Order Code RS21775
Updated April 5, 2004
CRS Report for Congress
Received through the CRS Web
Cable Television: Background and Overview
of Rates and Other Issues for Congress
Information Research Specialist
Information Research Division
This report presents information on the history of federal regulation of the cable
television industry and background information on cable rates and other cable industry
issues. Cable service is received by 70.5 million television homes, or approximately
74.9 % of all pay television subscribers. The Telecommunications Act of 1996, 110
Stat. 56, P.L. 104-104, eliminated most cable rate regulation beyond the basic tier of
services as of March 31, 1999. Some small cable operators were freed from regulation
upon the enactment of the law, but in most cases, rates for a basic tier of services
continue to be regulated. The Telecommunications Act also opened up new areas of
competition between telephone companies and cable companies. This report will be
updated as legislation or news events warrant.
History of Cable Rate Regulation
The Cable Communications Policy Act of 1984, 98 Stat. 2779, P.L. 98-549,
established for the first time a national regulatory policy concerning cable television
communications. The act established a comprehensive cable regulatory scheme
delineating regulatory authority among the federal, state, and local levels. Increasing
cable service rates and customer service complaints, however, prompted Congress to
revisit the law as local authorities and consumer groups lobbied for new legislation.
On October 5, 1992, Congress enacted the Cable Television Consumer Protection
and Competition Act of 1992, 106 Stat. 1460, P.L. 102-385. This law addressed such
issues as cable rates, must carry, retransmission consent, program access, franchising
authority, service standards, and more. Promulgation of regulations required by the 1992
act was done by the Federal Communications Commission (FCC). The regulations were
completed in stages, according to dates set by the act.
The FCC’s first set of cable rate rules implementing this act went into effect
September 1, 1993. The FCC expected, on average, a 10% reduction in overall cable
bills. However, “on average” did not mean all rates decreased 10%, or even that all rates
Congressional Research Service ˜ The Library of Congress
decreased. One reason was that all cable systems did not charge “unreasonable” rates.
Some rates increased, and Congress and the FCC decided to address the issue of rate
After conducting a review of cable rates following issuance of its 1993 rate
regulations, the FCC decided to revisit this issue. On March 30, 1994, the FCC issued
rules for a second round of cable rate regulations. These new rules were intended to cut
cable rates, on average, an additional 7%. No predictions were made estimating the
number of cable subscribers who would see further reductions in their cable bills. The
new rules took effect on May 15, 1994.
The Telecommunications Act of 1996, 110 Stat. 115, P.L. 104-104, was passed by
the 104th Congress in February 1996. This act eliminated most cable television rate
regulations beyond the basic tier as of March 31, 1999. In most cases, rates for a basic
tier of services (defined as the tier that includes “over the air” broadcast stations)
continues to be regulated either by local franchise authorities or state authorities. Most
small cable operators (those serving less than 1% of all cable subscribers and having no
affiliation with any company whose gross annual revenues exceed $250 million) were
freed from rate regulation immediately. The FCC continues to monitor cable rate activity
and issues an annual report on cable industry prices and one on competition in video
Current Cable Rate Issues
According to the 2002 FCC Annual Report on Cable Industry Prices1 released in
July 2003, the overall average monthly rate for cable programing services and equipment
increased by 8.2% from $37.06 to $40.11 over the 12-month period ending July 1, 2002.
Industry statistics on cable rates vary slightly from FCC statistics (see below), but cable
companies stated that sharply rising costs of obtaining sports and entertainment
programming coupled with system upgrades caused them to increase rates for
Ongoing consumer concerns about rate increases for subscription television
prompted Congress to mandate a General Accounting Office (GAO) study of cable rates
released in October 2003. In its report, Telecommunications: Issues Related to
Competition and Subscriber Rates in the Cable Television Industry,3 GAO sought to
examine the impact of competition on cable rates, assess the reliability of information
contained in the annual FCC report on cable industry prices, and examine the causes of
U.S. Federal Communications Commission, 2002 Annual Report on Cable Industry Prices, July
8, 2003, FCC 03-136. The 2002 report and previous years’ reports are available at
The FCC uses surveys of average monthly rates for cable programming services at the basic
service tier (BST) and the cable program service tier (CPST), also known as “expanded basic,”
as noted in the 2002 FCC Annual Report on Cable Industry Prices .
