MUNICIPAL REGULATION OF CABLE TELEVISION RATES UNDER THE 1992 CABLE ACT

This is the second article in a series of four articles addressing municipal regulation of the cable television industry. This article will explore the procedures employed in rate regulation.

In the event a municipality elects to regulate the rates charged by a cable operator for the Basic Service Tier and related equipment, it must first become certified. The certification process begins with the municipality certifying to the FCC, using Form 328 entitled "Certification of Franchising Authority to Regulate Basic Cable Service Rates and Initial Finding of Lack of Effective Competition", that (i) the municipality of other franchising authority will adopt within 120 days of certification and administer regulations with respect to basic cable service consistent with the regulations adopted by the FCC; (ii) the municipality has the legal authority to adopt the FCC regulations; (iii) the municipality has the personnel to administer the FCC regulations; and (iv) the municipality's procedural laws and regulations applicable to the rate regulation proceedings provide a reasonable opportunity for consideration of the views of interested parties.¹ A request for certification may be submitted to the FCC any time after September 1, 1993. A copy of the certification must be served on the cable operator. Note that the FCC has not set forth specific guidelines for the conduct of the procedural hearings relative to the basic service tier regulation. Therefore, unless a franchising authority has already done so, it must adopt hearing procedures which will provide "a reasonable opportunity for consideration of the views of interested parties".

Once the franchising authority has submitted Form 328 to the FCC, the franchising authority will automatically become certified within thirty days after its filing.² The FCC presumes every system lacks effective competition, but the certification will be automatically stayed if a cable operator, within 30 days, files an objection to the certification claiming effective competition exists in the system area.³ While a cable operator may contest the other representations in the certification, the filing of a petition for reconsideration on these other issues does not create a stay in the issuance of the certificate.⁴ A finding of effective competition is unlikely in that it is estimated only 1% of the nation's communities have effective competition.

Once the certificate is effective, the municipality has 120 days from the effective date of the certificate to adopt procedural rules and regulations regulating rates tor the basic service tier and equipment charges.⁵The municipality must then notify its cable operator that it has been certified and has adopted procedural rules.⁶

The initial date of regulation is the date of this notice to the cable operator. Thereafter, the municipality may demand that a cable operator submit its schedule of initial rates and justification within 30 days using FCC Form 393.⁷

A municipality is not required to seek certification.⁸ Nor has the FCC established any deadline by which certification must be obtained. Obviously, however, the later a municipality certifies, the later any rate regulation will occur.

Rate regulation is conducted primarily using the "Benchmark" rates determined by the FCC.⁹ The Benchmark rates vary depending on the size of the operator, the number regulates channels and the percentage of those channels carrying satellite programming.

Once the municipality receives a rate filing from a cable operator, it may agree with the rate and allow the rate to take effect without objection in 30 days if such rate is at or below the benchmark rate.¹⁰ If the municipality is unable to determine whether the rate is within the benchmark rate based upon the material before it, it may toll the effective day of the rate for 90 additional days to resolve the benchmark question.¹¹ If the cable operator submits a "cost of service" showing to justify a rate above the FCC's benchmark rate, then the municipality may toll the effective date of the increase for 150 additional days to review the "cost of service" submission.¹² These delays must be effectuated by a written order of the municipality.¹³ If the case is still pending before the municipal body after the 90 or 150 day tolling period, then the rates go into effect subject to a refund.¹⁴

The municipality may order prospective rate reduc-

December 1993 / Illinois Municipal Review / Page 15

tion,¹⁵ rate prescription,¹⁶ and refunds¹⁷ which may be awarded after notice to a cable operator and an opportunity for comment by all interested parties.¹⁸ The refunds may date back to September 1, 1993, or for one year, whichever is shorter.¹⁹ No fines or penalties may be assessed against an operator unless it refuses to comply with the municipality's order.²⁰

Once a municipality has made a determination regarding rates, this decision may be appealed to the FCC which has the right to review that determination for consistency with FCC standards and to grant relief consistent with FCC standards.²¹ Local decisions are reviewed on a rationale basis test.²²

The content of this article is intended to provide a broad outline of the rate regulation process. Many issues were not covered or were only touched upon. Before a municipality makes a decision on the issue of rate regulation, it should consult with its legal counsel or other experts in this field. •

1. FCC Form 328, OMB Oate August, 1993

2. Report and Order and Further Notice of Proposed Rulemaking; MM Docket 92-266, April 1, 1993 (hereinafter "FCC Report & Order, ¶ ——)

3. Report and Order, ¶ 80

4. Id., ¶ 85

5. Id., ¶ 116

6. Id., ¶ 116

7. Id.,¶ 116

8. Id., ¶¶ 53-56

9. If a cable television operator believes that its cost of providing cable television service exceeds the benchmark rates, it is allowed to file a "cost of service" submission as the basis for its rate to the regulating municipality. However, the FCC is still studying this issue and has not issued cost of service standards.

10. Report and Order, ¶ 118

11. Id., ¶ 117

12. Id., ¶ 119

13. Report and Order, ¶ 126

14. Id, ¶ 119

15. Id., ¶ 136

16. Id., ¶ 138

17. Id., ¶ 140

18. Id., ¶ 140

19. Id., ¶ 142

20. Id., ¶ 145

21. Report and Order, ¶ 147

22. Id., ¶ 149

Editor's Note CABLE TV RATE FREEZE EXTENDED Pursuant to an order dated November 10,1993 the FCC has extended the freeze on cable television rates to February 15, 1994. The freeze was scheduled to expire on November 15. This provides more time for communities to become certified to regulate basic cable rates. This order does not delay regulation by municipalities who are already certified to regulate basic cable rates or who become certified prior to February 15, 1994.

Page 16 / Illinois Municipal Review / December 1993