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MUNICIPAL REGULATION OF CABLE TELEVISION UNDER THE 1992 CABLE ACT By ANDREW T. FREUND and RICHARD G. FLOOD Zukowski, Rogers, Flood & McArdle This is the first in a series of four articles addressing municipal regulation of the cable television industry under the 1992 Cable Act. The remaining articles will discuss the procedures for rate regulation, consumer protection and customer service and franchise issues. A high ranking federal bureaucrat once said "if it moves, regulate it. If it doesn't move, kick it and when it starts to move, then regulate it." This statement exemplifies municipal regulation of the cable television industry under the Cable Television Consumer Protection and Competition Act of 1992 (the "Act"). The Act itself is short. However, the Federal Communication's Commission ("FCC") implementing rules and regulations are long and complex. Not only are the rules and regulations promulgated by the FCC long and complex, but as of the date of this article's publication, the FCC is still in the process of promulgating further regulations, including those relating to "Cost-of-Service" showings. Indeed, many of the forms the FCC intends to use in the implementation of the Act are still in their draft stage, including Form 393, the cable operator's primary means of justifying its basic service tier rate charges. Although implementation of the Act may be complex, the genesis of the Act is quite simple. Congress perceived that rates of systems not subject to effective competition were unreasonably high relative to rates in competitive market places. Congress' perceptions were born out when the FCC conducted a survey of cable system rates as of September 30,1992, which revealed that, on average, rates of systems not subject to effective competition are approximately 10 percent higher than rates of comparable systems subject to effective competition.1In theory, then, the goal of the Act is to reduce the overall rates charged by cable operators by an average of ten percent. The scope of the Act and the implementing regulations are much broader than regulation of cable rates. The Act and the regulations also cover consumer protection and customer service issues, certain franchising issues, must carry / retransmission consents, cable home wiring, access to programming and commercial leased access. Municipalities will primarily be concerned with only rate regulation, consumer protection and customer service and franchising issues. Municipalities will have little or no involvement in the other topics covered by the Act. By far the most talked about and highly publicized aspect of the Act are the provisions relating to rate regulation. The Act provides that a municipality may elect to regulate only those rates being changed for the "Basic Service Tier" and related equipment.2 The "Basic Service Tier" is defined to include as a minimum (i) the local broadcast signals distributed by the cable operator (except for superstations like WGN), and (ii) any public, educational and government (PEG) access channels.3 The basic service tier may include additional program services.4 Rates for the equipment used to receive the basic service tier may also be regulated by the municipality.5 This equipment typically involves converter boxes and remote switching devices, although other equipment would fall under this regulatory scheme. Regulation is permitted by a municipality even though existing franchise agreements contain provisions prohibiting rate regulation as the Act has preempted all such provisions in existing franchise agreements.6 Rate regulation by a municipality is not mandatory. However, if a municipality voluntarily elects not to regulate rates the FCC will probably not regulate the Basic Service Tier or related equipment.7 The FCC will regulate rates for the Basic Service Tier and related equipment even though a municipality does not, but only where the municipality's certification has been denied or revoked, or where the municipality has insufficient resources to regulate or lacks the legal authority to do so.8 The Act and its associated regulations will no doubt directly affect your municipality. As a result of the Act, municipalities, are being saddled with another unfunded federal mandate. Regulation necessarily entails administration including conducting hearings and em- Page 30 / Illinois Municipal Review / November 1993 ployment or qualified personnel to review the data provided by the cable operator. The cost of this regulation is borne by the municipality to be paid from its franchise fees. Moreover, if the municipality is successful in lowering rates, a municipality's franchise fees which are based on a percentage of gross revenues derived by the cable operator will therefore axiomatically decline. Financial consideration aside, the corporate authorities of a municipality may commit political suicide if they don't take the opportunity to reduce their constituent's cable rates by the projected ten percent. With the FCC suggesting that 75% of the cable subscribers are being overcharged and rate regulation being primarily the province of the municipality, there will be significant pressure on municipal officials to assert jurisdiction and regulate rates, regardless of the financial consideration discussed above. •
November 1993 / Illinois Municipal Review / Page 31 |
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