U.S. General Accounting Office, Telecommunications: Issues Related to Competition and
Subscriber Rates in the Cable Television Industry, Oct. 10, 2003, GAO-04-8. At
[http://www.gao.gov], click on GAO Reports, on Find GAO Reports, on GAO reports, then type
recent cable rate increases. In surveys of the industry conducted by GAO for its report,
GAO concluded that the annual FCC report did not appear to provide a reliable source of
information on the cost factors underlying rate increases or on the effects of competition,
most notably costs associated with upgrading equipment and services. GAO
recommended that FCC take steps to improve the reliability of data in its report. GAO
also found that several key factors, including a 34% average increase in programing costs
incurred by cable operators over the last three years — specifically a 59% average
increase in sports programing costs — and cost increases from system upgrades have put
upward pressure on operators to raise rates to their customers. The GAO report also
discussed the option of converting cable system pricing to a la carte (per channel) pricing
instead of the current tiered system. It noted that despite the customer benefit of greater
choice, a la carte pricing could impose additional equipment costs on the customer and
alter the current economics of the industry, especially how cable providers generate
Annual Cable Rates Data
Table 1. Cable Rates
(Average monthly “expanded basic” rate)
Source: National Cable & Telecommunications
The Current Cable Market
According to the FCC Tenth Annual Report on Competition in Video Markets,
released in January 2004,5 approximately 70.5 million homes in the United States, or
74.9% of all Multichannel Video Program Distributor (MVPD) television homes,
Note: NCTA [http://www.ncta.com] does not set the content of tiers or channel packages of its
members. Basic service tiers (BSTs) are defined as “... basic program services distributed by a
cable system for a basic monthly fee. Basic monthly services include one or more local broadcast
stations, non-pay networks and local origination programming.” Service tiers beyond the basic
tier are required by the FCC to include basic tier services and generally include a package of pay
channels as negotiated in the local franchise agreement between the local franchise authority and
the cable system provider. Additional price increments beyond basic offerings are considered
a tier. Pay channels beyond basic tier services are no longer regulated by the FCC, as of Mar.
The FCC Tenth Annual Report on Competition in Video Markets as well as previous year’s
reports and current and previous years of the aforementioned FCC reports on cable industry
prices are available at [http://www.fcc.gov/mb/csrptpg.html].
subscribed to cable television as of June 2003. As defined by the FCC, an MVPD
distributor is “an entity engaged in the business of making available for purchase, by
subscribers or customers, multiple channels of video programming.”6 Such entities
include cable operators, direct broadcast satellite (DBS) services, and — in much smaller
numbers — subscribers to MMDS (large dish satellite) and OVS (open video systems).
Subscriptions to DBS in recent years have increased rapidly. Between June 2002 and
June 2003, DBS subscribers grew by 2.2 million homes to approximately 20.4 million
homes, or 21.6% of all MVPD subscribers. MVPD (cable and noncable) subscribers total
approximately 94.1 million homes.7
As a result of the Telecommunications Act of 1996, telephone companies can
provide video services in direct competition with the local cable television company and
in certain cases may merge with the local cable company. Cable television companies are
also able to offer local phone service and broadband Internet services (including such
services as “Voice Over Internet protocol” [VoIP]). While individual consumers will
presumably have more choices as a result of competition in the developing
communications market, particularly from satellite services such as DBS, forecasts of
what will happen in this new and complex environment are conflicting and uncertain.
Recent actions, including the merger of Comcast Corporation with AT&T’s cable unit in
late 2002, and the acquisition of the DirecTV DBS operator by the News Corporation in
December 20038 reflect the trend toward the consolidation of larger MVPD providers.
Top Cable and DBS Systems
Table 2. Top 10 Multiple System Operators
(by number of subscribers)
Comcast/AT&T (21.4 million)
DirecTV (11.9 million)
Time Warner Cable (9.4 million)
Dish Network (Echostar Comm. Corp.)
5. Charter (6.4 million)
6. Cox (6.3 million)
7. Adelphia (5.5 million)
8. Cablevision (3.0 million)
9. Advance/Newhouse (2.1 million)
10. Mediacom (1.6 million)
Source: National Cable & Telecommunications Association [http://www.ncta.com] and Broadcasting &
Cable, “Top 15 MSOs,” November 10, 2003, p. 32.
See 47 CFR 76.1000(e) for definition of MVPDs.
Nielsen Research data on total television households estimates that there are 108.4 million
television households in the United States. [http://www.nielsenmedia.com/newsreleases/2003/0304_natl_UE.htm]
U.S. Federal Communications Commission, “Subject to Conditions, Commission Approves
Transaction Between General Motors Corporation, Hughes Electronics Corporation, and the
News Corporation Limited,” December 19, 2003. FCC News Release, FCC 03-328.
