FCC Probes Buy-Through Charge at Cox

4/11/2004 8:00 PM Eastern

The Federal Communications Commission is probing whether cable operators can charge a fee for music services and interactive programming guides to consumers that want to purchase just the basic tier and a premium service such as Home Box Office, but not expanded basic.

At issue is the applicability of the FCC’s so-called tier buy-through prohibition in a dispute involving Cox Communications Inc. and several communities in Connecticut that retain authority to set some of Cox’s programming fees.

According to FCC and industry sources, a Cox subscriber to basic and HBO is charged not only a set-top box fee, but also a $3.95 fee for a “digital gateway tier,” which includes the Music Choice service and an IPG.

Ten Connecticut towns, led by Enfield, have filed an FCC complaint alleging that Cox is violating the FCC’s tier buy-through ban by charging for the digital gateway.

If the FCC ruled against Cox, the decision wouldn’t have a major impact, because the vast majority of cable customers subscribe to expanded basic, which is not price regulated anywhere in the U.S.

“Cox is aware of the complaint. It’s a situation that affects a small percentage of our customers. I would add that it was always our intent to comply with the rules of the FCC, and we believe our practices are fully consistent with the buy-through rules,” Cox spokeswoman Laura Oberhelman said.

Under FCC rules, a cable operator that isn’t subject to effective competition (which means its basic tier is still regulated locally) is generally barred from requiring the purchase of a higher programming tier when the basic-only customer pays for a premium or pay-per-view channel.

Christopher Cinnamon, a Chicago-based attorney for the American Cable Association, said the Connecticut complaint should be dismissed because Cox’s charge for the digital gateway is not covered by the tier-buy through rule.

Cinnamon is advising clients that have imposed the same charge that the tier-buy-through ban refers to tiers of “video programming.” Since the digital gateway includes music and navigation services, the tier buy-through ban in not in effect, Cinnamon concluded.

“This is an important case for the industry and should be a straightforward case for the commission,” Cinnamon said.

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