FCC Debates Rate Cases After Dereg

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Washington -- An internal battle is erupting at the Federal
Communications Commission about how to deal with cable-rate issues after the agency's
authority to cap rates and order refunds formally expires March 31.

At least two factions are emerging.

On one side, some FCC officials are saying that regardless
of the sunset, they have a legal responsibility to complete work on pending complaints.

Those in favor of this approach said it is the correct
reading of the law, and it trumps arguments that following the law to the bitter end has
no practical value to cable subscribers.

On the other side, some FCC officials are arguing that
because Congress intended for the agency to stop regulating rates after March 31, all
pending and future rate complaints should be dismissed forthwith.

Those taking this side said the FCC should not waste its
resources on an issue that has no lasting effect. By that, they mean that any FCC refund
order issued after March 31 could be recovered by the operator in the next billing cycle
without FCC interference as a deterrent.

According to FCC records, there are 533 rate complaints
pending. A commission source did not know how many subscribers were potentially affected
by the pending cases. Since 1993, the FCC has ordered $97.3 million in refunds, which
operators have returned to subscribers in the form of bill credits, free programming, or
combinations of the two.

Because FCC senior officials were bogged down reviewing the
merger of AT&T Corp. and Tele-Communications Inc. and completing a rulemaking on
home-satellite-dish owners and their ability to view distant-network signals, they have
not been able to settle the dispute about leftover rate complaints.

"It's not resolved," one senior FCC staffer
said last week.

Under FCC rules and the Telecommunications Act of 1996, a
cable subscriber has 90 days to file a complaint with a local franchising authority. The
LFA, which must receive at least two such complaints, has 90 days to forward the
complaints to the FCC, which is under a 90-day limit to decide the case.

The three-step process became the norm because the 1996 law
eliminated subscribers' rights to file rate complaints with the FCC directly. It also
meant that the FCC would be required to deal with rate complaints for nine months after
the sunset.

The FCC anticipated this, adopting a rule in April 1996
saying that it will not "review any complaint with respect to cable-programming
service filed after March 31, 1999."

However, that rule did not cover pending cases.

"My view is that the people who file have a statutory
right to have their claim processed and adjudicated," an FCC source said.
"That's my strong legal opinion."

On the other hand, an FCC source said, there is legal
precedent for dismissing all pending complaints.

Here's the rationale: Because cable operators would be
free to recover any financial penalty that the FCC imposed, the source said, complaining
cable subscribers would have no "remedy," making it appropriate for the FCC to
drop all cable-rate cases.

"I think that would be consistent with past
precedent," said Washington, D.C.-based cable attorney Peter Feinberg of Dow, Lohnes
& Albertson.

Inside the FCC's Cable Services Bureau, headed by
Deborah Lathen, the preference is to stop processing complaints after March 31 in order to
conserve agency resources. Lathen's team's next big issue is the controversial
digital must-carry rulemaking.

"The view here is, 'Why bother?'" an
FCC source said.

That remark didn't sit well with an FCC source on the
other side of the debate.

"These people have a statutory right to have their
claims adjudicated, and we just can't take it away from them because it would be a
pain for the Cable Services Bureau," the source said.

The source added that although it is true that the FCC
might not be able to enforce refund orders after March 31, "the people who file the
complaints should weigh those considerations."

The source went on to say that cable operators that
complied with refund orders after March 31, but that then raised their rates quickly
thereafter to offset the effects, would have to deal with the "PR [public-relations]
heat" associated with such a move.

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