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Home My WebLink About1992-01 Cable Rules Watch Vol#1 Issue#1 A Publication of Wilkes Artis Hedrick & Lanei A 1Veusletter For Ccible Frauch.islug Authorities Vol. I -- Issue '1 A Publication of Wilkes, Artis, Hedrick & Lane January, 1992 FROM Th1i EDITORS • With this premiere issue, Wilkes, Artis, Hedrick & Lane, Chartered, is pleased to announce the start of our newsletter following local franchising developments at theFederal Communications Commission (FCC) regarding the Cable Television Consumer Protection and Competition Act of 1992. - This Act changes the ability of both the federal government and state and local regulatory and cable franchising bodies to regulate cable television rates and services. The legislation itself is complex and comprehensive (over 45 pages in length), but it leaves many substantial policy questions to be resolved by the FCC. • Our newsletter will focus on the impact of the new Cable Bill and actions which should be immediately addressed by local franchising . authorities to prepare themselves for the new world of cable regulation. The first lawsuits challenging the Act have already been tiled and more are expected. Our newsletter will be published at least four times per year with additional updates issued for crucial topics._ Please indicate your desire to receive further additions at no charge by mailing the subscription form on Page 6 now. TUE MANDATE FOR LOCAL FRANCHISE REGULATION The Cable Television Consumer Protection and Competition Act of 1992 was passed on October 6, 1992, when Congress overrode President Bush's veto of the bill. The Act reopens the door for local franchising authorities to regulate the basic service tier of cable television rates and certain "consumer protection" aspects of cable service. Over the next two years, the FCC is required to initiate and resolve, after the opportunity for public comment approximately 30 rulemaking or inquiry proceedings. Each proceeding will set policy or adopt specific rules governing such matters as the apportionment of local and federal cable rate regulatory powers, cable franchise renewal standards, standards governing competition, customer protection and more. These proceedings will determine cable regulations for the foreseeable future. The Act covers a wide range of subjects including mandatory requirements for cable systems to carry "local" commercial and non- commercial television stations ("must -carry"); a possible fee imposed by a television station for the right to carry the television station's programming on the cable system ("retransmission consent"); the requirement that programming production companies supply programming to competitive multi- channel video programmers; provisions promoting minority programming and the institution of a three-year holding period during which cable operators would notbe allowed to sell the system. Some issues should be immediately addressed by local franchising authorities to prepare themselves for the new world of cable regulation. IN THIS ISSUE • Rate Regulation • Franchising Authority Powers • What to Do Next • About the Editors • At Deadline • Subscription Information Page 2 Page 3 Page 3 Page 4 Page 5 Page 6 WILKES, ARTIS, HEDRICK & LANE, Chartered Washington, D.C. • Fairfax, Virginia • Bethesda, Maryland • Annapolis, Maryland THE ACT I. RATE REGULATION A. Franchise Authority Certification A franchising authority seeking to regulate so-called "basic tier" cable rates must first file a written certification with the FCC that it: (a) will adopt and administer rate regulations consistent with FCC regulations; (b) has the legal authority to adopt, and the personnel to administer, such regulations; and (c) will adopt laws and regulations providing a reasonable opportunity for consideration of the views of interested parties. Franchising certifications will be deemed effective 30 days after filing unless the FCC determines (after notice and opportunity to reply) that the franchising authority has not met the three criteria. The franchising authority will then have an opportunity to revise or modify its certification as appropriate. The FCC seeks public comment on whether it should adopt a standardized form for the certification. Cable operators or other interested parties may petition the FCC at any time to revoke a franchising authority's certification: The FCC itself must step in and exercise jurisdiction over rate regulation if it (a) disapproves or (b) revokes a franchising authority's certification. It is unclear whether the FCC must exercise jurisdiction over basic tier cable service even if " the relevant franchising authority never seeks certification. The FCC has tentatively concluded that if the franchising authority chooses not to