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AGENCY WILL DECIDE IF COMPETITION FROM SATELLITE SYSTEMS HURTS CABLE

In a case that ultimately could mean big changes for the cable television business, the Federal Communications Commission has agreed to hear arguments that competition from direct broadcast satellite systems warrants rate relief for cable operators.

The FCC said it will accept public comments on a request from Continental Cablevision Inc. that its Los Angeles cable system deserves relief from regulation because of competition from a satellite television service.Continental cited a little-noticed Jan. 20 FCC decision, in which the agency rejected a West Virginia cable company's similar claim but invited other companies to petition for special relief.

The invitation was extended despite language in the 1992 Cable Act that says an area must have two services competing against a cable provider, each of which is available to 50 percent of the homes in the market and penetrates 15 percent of the total homes, before rate relief is triggered.

Even before the West Virginia ruling, FCC chairman Reed Hundt indicated willingness to look beyond the percentage thresholds.

In a Dec. 20 speech, quoted in the trade publication Warren's Cable Regulation Monitor, Hundt said it may be that in some markets competitors such as direct broadcast satellite systems "can create such consumer choice that the economic evidence could assure us that cable operators will not be willing to charge customers `unreasonable' prices."

Direct broadcast satellite systems, or DBS, give consumers access to programming similar to cable offerings. They deliver the programming to individual satellite dishes and decoder boxes in each consumer's home.

Not surprisingly, DBS companies insist they're still a minuscule factor in the television marketplace and still need the protection of cable rate regulation.

"The cable industry is claiming that they need relief right now, even though we're just getting started," said Tom Bracken, vice president of communications for DirecTV. DirecTV is a unit of General Motors Corp.'s Hughes Electronics unit.

DirecTV has about 500,000 subscribers nationwide, he said, compared with 60 million cable subscribers. The DBS service has only recently been offered in Los Angeles.

Margaret Sofio, a vice president at Continental, said absolute numbers of current subscribers are less important than the potential competitive threat.

"If you have a competitor entering your market, you don't wait until you've lost 15 percent of your business," she said.

Sofio said Continental wouldn't necessarily raise rates if the FCC decides in its favor. "There's a lot that comes with regulations that's not just tied to price," she said. Freedom from regulation would allow Continental the flexibility to change programming packages quickly in response to competition, Sofio said.

Cable industry analysts said they expect to see more filings like Continental's, especially if the Continental effort succeeds.