HomeMy WebLinkAbout6.e. Cable Rate Regulation � s
c=�r oF Ras�ovrrr
EXECII'I'IVE SIINIl�SARY FOR ACTION
CITY COUNCIL MEETING I?ATE: August 3, 1993
AGENDA ITEM: Cable Television Rate Regulation AGENDA SECTION:
New Business
PREPARED BY: Stephan Jilk AGENflA'�uA �
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ATTACHI�SENTS: i992 Cable Act Information APP VED .
The 1992 Cable Act, passed by Congress, allowed for the regul tion of
rates charged by local cable television companies . For several years
cities in which cable companies operated were not allowed to regulate rates
charged by these companies.
The new regulations, which will now go into effect October l of this year,
will allow municipalities to aetually regulate the rates charged by cable
companies for the °basic tier" of services. The act also allows for cities
to regulate the types of programs affered on those channels that are
considered "basic tier�� .
Sn reviewing the act and discussing it with representatives of other cities
I f�und that there seemed to be little advantage to the Ci�y of Rosemount
to get into the regulation of rates and service at this time.
The first time the City would be able to do so would be this October lst.
If the City does choose not to get invalved, at this level now, it does not
eliminate the possibility of the City doing 50 later. There is no time
limit on a city choosing to choose the option of setting rates or not.
In other words if the City does not choose to do so now than we don' t lose
our opportunity to do so unless the law would change at a later date
eliminating this option for cities .
In taking this to the Citys � Utility Commission their recommendation is to
nat take the opportunity to regulate rates at this time. It was felt that
there were few, if any, benefits to the City doing so at this time.
It is also my recommendation that the City not pursue any involvement in
the regulation of cable rates at this time.
RECObIlrlENDED ACTI ON:None
COUNCIL ACTION:
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Cabls Rato RaQulstion Exocutivo Summary
I . Intzoduction
1 . This R�port an�Qrder and�rth�Y Notice of Pror,os�s�
Rulemakina amends the Cammissian's rules to implement Sections 623
(subscriber rate regulation} , 612 tcommercial leased access} , and
622 (c� tsubscriber bill itemization} , of the Communications Act of
1934, as amended by the Cable Television Consumer Protection and
Competition Act of 1992 ("Cab1e Act af 1992 or "1992 Cable Act") .
The Rgpnrr and_ -0rder reflects, in large part, the �ommissian' s
efforts to ensure that cable subscribers nationwide enjay the rates
that wauld be charged by cable systems operating in a campetitive
environment . The F��rrher Notice examines whether the Commission
should refine its initial analysis by excluding the rates of cable
systems with less than 30 percent penetration frorn iLs analysis of
systems facing effective competition, even though such systems aze
defined as systems that face effective competition under the 1992
Cable Act . `
2 . The Cable Act of 1992 generally provides that where
'� competition is present, cable television rates shall not be subject
to regulation by government but shall be regulated by the market .
The Act contains a clear and explicit preference for competitive
� resolution of issues where that is feasible. However where
c tition is absent, cable rates are to be re ulate to pro ec
t �on is o a en
' ntly by t e e era ommu� ications ommission an y s ate an
oca cxo er ments ,
responsible for the'regulation of rates for programming service and
equipment o sic service tier and this Commission will
entertain complaints against e ra es for programming services and
equipment for the eable programming services tier or tiers.
(Services offered on a per-channel or per-program basis are nat
subject to rate regulation) .
3. The primary results of this procesding are: l)
development of a process for identifying those situations• where
effective competition exists 4and rate regulation is thus
' Cable Television Consumer Protection and Competition Act,
Pub. L. No. 102-385, §� 3, 9, 14, 105 Stat. 1460 t1992) ("Cable Act
of 1992") . The Cable Act of 1992 became law on October 5, 1992 .
This proceeding was commenced through the issuance of �ur Notic�
Qf pr�c�osed Ru�e Makinq in Docke.s, _9_�_.2�i�.r 8 FCC Rcd 510 t1992)
("Notice") . The Commission is required to p=escribe regulations
to carry out its obligations under the rate regulation prouisions
of the Act within 180 days of the 1aw' s enactment. •
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� precluded) , 2) establishment of the boundaries between local and
state, and federal responsibilities, 31 development of procedural
and substantive rules to govern the regulation of basic sezvice
tier, cable programming service, and leased �hannel rates, and 4)
creation of a process of gathering information to faeilitate the
regulation that is being undertaken and periodically review its
effectiveness .
