Localities Seen Stretched Thin in Responding to Cable Basic Tier NPRM That Industry May Welcome
Cable industry support for the cable basic tier regulation Further NPRM and order on October's FCC agenda (see 1810010027) doesn't appear to have coalesced, while localities are tied up responding to and fighting other FCC matters, officials on both sides told us. The import of the eventual rules may be limited by the relative lack of local cable regulation, too.
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American Cable Association President Matt Polka said the FCC "is asking the right questions" in the NPRM about the effectiveness of the current rules regime. Cable lawyer Alan Mandl of Ferriter Scobbo said the idea of letting local franchise authorities (LFAs) set basic service tier rates and equipment rates is "intriguing." He said there could also be some cable industry reluctance.
NATOA General Counsel Nancy Werner and others said localities could be spread thin dealing with the local rate regulation proceeding as they facing the cable franchise fees proceeding approved at September's meeting (see 1809260029). "It’s not hard to understand why cities fight so hard to find ways to expand franchise fees," with many relying on that tax revenue, CCG Consulting Doug Dawson blogged Friday. He said cord cutting and cord shaving are prompting those communities to look for ways to protect that revenue, but as cable service declines, franchise tax revenue will do similarly.
The proceeding asks for input on possible replacements to the "many pages of regulations and numerous complex rate calculation forms." Options include eliminating the forms altogether and letting LFAs set basic service tier rates and equipment rates that comport to federal guidelines, with the agency adjudicating disputes. It asks for comment on eliminating rate regulation of cable equipment used to receive non-basic tiers and exempting small cable systems of 15,000 or fewer subscribers from rate regulation. It asks about doing away with benchmark rates when setting an initial regulated rate and on simpler means for calculating rate increases. The draft order revises or eliminates rules the FCC said are obsolete in the face of the cable programming tier regulation sunset.
The proceeding notes basic rates aren't regulated "in the vast majority of markets" because of effective cable competition from satellite and other services, though such regulation remains in some markets in Massachusetts and Hawaii. The Massachusetts Department of Telecommunications and Cable and Hawaii Department of Commerce and Consumer Affairs didn't comment.
The justifications for rate regulation rules "don't exist in the same way they used to" before direct broadcast satellite, telco and over-the-top competition, Polka said. He said LFAs should have the ability to intervene in areas where lack of effective competition is demonstrable, but the "Byzantine" rules that apply in those cases should be streamlined.
Local rate regulation was dealt a body blow by the effective competition finding, and few local governments followed that with a filing for certification that their communities aren't effectively competitive, said municipal cable franchising lawyer Mike Bradley of Bradley Berkland. Reasons range from the high bar for showing they weren't effectively competitive to the fact regulating just the basic cable tier has little effect on cable subscribers' bills, he said. Since rate regulation rules have existed for years, changing them likely would be a bigger burden for cable operators than compliance, he said. He added that operators are likely the only fans of the proceeding because "It's just going to go from bad to worse" in terms of the last remaining local governments having the ability to regulate basic tier rates.
Cable wants broader deregulation and the FCC to "tread carefully" on the complex local rate regulation regime in place for decades, Mendl said. Rules do need simplification, he said. "It's a complicated system."
The cable industry could push to end rate regulation altogether if Charter Communications succeeds with its petition for an effective competition determination based on OTT competition in numerous Massachusetts communities (see 1809170020), said a lawyer with cable clients and franchise experience. The lawyer also said it could get tougher to demonstrate effective competition in communities as DBS also loses subscribers to OTT services, giving it less penetration into markets. The attorney said a broader definition of competing providers is needed.