Policy

Comcast Gets Dallas Relief

11/18/2005 7:00 PM Eastern

Washington— The Federal Communications Commission last Monday barred the city of Dallas from regulating basic-cable rates charged by Comcast Corp., settling a bitter dispute between city regulators and the largest U.S. cable company.

In a short ruling that took a year to decide and release, the FCC determined Comcast met its legal burden of proving that more than 15% of Dallas households subscribe to a major satellite service.

“We are pleased that the FCC has recognized the high level of competition that exists in Dallas,” Comcast spokesman Tim Fitzpatrick said.

WHAT HAPPENS NEXT

When the 15% test is met, local regulators may not set basic-programming or equipment rates. Similarly, cable operators are no longer required to provide a uniform rate structure and they may require basic subscribers to buy a higher tier in order to obtain access to a premium service like Home Box Office.

Comcast has about 136,000 subscribers in Dallas, the country’s seventh-largest TV market. Assuming that Comcast and Time Warner Inc. complete their takeover of Adelphia Communications Corp., Comcast intends to transfer the Dallas franchise to Time Warner Cable.

The FCC released the order on the same day that U.S. Digital Television began offering a low-cost multichannel TV service in the Dallas-Fort Worth market.

“That was purely coincidental,” said an FCC source, who requested anonymity because the source was unauthorized to speak to the media.

While Comcast argued that direct-broadcast satellite penetration was 17%, Dallas regulators complained that Comcast had inflated DBS penetration and relied on outdated U.S. Census data. The FCC said the city’s arguments “lack merit.”

Because a senior official in the FCC’s Media Bureau signed the decision, Dallas is allowed to appeal it to the agency’s commissioners.

Nick Fehrenbach, Dallas’ manger of regulatory affairs and utility franchising, said he needed to review the FCC ruling before making a decision about an appeal.

“We are going to try to appeal that decision,” said Mitchell Rasansky, a nonpartisan member of the Dallas City Council, adding that satellite competition did not shield cable subscribers from rising rates and inferior customer service. “I don’t think they are protected.”

The FCC does not retain data on the number of cable subscribers nationally who are served by cable systems that have been deemed subject to effective competition by the agency, an FCC official said last week.

Media Bureau spokeswoman Rebecca Fisher said that in 2005, cable operators had filed 363 deregulation petitions. Of those, the agency had answered 233, or 64%.

Under the 1992 Cable Act, cable companies are presumed not subject to effective competition, which gives local governments the right to cap the price of basic-service rates and equipment fees. Cable operators shoulder the burden of proving the 15% test has been met in a legal process that can cost thousands of dollars in FCC fees and charges to obtain satellite subscription data from a private vendor.

STREAMLINING SOUGHT

In 2002, the National Cable & Telecommunications Association asked the FCC to streamline the process by deregulating every cable system within any state that had at least 15% satellite penetration. At the time, the NCTA’s proposal would have led to blanket cable deregulation in 41 states unless a community could prove to the FCC the absence of 15% penetration.

Earlier this year, FCC Media Bureau staff urged the agency’s five commissioners to reject NCTA’s request. The recommendation, circulated during the waning moments of FCC chairman Michael Powell’s tenure, has not been acted on under new FCC chairman Kevin Martin.

Local governments remain strongly opposed to NCTA’s proposal. In August, Little Rock, Ark., Mayor Jim Dailey, chairman of an FCC advisory panel, sent Martin a letter insisting that federal law required the agency to determine the level of cable competition in particular franchise area, not within an entire state.

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