Loading...
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 � � t�vi 6E 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: � �� tibb l����° � � .,� � 11FpENDIX A . 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. • � 1 � 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 -� 2 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 _� 3 ) 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. _� 4 � , . � 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 � " 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 .� 5