Late Fees Dominate Agenda of States

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The recent flurry of attacks across the country on cable
late fees has sent some state associations into alert mode for 1998, as they either draft
bills to legalize their collection practices or scramble to fend off unfriendly bills.

Although ongoing operational issues -- tax rates,
pole-attachment fees, the structure of state cable and utility regulatory authorities --
remain on the front burner for many state lobbyists, criticism on collections has forced
at least four states to put those other issues aside and to concentrate on late fees.

By this time next year, fees could be set at as low as
$1.11 per month (in Indiana) and as high as $7.50 (Oklahoma). Much of the activity is
triggered by class actions filed -- and, in the case of Washington, D.C., and Baltimore,
won -- by Washington, D.C.-based attorney Philip Friedman. Three states where suits are
pending -- Illinois, Oklahoma and Indiana -- will fight the battle in the legislature even
as the court actions continue.

Illinois cable operators hope that tempers will have cooled
after a session-ending debacle in which the state House of Representatives passed a bill
legalizing late fees of up to $5 per month. But before the measure made the Senate floor,
House members, under heavy criticism in the press, had to admit that they passed the fee
bill thinking that it had to do only with storm-water management. Given the heat, the
Cable Television and Communications Association of Illinois (CTC) agreed to withdraw the
bill for a more thorough airing this year.

CTC president Gary Maher has met with newspapers in the
state, especially in Chicago, in an attempt to emphasize the fact that cable late fees are
mild when compared with charges in other industries, such as banking.

Other cable state associations will use this comparative
strategy when fighting bills. Indiana operators argued that parking tickets in
Indianapolis, assessed originally at $6, double in price if not paid within three days.

'We're not unreasonable in our late fees,
especially when you consider that it's a service that you've contracted to take,
and it isn't something that you need to function in the home, like electrical or
telephone service,' said Dottie Hancock, executive director of the Indiana Cable
Telecommunications Association.

But she's got a hard sell to convince state Rep.
Edmund Mahern. He's introduced a bill that will limit late fees to 10 percent of the
first $3 of an overdue bill, plus 3 percent on each additional dollar. Using that formula,
it would cut cable late fees to a maximum of $1.11 per month on a $30 bill. The late fee
currently averages $5.

Operators in Oklahoma will push a bill modeled after one
passed in California two years ago. It will not head off legal action, though. Class
action is pending in a suit filed late in 1997 against the state's largest operators.

Jim Walker, executive director of the state cable
association there, said the bill asks for late fees as high as $7.50 per month. Oklahoma
operators will also attempt to introduce a bill, modeled after one in Kentucky, preventing
landlords from demanding kickbacks in return for access to multiple-dwelling units.

Legislation contemplated in Wisconsin will forbid operators
from assessing a fee until 15 days after the service is used. Since most operators bill in
advance of the month, this means that a consumer would actually be 45 days late, in some
cases, before being dunned by the cable company. The bill would also cap fees at $2.75.

Tom Hanson, executive director of the state's cable
association, said fees now average about $5. He noted that the state has had a policy for
10 years that late charges must be justified by costs, adding that operators are confident
that their fees meet that test.

Another legislator in that state has rumbled about
outlawing downgrade charges, Hanson said.

The late-fee issue will die down in Washington state not
due to a legislative fiat, but due to a settlement between consumers and
Tele-Communications Inc. in Tacoma, where TCI had proposed lowering the fee from $5 to $3,
among other points.

Besides late fees, legislators in Arizona, Minnesota and
Georgia will confront other vital issues affecting revenue and competition.

Arizona could be a test case on rights-of-way fees. Cable
operators and telephone companies tried last year to negotiate a reasonable statewide
policy on fees with the Arizona League of Cities and Towns. The talks collapsed over the
amount of compensation. Some cities have moved ahead, demanding ROW fees as high as 4
percent of gross, on top of other transactional fees and licenses paid by the state's
telecommunications companies.

The fees will be challenged in state tax court, but the
companies also revived their fight for a unified policy by sponsoring a state bill that
will pre-empt cities.

Susan Bitter Smith, executive director of the Arizona
Telecommunications Association, said the bill has bipartisan support in both houses among
party leaders.

'I think that we will prevail in the legislature, and
in tax court, too,' she said. The goal of telecommunications companies is to limit
new ROW fees to 1 percent, she added.

Minnesota and Georgia legislators may change the way that
municipalities get into telecommunications. In Minnesota, one proposal would repeal a 1915
statute requiring the approval of 65 percent of a city's voters before the locality
can get into the local-exchange business.

'We feel that the current law provides good public
review of what the cities are doing,' said Mike Martin, director of the Minnesota
Cable Telecommunications Association. 'People need to know just how competitive the
telecommunications market is. They need to know about the risks and about the mistakes
that they could be making.'

Georgia may take a different tack. One proposal would
require municipalities to comply with the same state and federal requirements that are
applicable to private operators. As such, cities will have to include all taxes,
franchise, permitting and pole-attachment fees in their rates and provide competitors with
nondiscriminatory access to municipal plant.

More important, the bill does not allow a municipality
entering the cable business to continue regulating the incumbent. Passage of the bill is
critical to operators, since the Municipal Electrical Authority of Georgia, which was
created to purchase bulk power for the state's municipally owned electrical
utilities, is building a $35 million statewide fiber optic backbone.

Local governments can easily hook into that fiber, and that
will make it easy for them to get into cable, according to Nancy Horn, president of the
Georgia Cable Television Association.

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