News

Local Regulators Cool To Re-Reg Bill

8/09/1998 8:00 PM Eastern

Washington -- Local regulators last week voiced
reservations about new legislation that would empower local governmental units to keep
cable operators rate regulated beyond March 31, 1999.

The bill, introduced by Rep. Billy Tauzin (R-La.) and Rep.
Edward Markey (D-Mass.), would permit a local government to withhold deregulation if the
operator refused to unbundle an expanded basic tier for the purpose of creating mini-tiers
or a la carte services.

The cable operator would remain handcuffed if it failed to
provide, as the bill puts it, "an acceptable range of programming choices to the
extent technically feasible and economically reasonable."

David Olson, cable director for the city of Portland, Ore.,
said the Tauzin-Markey bill was a recipe for disaster because it would plunge cities and
cable operators into unending content disputes.

"Local governments have never sought to get embroiled
in these content discussions," Olson said. "I think the judiciary would throw it
out real soon."

Under current law, large cable operators are to be
deregulated on the upper tier (the so-called CPS tier) on March 31, 1999, though basic
rates will continue to be price-controlled until a system faces effective competition from
one or several alternative multichannel video programming distributors.

Olson said if Congress is concerned about cable rates, it
should eliminate the March 31, 1999, sunset -- an action which Markey is proposing in
separate legislation.

"It was a mistake to set [deregulation] without any
regard to effective competition," Olson said. "If there are any tools that I
have ... to prolong, elongate or stretch out that date or to push that date out until
there's competition here, I will do it."

Cable operators could appeal a local government's
denial of deregulation to the FCC if they could show the action was arbitrary and
capricious. If the FCC affirms the local government's decision, the cable operator
remains rate-controlled for at least 12 more months.

"I think any methodology that gives consumers more
choice and control over what they watch and what they have to pay is probably a good
thing," said Susan Littlefield, cable regulatory administrator for the city of St.
Louis. "But the devil is in the details."

Littlefield said cities would need clear and simple
guidance from Congress on deciding whether an operator is offering subscribers an
acceptable range of programming.

"If you start making it complicated, it won't
work any better than rate regulation, which hasn't worked at all, and it won't
protect consumers," she said.

The bill authorizes the FCC to draft rules within 120 days
that would spell out the role of cities in overseeing the packaging of cable programming.

The Tauzin-Markey bill would require some or perhaps all
operators to offer a basic tier consisting of local TV signals and public, educational and
governmental (PEG) channels, and nothing else. The lifeline or "skinny" tier, as
Tauzin called it, would be price regulated by the FCC, not by local governments, which
have that right today.

Mike Reardon, a past president of the National Association
of Telecommunications Officers and Advisors, said his experience with cable rate rules as
handed down by the FCC has been frustrating and something he would not like to see
prolonged.

"The concept of requiring lifeline is admirable, but
again I am concerned that the FCC is the final decision-maker in how this thing will be
implemented and what the cost will be to the subscriber," he said.

Reardon said he would, however, support a lifeline tier
"if it really is a lifeline service with lifeline fees."

According to cable attorneys, the wording of the
bill's lifeline basic mandate was vague. It was unclear whether it would apply to all
cable systems or just to those not subject to effective competition. If it applies to
cable systems subject to effective competition, would the lifeline tier still be price
regulated by the FCC?

Aides to Tauzin and Markey said the intent was to impose
the lifeline tier mandate on cable systems not subject to effective competition.

Littlefield applauded the lifeline tier approach but
declined to endorse giving the FCC rate-setting authority.

"Do I think that should be regulated at the federal
level? Probably not -- I don't think the FCC has enough staff to do it," she
said.

When the bill was handed out to reporters two weeks ago in
draft form, it failed to state whether lifeline basic would have to include digital TV
signals.

The bill actually introduced said digital signals would not
have to be carried on the lifeline tier unless the FCC required it. Must-carry of digital
TV signals is a pending rulemaking at the FCC not expected to be decided until late this
year or early next year.

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