Timing of Cable Basic Tier FNPRM Raises Rate Re-Regulation Questions
With the FCC eyeing what it calls "fundamental changes" to its local cable rate regulation framework, most lawyers with local franchise authority (LFA) experience and locality allies we talked to said this is likely the agency looking for an easy target in its deregulation quest. A minority view believes cord cutting could be raising fears LFAs could soon end up in position to re-regulate cable franchises, and the FCC is tackling those little-employed rules before then. Commissioners launched a Further NPRM at October's meeting that would revise the agency's cable rate rules regime for basic tier regulation by LFAs (see 1810230037).
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NATOA General Counsel Nancy Werner said re-regulation is unlikely because the burden is on LFA to prove a market doesn't have effective competition, and it’s not clear many localities will try to go down that road. She said the cable franchising NPRM that seeks to redefine in-kind services cable operators provide for public, educational and government channels could have a big effect on LFA revenue. That plus cord cutting affecting cable franchise fees means localities won't have as many resources to pursue that route, she said.
DBS has been losing subscribers, which could mean its penetration drops below the 15 percent cutoff in some communities, opening the door to re-regulation, but cable operators also have been losing subscribers and if they drop below 30 percent they become unregulated, said localities lawyer Tim Lay of Spiegel & McDiarmid. He said rate re-regulation theoretically could become possible in some markets, but a wave of re-regulation by franchising authorities is unlikely since data requirements for showing no effective competition in a market are expensive.
The FNPRM -- in a view echoed by multiple lawyers -- said "very few local communities are actively regulating rates." It said many of rules and forms appear "outdated." Municipal cable franchising lawyer Mike Bradley of Bradley Berkland said the 2015 effective competition order, which put the burden on localities to show they aren't competitive markets, was largely a death blow to local rate regulation. The FCC said only two franchising authorities successfully rebutted the presumption of effective competition. They were Hawaii's Department of Commerce and Consumer Affairs, certified to regulate rates in two communities, and the Massachusetts Department of Telecommunications and Cable, certified to regulate rates in about 100. The FCC didn't comment.
The FNPRM's timing is odd due to relative lack of local rate regulation, and could point to concerns about communities getting re-regulated in the future, said a cable lawyer with localities experience. He said pursuing such changes is less political risky than granting Charter Communications' petition to have many Massachusetts and Hawaii communities declared effectively competitive because of AT&T's DirecTV Now streaming service (see 1809170020).
Charter's argument "seems a little premature," Bradley said. It's not clear there's any way to determine DirecTV Now penetration levels in those markets, so it's not clear how the service fits under the effective competition rubric, he said.