The Federal Communications Commission is probing whether cable operators may charge a fee for music services and interactive programming guides to consumers who want to purchase just the basic tier and a premium service such as Home Box Office, but not expanded basic.
At issue is the applicability of the FCC's so-called tier buy-through prohibition in a dispute involving Cox Communications Inc. and several communities in Connecticut that retain authority to set some of Cox's programming fees.
According to FCC and industry sources, a Cox subscriber to basic and HBO is charged not only a set-top-box fee, but also a $3.95 fee for a "digital gateway tier," which includes the Music Choice service and an IPG.
A total of 10 Connecticut towns, led by Enfield, have filed an FCC complaint alleging that Cox is violating the agency’s tier-buy-through ban by charging for the digital gateway.
If the FCC ruled against Cox, the decision wouldn't have a large impact because the vast majority of cable customers subscribe to expanded basic, which is not price-regulated anywhere in the United States.
"Cox is aware of the complaint. It's a situation that affects a small percentage of our customers. I would add that it was always our intent to comply with the rules of the FCC, and we believe our practices are fully consistent with the buy-through rules," Cox spokeswoman Laura Oberhelman said.
Under FCC rules, a cable operator not subject to effective competition (meaning that its basic tier is still regulated locally) is generally barred from requiring the purchase of a programming tier higher than basic when the basic-only customer pays for a premium or pay-per-view channel.
Christopher Cinnamon, a Chicago-based attorney for the American Cable Association, said the Connecticut complaint should be dismissed because Cox's charge for the digital gateway is not covered by the tier-buy-through rule.
Cinnamon is advising clients that have imposed the same charge that the tier-buy-through ban refers to tiers of "video programming." Since the digital gateway includes music and navigation services, the tier-buy-through ban in not in effect, he added.
"This is an important case for the industry, and it should be a straightforward case for the commission," Cinnamon said.