4 . In the $,��.�ort and O�der, the Commission seeks a
comprehensive approach to cable rate xegulation that achieves a
reasonable balancing of statutory requirements and that will
promote the broad policy objectives reflected in the statute. As
required by the 1992 Cable Act, it pxovides for -regulation of cable
rates by local franchising authorities and the Commission pursuant
to jurisdictional and procedural requirements that have been
designed to reduce burdens on cable operata=s, lacal authorities,
th� Commission, and consumers . In addition, the requirements that
will govern permitted rate levels for cabie service and reflect a
balancing of the inte-rests of consumers and of cable operators .
In this regard, the initial rate regulations shauld produce
s��bstantial savings to cansumers on an aggreqate industry basis.
These savings will result from rate reductions required fxom ,�.
broad segment of regulated cable operators that service most of the
nation' s cable subscribers . The required rate reductions. should
not hinder the ability of the cable industry to continue to provide
quality services to consumers . On a going forward basis, price
caps for regulated cable systems wi11 reduce administrative burdens
�� and permit the continued growth of services while effectively
` governing future rate levels .
5. The regulations adopted today may well change over
time . In accordance with the statute, the Commission will review
and monitor the effect of our initial rate segulations on the cable
industry and consumers, and refine and improve our rules as
necessary. In addition, it will issue separately a �econd Further
I�,tice to obtain a better record for adoption of cost-of-service
showings by cable operators seeking to raise rates above capped
levels . This step is necessary to assure that the xegu2ations
gaverning such showings will correctly balance the interests of
consumers in paying a fair rate and of cable operators in earning
a reasonable profit.
II . Rovort ind Ordor
]�. Rata R�qulatioa ot Cabl• S�z�rfc�
1. Ro2lbick ot Cibl• S�svic� Rat�s
• 6. The R�x�ort and _Qr�ier finds that Congress was
concerned that rates of systems not subject to effective
� campetitian reflect undue market gower and are unreasonable to the
extent they exceed comgetitive rate leve2s. This conclusion is
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j based upon the findinqs and goals of the Cable Rct of 1992, the
' overall scheme of regulation under it, and the fact that the
Commission must consider the rates of systems subject to effective
competition in establishing raLe regulations. Additionally, the
Cor�.^�issian conducted a survey af cable system rates as of Segtentber
3p, 1992, which revealed that, on average, rates af systems not
subject to effective campetition are approximately 10 percent
higher than rates of comparable systems subjeet to effeetive
competition, as that term is defined in the statute. Thus, the
Commission' s survey supports the findings of Congress that current
rates for cable systems not subject to effective competition
reflect pervasive rnarket power.
7 . The Commission concludes, thezefore, that its
initiai effort to regulate rates for cable service should provide
for reductions from current rates of cable systems exhibiting undue
market power. The Commission' s initial implementation' of rate
regulation af cable service will generally lead to significant
xeductions from current rate levels far most cable systems . 4ur
agproach will enable local franchise autharities to require rates
for the basic tier, and the Commission to reqvire xates for cable
programming services on the basis of individual cflmplaints, to fall
approximately 10 percent, unless the operator is already charging
rates that are at Lhe "competitive" benchmark level or it can
justify a higher rate fram September 30, 1992 levels, based on
costs . The Commission estimates that this roliback wiTl affect
approximately three-quarters of cable systems, with a total
,� consumer benefit of approximately S1 billion. Rates af al.l
regulated systems will then be subject to a price cap that will
govern the extent �to which rates can be raised in the future
without a cost-of-service showing. We will also examine systems
with rates substantially above the benchmark and will seek to
refine the benchmark through further industry surveys.
