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TCI of New York is raising its rates for Buffalo cable television subscribers for the second time this year, a move that could lead to a showdown with City Hall over its franchise.

Beginning in May, TCI will increase the basic rate from $7.86 to $8.26, a 5 percent increase, and the rate for its most popular service, expanded basic cable, from $21.20 to $22.39, a 5.6 percent increase.

The latest increases follow a 96-cent hike in the expanded basic cable charge in January.

Common Council Majority Leader James W. Pitts said he plans to introduce a resolution calling for the city to terminate TCI's franchise.

"At this point, we should give them a certain amount of time to reduce rates or increase service, or say we don't want them anymore and get another cable company here," he said.

Such a move, he added, would likely lead to a lawsuit by TCI.

"People are getting nickled and dimed to death by TCI, and there's no way they can justify this increase," Pitts said. "People are totally incensed, and this is going to rip it."

Paul J. Meegan, general manager of TCI, defended the rate hikes.

"They're going up, but they went down big time last year," he said. "So the net result is about a 2.6 percent increase per year averaged over the past 2 1/2 years."

Even with the planned increases, Buffalo cable customers will pay slightly less than their suburban counterparts. Jones Cable charges $22.68 per month for expanded basic cable, and Adelphia Cable charges $23.45. The national average for expanded cable is $21.25.

Meegan said the rate increases are the result of changes in federal regulations that allow cable companies to pass along the cost of inflation and certain other external costs to their customers.

"It has been almost two years since the FCC has allowed the cable industry a rate increase to compensate for inflation and the increases in programming costs," he said.

Pitts, chairman of the Council cable television committee, said TCI is taking advantage of a push toward deregulation in Washington, D.C. He also said proposed federal legislation will make it easier for new competitors such as telephone companies to offer cable.

TCI's 10-year franchise with the city expired in February 1994, and the New York State Cable Commission has granted it two extensions since then. Now is the time for the city to turn up the heat, Pitts said, by signaling Buffalo may give its business to another company. NYNEX has expressed an interest, he said.

"I've received numerous calls from people on fixed incomes who can't afford the prices and people who are incensed they're paying for things they don't want," Pitts said.

Meegan countered that Buffalo cable viewers are getting good value for their dollar. He noted that expanded cable subscribers get more channels than suburban viewers and pay less for installation.

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