Washington -- Cox Communications Inc. is fighting a federal
complaint alleging that the MSO is overcharging San Diego subscribers by requiring them to
buy programming that they don't want as a condition for purchasing Home Box Office
Cox said the complaint -- filed late last year by three
subscribers -- was meritless, and the subscribers did not have legal standing to take on
the cable operator throughout California. Cox told the Federal Communications Commission
that it had complied with the 1992 law regulating so-called buy-through demands that cable
operators may impose on their subscribers.
"Cox's San Diego system has at all times complied
with its obligations under the buy-through provisions," the MSO said in a lengthy
response to the complaint, which was filed in November.
An FCC source said the case could be significant for the
cable industry, especially if the agency rules against Cox. Starting in 2002, cable
operators are supposed to be fully addressable, and those that aren't will need
waivers to continue demanding the purchase of expanded basic with the purchase of premium
Cable operators that are not addressable in 2002 must show
the FCC in their wavier applications that unbundling would lead to an increase in rates.
"We've never had a case like this before,"
the FCC source said. "It could send a signal to operators about how we would
interpret any waiver [requests] in 2002."
The Cox subscribers -- whose state court case is being held
in abeyance until the FCC issues its ruling -- claimed that the San Diego system is
technically ready to unbundle premium networks from expanded-basic tiers, which typically
include dozens of national cable networks. San Diego is Cox's second-largest system,
with 490,000 subscribers.
In their complaint, the subscribers said that in effect,
they are being forced to pay an extra $20 per month for an expanded-basic tier that they
don't want in order to buy HBO and Showtime.
In responding to the complaint, Cox said the particular
system that serves the complaining subscribers (the "South" branch) has been
offering the basic tier and premium channels without an expanded-basic buy-through since
1991 -- more than one year before Congress stepped into the picture with a new law.
Fred Cary, the attorney for the Cox subscribers, said
Cox's claim that South branch subscribers do not have a buy-through requirement was
misleading because the MSO has not been advertising the fact that subscribers do not need
to buy the upper tier.
"The problem is," Cary said, "that they
never tell anybody when they call that they have that option."
In its response, Cox told the FCC that 240 South branch
subscribers take just basic and a premium channel. The operator said these subscribers
also receive two upper-tier channels free-of-charge because filtering them out would cause
major signal degradation.
Cary returned to California state court last week to urge
the judge to reinstate the case in Cox franchise areas other than San Diego.
Cary added that he disagreed with Cox's view that the
San Diego subscribers do not have the legal standing to battle the MSO outside of their
South branch system. "This action could have been brought by people in California who
are not even cable subscribers," he said.