file a certification, the FCC has no jursidiction to step in. This, like many issues, must be clarified by the FCC in its final Order, and possibly in court. B. Cable Systems Subject to Rate Regulation Only cable systems that do not have "effective competition" are subject to rate regulation. " The Act defines "effective competition" quite narrowly to mean that: (a) fewer than 30 percent of the households in the franchise area are cable subscribers; (b) the franchise area is served by at least two unaffiliated "multichannel video programming distributors" (e.g., cable operators, "wireless" cable providers, direct broadcast or other receive -only television satellite ._:service providers), each of which `offers .comparable video programming to at least 50 percent of the households in the franchise area, and at least 15 percent of the households in the franchise area subscribe to the smallest of the distributors; or (c) the franchising authority itself operates a multichannel video programming service that is offered toat least 50%'of the households in the franchise area. The Commission has proposed that franchising authorities submit an initial finding of lack of effective competition (and the basis therefor) as part of the initial certification process. C. Rate Regulation of "Basic Tier" Service Franchising authorities are only permitted to regulate rates for "basic cable service", which is carefully defined as the cable service tier containing (a) local television broadcast channels (commercial and non-commercial) and (b) any public, educational, and governmental (PEG) access programming required to be carried pursuant to the operator's franchise agreement. Significantly, local franchising -authorities are -not required -under -the -Act -to regulate rates; they are merely permitted to do so if they wish. The FCC must adopt regulations by April 3, 1993, to use in establishing "reasonable" cable rates for basic tier service and procedures for resolving disputes between cable operators and franchising authorities. The FCC has proposed regulations to be used by franchising authorities in establishing "reasonable" cable rates. It has identified two approaches: (a) a "benchmark" approach; where the Commission would establish a rate (or formula) to be used nationwide as a measure against which all basic tier cable rates would be tested, or (b) a "cost - based" approach under which the reasonableness of each individual system rates would be determined using traditional ratemaking principles. The Commission has tentatively concluded that • it ' prefers the benchmark approach. The Act also requires that rate regulations apply to the fees charged for installation and lease of equipment used to receive basic tier service. The Commission has proposed that franchise authorities base these fees on actual costs on a system -by -system basis. WILKES, ARTIS, HEDRICK & LANE, Chartered Washington, D.C. • Fairfax, Virginia • Bethesda, Maryland • 2 Annapolis, Maryland D. Regulation of Services other than Basic Tier The Act does not undertake to directly set the rates on programming services other than the basic tier. However, the FCC can, in fact, regulate such rates on a "complaint" basis. By April 3, 1993, the Commission must establish criteria for determining when such rates are unreasonable, and procedures for resolving complaints. All public comments with respect to rate regulation must be filed with the Commission by the end of January, 1993 (tentative date). II. OTHER FRANCHISING AUTHORITY POWERS The Act prohibits franchising authorities from granting exclusive franchises or unreasonably refusing to award competing franchises. However, franchising authorities are permitted to require cable operators to provide access, capacity, facilities and financial support for public, educational, and governmental channels. They may also require adequate assurance that the cable operator has proper financial, technical or legal qualifications. Franchising authorities are permitted to establish and enforce customer service and system construction require- ments. The FCC must establish minimum customer service requirements (i.e., cable system office hours, telephone availability to subscribers, rules concerning outages, installations and service calls, standards governing bills and refunds, etc.). These requirements can be superseded by more stringent state and local regulations. The FCC has now sought comment on proposed regulations concerning customer protection issues. By October 6, 1993, the FCC must establish minimum cable technical standards. Franchising authorities may incorporate those standards in their franchise agreements, but may not impose more stringent standards without obtaining an FCC waiver. The Act also makes some revisions to current law regarding when and under what terms a franchising authority may conduct a franchise renewal proceeding. ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ WHAT SHOULD FRANCHISING AUTHORITIES DO NOW? Obviously, the full scope of the new cable regulatory thrust must await at least the Commission's initial rulemaking efforts, specifically the regulations governing rates for basic service which must be adopted (not merely proposed) by April 3, 1993. However, thele are some things which franchise authorities must immediately begin to consider, including: Reactivating franchising authorities that may be dormant. Reviewing (and revising if necessary) charters and other implementing statutes to insure that franchising authorities have the legal authority to adopt and administer rate regulations consistent with the Act and FCC regulations. Insuring that franchising authorities will have the personnel to administer regulations, including those requiring open meetings, hearings, etc. Becoming familiar with various current FCC rulemaking proposals and determining whether the franchising authority wishes to file comments or otherwise participate in these proceedings. Preparing to file required certifications within the next several months. Reviewing current cable franchise agreements for compliance with Act. Determining whether the local cable system has "effective competition" as defined in the Act. WILKES, ARTIS, HEDRICK & LANE, Chartered Washington, D.C. • Fairfax, Virginia • Bethesda, Maryland • Annapolis, Maryland 3 bsta#itial dxperience fire fi id of conmunicatiot g latory policy pro tidings, compar tt a It eiis f roadcast n `sacs, s`>:: ct u attoc Jcensrn s un<matters asneerning tetecommuntca:: ns ...............................................:.......:........... .................................................................... ................................................................... STATE . EN' IR< NME iT. .................................................................. .................................................................. .................................................................. .................................................................... contents of tuts pu oInlatIori presented in ti b cation:imav be•` Tint .t lf: Should not icatiioa.witflcu stl as legal adviica . Reade tiuidual. professional counselin WILKES, ARTIS, HEDRICK & LANE, Chartered Washington, D.C. • Fairfax, Virginia • Bethesda, Maryland 4 • Annapolis, Maryland AT DEADLINE At its November and December meetings, the FCC initiated several major rule making proceedings to implement the Cable Act, including proposed rules regarding cable rate regulations to be followed by cable franchise authorities. Among the highlights of the rules are: • two alternative methods for establishing "reasonable" rates: (1) the benchmark approach, and (2) a cost -based approach that would examine the costs incurred by individual cable systems. The FCC indicated that its preferred approach was to use a benchmark. • a tentative decision specifying the subscriber premises equipment that will be subject to rate regulation and a method for establishing reasonable rates for that equipment. • an inquiry as to whether the Act permits the FCC to regulate rates if a franchising authority chooses not to do so, although the FCC's tentative conclusion is that it lacks such jurisdiction. • a proposal that a franchising authority be required to submit an initial finding that the cable system under its jurisdiction lacks effective competition (as defined in the Act) as part of the franchising authority's initial certification process. • a request for public comments on procedures for filing, approving and revoking certification. Other current FCC rulemaking proceedings deal with: cable system ownership rules, EEO policies, program distribution and carriage requirements, limitations on "tiering," consumer protection provisions, must - carry and retransmission consent, obscene and indecent programming on leased and public access channels and home wiring. WILKES, ARTIS, HEDRICK & LANE, Chartered Washington, D.C. • Fairfax, Virginia • Bethesda, Maryland • Annapolis, Maryland 5 r SUBSCRIPTION• FORM To receive further complimentary copies of this newsletter, which highlights Issues important to Cable Franchising Authorities, complete this form and mail to: Cable Rules Watch Wilkes, Artis, Hedrick & Lane 1666 K Street, N.W., Suite 1100 Washington, D.C. 20006 Mr./Mrs./Ms. Title Organization Street City State Zip Code Telephone ( ) Wilkes, Artis, Hedrick & Lane 1666 K Street, N.W., Suite 1100 Washington; D.C. 20006 I— • 2 '`?" ;.• U.S.POSTAGE DEC29'92r-75* '11' 4 I ... a 2 9 ...- . 00::60121 . 209676 Charles Gutman City -Attorney 108 E. Green St. Ithaca. NY 14850