Are Cable Rates Deregulated Now?

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Washington -- Realistically, the upper-tier rates of large
cable operators are deregulated now -- four months before they're officially supposed to
be.

That's because it is highly unlikely that the Federal
Communications Commission could impose a meaningful fine on a cable operator with rates
that currently exceed legal levels.

"Arguably, that's the case," National Cable
Television Association president Decker Anstrom said.

Until March 31, 1999, the FCC has the authority to regulate
the upper-tier rates of large operators and to require refunds to compensate subscribers
who have been overcharged.

But here's the problem facing the FCC: Under the law and
FCC rules, cable subscribers have 90 days to file complaints with the local franchising
authority, and LFAs, in turn, have another 90 days to submit at least two complaints to
the FCC. The commission is required to render a decision within 90 days.

Consequently, it's quite possible that the agency will have
a backlog of complaints on file as of March 31, and that it could receive valid new
complaints after March 31, based on rate increases that operators imposed before the
sunset.

The FCC would then have to make a choice: Does it go
through the motions of processing complaints and issuing refunds, knowing that the cable
operator is free to recover the refund amount the next month? Or does it issue an edict
saying that it's out of the rate-regulation business for good and dismiss all complaints?

"That's the big question hanging out there," said
Peter Feinberg, a cable attorney with Dow, Lohnes & Albertson.

Feinberg said he is hopeful that the FCC will follow
precedent and dismiss the complaints.

In 1996, after Congress deregulated the upper-tier rates of
small operators, the FCC dismissed rate complaints that had been filed before passage
because it realized that any refund liability could be recovered by the operator in the
next billing cycle.

"They basically stopped issuing those rate
orders," Feinberg said. "I would argue that the same presumption should apply
here -- that the operator is effectively deregulated, and that the intent of the law was
to get the operator out from the ambit of rate regulation after March."

FCC officials said they are watching to see whether cable
operators are increasing rates in a manner designed to take advantage of the sunset.

"I wouldn't think that they would do that at severe
risk to their company and the entire industry," one FCC source said. "It would
fly in the face of everything that has been counseled and suggested ... by people like
[Tele-Communications Inc. president and chief operating officer Leo J. Hindery Jr. and
others]."

Anstrom said it would be the "height of
foolishness" if operators were perceived as taking advantage of a paralyzed FCC over
the next four months.

"The companies have looked at that, and they
understand that there is a letter and spirit of the law here," Anstrom said.
"You're not going to have companies out there inviting the FCC to issue these things,
and then have the companies figuratively thumb their nose at them."

Cable attorney Frank Lloyd of Mintz, Levin, Cohen, Ferris,
Glovsky, and Popeo, based here, said the cable industry would have "political
constraints" on its rates over the next few months if, in fact, FCC rules are no
longer meaningfully operational.

"No one wants to draw the ire of the localities, the
Congress and the FCC," Lloyd said.

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