CABLE STRATEGY SHIFT PROMPTS FLURRY OF FILINGS FOR RATE RELIEF
In last year, FCC has seen number of filings for rate relief by cable systems more than double and MSOs are acknowledging shift in strategy designed to help them compete more aggressively with DBS at local level. Since last Feb., 47 petitions for determination of effective competition have been filed at FCC, compared with 18 such filings in 2000 and 24 in 1999. Commission officials acknowledge surge in filings seeking freedom from rate regulation by local franchising authorities. Although agency doesn’t regulate rates, local authorities can do so on basic service. While many of filings for relief appear to come from small companies such as Falcon in Drain, Ore., in reality most of those systems have been bought by larger systems operating out of big cities. Most of filings at FCC were by 2 MSOs -- Charter and Time Warner Cable (TWC). Adelphia also filed many in 1999.
Sign up for a free preview to unlock the rest of this article
If your job depends on informed compliance, you need International Trade Today. Delivered every business day and available any time online, only International Trade Today helps you stay current on the increasingly complex international trade regulatory environment.
TWC spokesman acknowledged that flurry of filings was part of larger corporate strategy designed to give company more flexibility in pricing packages for basic services: “By far, DBS is the biggest factor in these filings.” Latest FCC report on state of competition showed cable had “dominant” role with 78% of market, while DBS held 18%. TWC spokesman Mike Luftman said his company didn’t believe municipalities should be regulating rates of TWC’s smaller corporate pieces and was telling local employees to make filings at FCC for relief: “They are encouraged to do these filings as part of a corporate program.”
Charter dir. of govt. relations for Gulf Coast region, Bill Ferry, acknowledged some systems, particularly those in Ala., actually hadn’t seen much change in competitive landscape. Charter just now is seeing that it can make filings in spots where it butts up against another cable operator, he said. For example, if 2 cable operators have territories within one small town or franchise area, FCC’s rules allow them simply to carve up town between them to determine there’s effective rate competition. They don’t necessarily have to compete head-to-head with another cable company or overbuilder to get relief, just serve less than 30% of town’s or franchise area’s population.
To win rate relief -- and most of them do so -- companies must meet FCC test, and there are 4 ways to do that. Under standard of low penetration, cable operator must serve less than 30% of households in franchise area. Under competing provider test, there are 2 standards that must be met: First, there must be at least 2 providers that offer service to at least 50% of market and all competitors -- aside from largest one -- taken together must serve at least 15%. Under municipal provider test, cable operator can get relief if company competes against municipal-owned system and municipality offers service to at least 50% of households in franchise area. Final test, added in 1996 Telecom Act, is met if local exchange carrier (LEC) offers video service in cable franchise area.
As of Jan., FCC deemed 842 communities to have “effective competition,” meaning cable companies there no longer were subject to rate regulation. Commission records show 240 of those community designations came in July 2000- July 2001 period.