In a unanimous vote, four members of the Federal Communications Commission officially deregulated AT&T Broadband's Boston system last Wednesday.
The ruling upheld an order adopted by the Cable Services Bureau last July. Cablevision Systems Corp. had sought relief from the FCC in July 1997; AT&T took over the case after it acquired the Boston system.
Boston Cable Office director Mike Lynch said the ruling did not surprise him. The impact of the FCC's ruling should be softened by a rate agreement reached late last year with AT&T, which covers basic rate increases for the next six-and-half years.
"We reached a rate settlement agreement with them in December," Lynch said. "They could have told us to take a walk, but did not."
Nevertheless, under Wednesday's FCC ruling, the city cannot regulate AT&T's basic rates. Upper-tier rates were deregulated by Congress in 1996, effective March 31, 1999.
AT&T is also exempt from an FCC rule requiring uniform rates, and another regulation that bans rate-regulated cable operators from requiring subscribers to purchase a tier of programming before they may buy premium networks or pay-per-view events.
The FCC determined that AT&T Broadband was subject to effective competition from RCN Corp., which provides both video programming and local phone service.
Under federal law, it's easier for cable operators to make the case for rate deregulation when competing with a local telephone carrier. For example, the law does not require the cable company to demonstrate that the telco serves a certain number of video subscribers to trigger deregulation.
Nonetheless, Boston protested that it was premature to deregulate AT&T because the incumbent served 150,000 subscribers, to RCN's 11,000 cable subscribers in just a few city neighborhoods.
In the nine-page order, the FCC reaffirmed the bureau's conclusion that a phone company that provides competing video service is not required to wire an entire city before the incumbent cable operator may seek basic-tier deregulation.
"In order to establish the presence of effective competition, a cable operator need not prove that a competing [phone company] is providing [video] service throughout its service area," the FCC said.
Instead, the FCC said, the cable operator must show that the competitor's facilities substantially overlap with the incumbent's. The FCC found that RCN met this test by serving 11,000 subscribers in multiple areas within Boston.