Boston Appeals FCC's Deregulation Order


Boston officials have asked the Federal Communications Commission to overrule an order deregulating that city's cable market.

The city contends that the deregulation order — issued by the FCC's Cable Services Bureau on the grounds of effective competition between incumbent AT&T Broadband and overbuilder RCN Corp. — is absurd because RCN reaches only four of the city's 16 service areas.

RCN has also slowed buildouts in Boston and elsewhere, citing a lack of available capital.

Boston appealed the order to the FCC on Aug. 20, and other cities are watching the proceeding closely. Municipal attorneys said that the ruling sets a bad precedent by applying competitive parity to a "David and Goliath" situation.

The initial deregulation request came from Cablevision Systems Corp., which owned the Boston system when RCN received its franchise in 1997.

The Cable Services Bureau acted on the request July 20, effectively putting Boston out of the basic rate-regulation business. The ruling also allows AT&T to increase its charges for set-top boxes and remote controls.

The ruling affords AT&T Broadband more flexibility to sell and advertise bundled services and at a single price, like the direct-broadcast satellite providers. In a regulated system, cable providers must break out each rate-regulated item on the cable bill.

"As soon as RCN put in a franchise, Cablevision put in its request [for deregulation] based on RCN promises and projections, which has not happened at all," said Boston corporation counsel Merita Hopkins. "Boston is nowhere near two competing networks."

RCN entered the market in partnership with Boston Edison Co., now known as NSTAR, and offered big plans for a citywide build-out. But Hopkins said RCN has not met its construction deadlines.

To date, RCN has signed up 5,000 homes in the Hyde Park, Roslindale and Dorchester neighborhoods. By contrast, AT&T Broadband has 150,000 subscribers.

And build-out criticism isn't limited to RCN. Neither Cablevision nor AT&T ever wired the whole city, said Hopkins.

"Even the incumbent is not ubiquitous," the attorney said. AT&T was granted the Cablevision franchise on a provisional basis, provided it upgraded the system for digital cable and cable-modem services, but that hasn't happened either.

It's possible that the system will get yet another new owner if Comcast Corp.'s bid to acquire AT&T Broadband proves successful.

Hopkins reasserted the city's support for competition, noting that Boston "did the first [open video system] license in the country" to induce RCN to enter business in the city.

"Boston would be delighted to no discuss these issues, but for public policy reasons, we need to continue to control basic rates," she said. "The Telecom Act guarantees minimal rate protection, and we still need it."