healthy competition.

But long-distance companies, such as AT&T, argue that the Bells operate as a virtual monopoly and are urging that reform legislation require the Justice Department to certify that local phone markets have real competition before allowing the Bells to offer long-distance telephone service.

Eventually, all three industries - local phone companies, long-distance providers, and cable TV operators - will play in one another's markets, giving consumers many choices. "We're at the dawn of competition," says Michael Wirth at the University of Denver. "It's all going to happen," he says, but not quite as quickly as Congress believes.