FCC Warns LFAs About Rate Regulation

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Washington -- In so many words, the Federal Communications Commission is banning local governments from placing limits on basic tier rates charged by cable operators that are new entrants into the market.

The media regulator said in a public notice released Jan. 16 that local governments likely have no basis to regulate a new provider when incumbents have been broadly deregulated as a result of competition from satellite TV providers and, more recently, local phone companies.

The FCC was vague about the reason for its public notice. It didn't provide even one example of where a local government had stepped in, or threatened to step in, to regulate basic rates of a new video provider, such as Verizon Communications.

"Recently, when new entrant cable operators have proposed to provide cable service in franchise areas served by incumbent cable operators, issues have arisen about regulation by the local franchising authority of the new entrant's basic-cable service rates," the FCC said in the two-page notice. "The purpose of this public notice is to provide guidance to new entrants and LFAs on some of those issues."
It's not clear to what extent the FCC's warning covers AT&T, which claims that it is not legally a cable operator when providing its U-verse video service based on Internet Protocol standards.

In March 31, 1999, the FCC lost authority to regulate cable rates above the basic tier. Deregulation of the basic tier requires a showing by a cable operator to the FCC that enough competition exists to eliminate regulation.

Typically, deregulation is legally met when satellite TV providers have 15% market share or when local phone companies provide video over their own facilities, without regard to market share. The FCC has found "effective competition" exists in hundreds, if not thousands, of communities.

The basic tier consists of local TV signals, usually public, educational and governmental channels and any cable programming service that the cable operator elects to include.