Program Access Rules
Many providers of cable television programming are owned by or affiliated with
cable television operators. Concerns that such programmers may only provide their
programming to their corporate affiliates prompted Congress to enact a provision in the
Cable Act of 1992 addressing “program access” concerns. Program access provisions
prevent the use of exclusive contracts between cable operators and their affiliated
programmers for satellite delivered programing. The FCC was instructed in the statute
to reexamine the continuing need for the prohibition after it had been in effect for 10
The prohibition was set to expire on October 5, 2002, but the FCC issued a Report
and Order on June 13, 2002, extending for five years (until 2007) the statutory
prohibition. The FCC found that the prohibition continues to be necessary to preserve and
protect competition and diversity in the distribution of video programming. 9
Broadband Cable Modem Service
Broadband or high-speed Internet services can be offered through a series of
technologies including cable, digital subscriber lines (DSL) provided by telephone
carriers, satellite television, fixed wireless, and others. Cable television companies offer
broadband services via a cable modem. Classifying broadband cable service as an
“information service,” a “telecommunications service,” or as a combination of the two has
important regulatory implications. Generally, classification as an information service
would subject cable broadband services to minimal federal regulation and no requirement
that they provide open access to their systems to competing Internet Service Providers
(ISPs). Classification as a telecommunications service could subject cable broadband
services to common carrier regulation and could require provision of open access to
competing ISPs. Recently, the courts and the FCC have come to different conclusions
regarding classification of these services.
In a ruling on March 14, 2002, the FCC ruled that cable modem service is properly
classified as an interstate information service. The ruling further determined that cable
modem service is not a “cable service” and that cable modem service does not contain a
separate “telecommunications service” and is not subject to common carrier regulation
(the rules which govern telephone providers).10
However, in an opinion filed on October 6, 2003, the United States Court of Appeals
for the Ninth Circuit came to a different conclusion regarding the classification of cable
modem services. The court ruled in Brand X Internet Service v. FCC that cable modem
services are legally in part a telecommunications service, which could lead to the
A copy of the ruling is available on the FCC website at
A news release summarizing the FCC decision is available on the FCC website at
requirement that cable operators open their lines to competing Internet service providers.11
This decision vacated in part the FCC March 2002 declaratory order which classified
cable modem service as exclusively an information service free from the rules of access
governing telecommunications services. The FCC appealed the Ninth Circuit’s decision,
but the court on March 31, 2004, denied the FCC’s petition for a full court review. It is
unclear if the FCC will appeal the Ninth Circuit’s decision to the United States Supreme
Select Additional Resources on the Cable Television Industry
U.S. Federal Communications Commission. “FCC Role in Cable Rate Regulation Ends.”
Consumer Alert. March 1999. At [http://www.fcc.gov/Bureaus/Miscellaneous/Factsheets
/cblrate.html], visited March 17, 2004.
This two-page notice details the end of federal regulation of expanded basic cable
rates as of March 31, 1999, which was mandated by the Telecommunications Act of
1996, P.L. 104-104.
——. “General Information on Cable TV and Its Regulation.” Fact Sheet. June 2000.
At [http://www.fcc.gov/mb/facts/csgen.html], visited March 17, 2004.
This extensive fact sheet presents background information on the history and
evolution of the cable industry in the United States, including the evolution of parts of the
Communications Act of 1934, which affect cable television, discussion of issues such as
must-carry regulations, and information on the regulation of cable television by state and
local authorities, including local franchise authority agreements and customer service
guidelines. Additional fact sheets on specific cable TV topics are available on the FCC
website at [http://www.fcc.gov/mb/facts/#cable].
For Members of Congress only, an annotated listing of federal, state, and
nongovernmental Internet resources is available on the CRS website, Cable Television
External Links at [http://www.crs.gov/reference/topics/telecommunications/cable.shtml].
Selected CRS Products on Related Issues
CRS Issue Brief IB10045. Broadband Internet Access: Background and Issues.
CRS Report RL31260. Digital Television: An Overview.
CRS Report RS21768. Satellite Television: Reauthorization of the Satellite Home Viewer
Improvement Act (SHVIA) and Related Issues.
See Brand X Internet Service v. FCC, 345 F. 3d 1120 (2003). The decision can be found at the
FindLaw website at [http://caselaw.lp.findlaw.com/data2/circs/9th/0270518p.pdf].
More detailed discussion on broadband Internet service is available in CRS Issue Brief
IB10045, Broadband Internet Access:Background and Issues.