As Sunset Looms, FCC Keeps Busy

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Washington -- The Federal Communications Commission made a
decision last week -- just days before being barred from regulating cable rates any
further -- that could keep the agency involved in the adjudication of rate complains well
into the year 2000.

Instead of dismissing hundreds of pending rate complaints,
as some FCC officials had urged, the agency decided to issue decisions on all of them and
to accept new complaints until about Sept. 30, based on cable rates in effect on or before
March 31.

Because Congress mandated that the FCC had to stop
regulating cable rates after March 31, some FCC officials said continuing to process rate
complaints would be a waste of the agency's time and resources.

Their position was that cable operators could recover
future refund orders issued by the FCC in the next billing cycle with impunity.

But some FCC commissioners insisted that a literal reading
of the law required the agency to process all valid complaints.

"It's the correct thing to do," said Ken Johnson,
spokesman for House Telecommunications Subcommittee chairman Rep. Billy Tauzin (R-La.).
"Frankly, Billy has been very disappointed that the FCC has not been more aggressive
in pursuing consumer complains in the past."

The FCC was expected to put out a press release last Friday
explaining its decision, which apparently sidestepped an existing rule that said the
commission would not accept any new complaints after March 31.

As a result of the decision and under complaint-filing
procedures already on the books, the FCC will accept cable-rate complaints from local
governments until Sept. 30. The agency would have another 90 days -- or until Dec. 31 --
to issue decisions, which could include subscriber refunds.

Cable operators or local governments would then have 30
days to decide whether to appeal the FCC's decision, pushing the process into January 2000
and potentially beyond.

At the same time that the FCC decided the rate issue, it
also adopted new rules three years in the making in connection with changes in cable
policy that Congress included in the Telecommunications Act of 1996.

The order, which the FCC was very close to releasing
publicly, is expected to address ownership rules for small cable operators and pricing
rules for cable operators serving apartment buildings.

"We have come to an agreement, and it is not a
unanimous decision in all respects," an FCC source said.

The order is also expected to settle a long-standing feud
between cable operators and local governments regarding the use of franchising power to
force cable operators to make certain types of network upgrades.

In addition, the FCC is expected to specify what conditions
need to prevail for a cable operator to gain complete price deregulation from the agency,
especially when the competitor is a phone company.

Although cable operators are deregulated on the upper tier
after March 31, they will still be regulated on the basic tier until they can demonstrate
to the FCC that they face "effective competition."

However, some cable attorneys believe that some local
governments will abandon basic-tier regulation.

"Why should they regulate the basic tier if they know
that the operator can make up a reduction up top?" one cable attorney asked.

Local franchising authorities, meanwhile, are worried about
more than just whether cable rates will skyrocket after March 31.

Following a January meeting at the FCC, officials for the
National Association of Telecommunications Officers and Advisors came away with the
impression that the agency considers itself "out of the rate-regulation
business," NATOA president Jane Lawton said.

That begs the question, however, of what the FCC plans to
do with rate complaints filed by cities prior to March 31.

NATOA members, who continue to have authority over
basic-cable and equipment costs, also want FCC assurances that the agency will support
cities' future requests for additional information from operators, which may try to use
expiring rate regulation as an excuse to withhold data that LFAs may need.

As they approach the sunset, cable operators insisted last
week that subscribers won't be hit with surprise price hikes this year -- and certainly
not this week.

"I don't think that you'll see any dramatic changes or
rate increases," said Jim Hatcher, vice president and general counsel for Cox
Communications Inc. "It will be business as usual."

Like other operators polled for this story, Cox has already
set moderate rate increases for 1999, at about 5 percent on average. "The sunset
won't affect those," Hatcher added, for two reasons.

"The main reason is competition," Hatcher
explained, from direct-broadcast satellite in all Cox markets and from wireless cable or
telephone companies in some markets.

"We just don't have the luxury of raising rates,
whether there's a cap or not," he said.

Hatcher believes that the threat of reregulation will also
keep industry prices in check. "We've seen this before," he said of the
reregulation in 1992. "We know that there are Congressmen who are watching all of the
rates very closely."

Joe Estrella and Monica Hogan contributed to this story.

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