Oregon Cities Charge TCI with Evading Rate Rules

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A handful of Oregon communities have filed a complaint with
the Federal Communications Commission, asking the authorities to rule on whether
Tele-Communications Inc. evaded tiering rate rules.

The communities are represented by the Mt. Hood Cable
Regulatory Commission and include Portland, Gresham, Troutdale, Fairview and Wood Village.
The commission, which regulates TCI Cablevision of Oregon Inc. and TCI of Southern
Washington, asserts that TCI should discount its cable product service tier (CPST) charges
to reflect money it has received from networks in exchange for launching their
programming.

The commission's filing cites press coverage, noting
that TCI may have been paid as much as $13 per subscriber to launch the Fox News Channel,
and amounts ranging from $3 to $5 as launch fees from networks such as Animal Planet. If
the published reports are true, the commission wrote, the charges appear to be "far
beyond customary promotional costs" typically paid by programmers.

The commission notes that previous rulings by the FCC
require that rates "be further adjusted to reflect revenues received by the operator
from the programmer."

"We believe that the letter and spirit of the Cable
Act (CHECKING), and the FCC's rules interpreting and applying the Act, were meant to
prevent such possible avoidance mechanisms," said David Olson, cable director for the
commission, in a prepared statement. If the commission finds that TCI "wrongfully
failed to offset rate increases" by the amount of launch fees, the FCC should
exercise its evasion authority and order refunds, according to the commission.

A spokeswoman said the operator has not seen the complaint
but TCI executives are comfortable and confident they have interpreted past orders
correctly. TCI will also have to determine if the Mt. Hood complaint is timely -- FCC
rules dictate complaints about rate hikes be filed within 180 days of an increase.

The Mt. Hood complaint may add fuel to an already
smoldering issue. FCC staff sources indicate the organization is already examining
changing the rules regarding cable's external costs. Under scrutiny in a larger
investigation into cost increases are income sources including pay-for-carriage,
advertising and home shopping revenue. Action on this issue may be forthcoming midsummer.

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