2 . Standards and Proc�dur�s �or ld�atifyinq Cabl.• Systams
Not Sub�oct to Z�f�ctiv� Coarp�tition
a,. l,pplication o� =lfsctiv� Cvmpititioa T�sts
8. Cable service and eqvipment rates may only be
regulated undez the Cab1e Consumer Protection and Competition Act
of 1992 ("5�992 Act") if the cable system is not subject to
effective competition. Under the statut�, *effective competition"
exists if: (a� fewer than 30 percent of households in the franchise
area subscribe ta the cable service of a ca.ble system; (b) (i) the
fzanchise area is served by at least two� unaffiliated multichannel
video programming distributors ("multi�hannel distribu�ors"), each
of which affers comparable programming to at least 50 percent of
households in the franchise area, and {ii) the number of households
subscribing to programming services offered by multichannel
distributors other than the largest multichannel distributor
exceeds 15 percent of households in the franchise area; or (c} the
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) frar.chise authority itself is a multichannel distributor and offers
video programming to at least 50 percent of the households in the
franchise area . �
(1) Multichznn�l Vid�o Proqramminq Distributor
9. When applying the above definition, multichannel
distributors will include cable systems, t�1DS opexatars, SMA2V
systems, DBS operatars, TVRO distributors and video dialtone
service praviders. We here determine that programmers using leased
access channels on cable systems will not be considered
multichannel distributors.
(2) Avsilability of Ccunp�tiaq S�rvicos
14. A multichannel distributor' s serviee is "offered"
in a franchise area if the service is bcth technically and actually
available, with no regulatory, technical or other impediments to
households taking service. Service will be deemed to be
"technically available" when the multiGhannel distributor is
physically able to deliver the service to a household wishing to
subscribe, with only minimal additional investment by th'e
distributor . A' service will be considered "actually available" if
subscribers in the franchise area are reasonably aware thraugh
marketing efforts that the service is available.
.� (3) Dafinitioa ot 8ous�hold
11 , we define the term "household" as each separately
billed or billable customer, except � that we treat individual
residences of multipie dwelling units as separate households .
(4) M�aauz�m�nt of Subaczib�rship
12. For purposes of applyinq the 30 percent threshold
in the firsL effective competitian test, the measurement of
subscribership wi11 be based on that of the particular system in
question, and nat an aggregation of all cabls systems or
competitors in the franchise area. For purposes of applying the
15 percent threshald in the second effective competition test,
Subscribership of alternative multiehannel distribuLors wili be
calculated on a cumulative basis; however, only those multichannei
distributors that offer programming to at leas�t 50 percent af the
households in the franchise area will be included in the 15 percent
cumulative measurement.
(5) Froqram Comparability
13. A multichannel distributor will be deemed to offer
"comparable programming" to that provided by a cable system if it
offers at least twelve channels of video programming, including at
least one nonbroadcast channel.
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� b. Findinq cf a�tsctivo Camp�tition:
14 . For purposes of implementing rate regulation by
local franchising authorities, we presume that cable operators are
not subject to effective competition. Franchising authorities may
rely on this presumption when fi2ing a certification with the
Commissian to regulate basic rates. The cable operatar will then
have the burden of rebutting this presumption with evidence
demonstrating that effective competition does in fact exist .
15. To ensure that cable operators have access to the
data they need to mount a successful challenge to- the gresumption
against effective competition, alternative multi�hannel
distributors will be required to xespond, within 15 days, to
requests from cable operators for relevant information. Responses
by the alternative distributars may be limited to the numeri�al
totals needed to calculate the distributor!s reach and penetratian
in the franchise area .
3, Requlatian of th� Bssic S�rvic• Tisr
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" a. Assartion of Jurisdiction ov�x Baaic S�rvic� and
�quipmont Rit�s
(1) Jurisdictioa Owir Bisic Rst� R�qu2ation
� 16. The 1992 Cabie Act requires local authorities
wishing to regulate basic service and equipment rates to certify
in writing to the Commission that tl} its rate regulations will be-
consistent with the rate requlations we prr escr% i ) it as Lne
1 aut o it to a and ne ersv�,�,G� �u odminister e
ations, an i s proce ura ru es provs e an a ortunit
consi era ion o views o e es . uch
certification i e wi e omms.ssion y a ranchising authority
� will became effective 30 days after filing y;Ill�+�. the Commission
finds, after notice and a reasonable opportunity to comment, that
the franchising authority has not met one of the three criteria
above . If the Commission disap.proves the eertification, the
franchising authority wi11 be natified of any revisions or
modifications necessary to gain - approval. If the Commission
disapproves '-or revokes a certification, we will exercise the _
franchise authority' s regulatory jusisdiction until the authority -
becomes qualified by filing a new certification that meets Lhe
reqvirements set foxth above. Such new certifications become
effective upon approval hy the Commissian, which approval �or
disapproval) will be issued within 90 days of filing.
(s) Division ot Jurisdfetioa B�tK�sa !CC znd 7�oez1
Govoramoats
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