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Mixed cable rulings show gains for cities.

A federal district court in Wyoming has ruled that cities can protect their consumers from excessive rate increases for basic service.

This is the first case to examine the scope of local authority to regulate basic rates under the Cable Act. It is particularly significant in light of recent FCC changes in the effective competition standard, which will permit more cities to regulate rates.

The court stated that Gillete, Wyo, has the right to reduce basic service cable rates from $17.05 to $11.80 and can order the cable operator, TCI Cablevision of Wyoming, to pay subscribers a refund for increasing rates without the prior approval of the city. As a result, the TCI may be required to refund more than $300,000 to Gillette subscribers.

The decision is not a substitute for proposals to revise the rate regulation provisions of the Cable Act, because even under the FCC's new rules, most cities will not be able to protect subscribers against excessive rates increases. Also, the decision does not prevent operators from retiering services to subscribers' detriment.

Before October 25, 1991, FCC regulations allowed cities to regulate rates for "basic rate service" if fewer than three television signals were available in the community. Fewer than three signals were available in Gillette, and in 1989, Gillette notified its cable operator that the city intended to regulate cable rates.

When TCI announced changes in the tiering and large price increases in February, 1990, the city ordered the company to rescind the proposed increase and subsequently adopted an ordinance reducing the basic cable rates.

TCI sued the city in federal court, claiming that under the Cable Act, cities can only approve or disapprove basic service rate increases, and cannot set rates.

Disagreeing with TCI, the Court ruled that cities can set rates and can roll rates back to lower levels. It ruled that a city can link rate reductions to customer satisfaction. Further, it ruled that a decrease in services was an increase in rates: as a result, the May 1990 increase had been subject to the city's review. And, because TCI had increased rates without the city's approval, the Court concluded that the increase was illegal, and that refunds would have to be made to subscribers.

The Court refused to deregulate expanded basic rates, and scheduled a trial to determine whether expanded basic rates are basic service rates, and therefore subject to regulation.

The Court ruled that TCI did have authority to re-tier its services, because the City's franchise did not require it to provide a particular number or any particular types of programming as part of basic service. The Court also ruled that additional outlet charges are not "basic service" charges under the Cable Act, and are not subject to regulation.

Despite these two adverse rulings, the decision may be of tremendous significance to many cities now facing scheduled January 1991 rate increases.

Under the new FCC regulations, a city may regulate rates if fewer than six unduplicated signals are available in the community, and if there are no independent companies--other cable companies, for example--which have obtained a substantial portion of the market in head-to-head competition

Many more cities will be able to regulate rates and the Gillette decision will be particularly important to these cities if they take the proper steps now to assert control over rates.

Morganton, N.C.

The U.S. Court of Appeals for the Fourth Circuit has rejected claims by a cable operator that the first amendment prevents cities from denying renewal.

The decision was issued in Madison Cablevision Inc. v. City of Morganton, a case involving a dispute between Monganton, N.C. and a subsidiary of the nation's largest cable operator, TCI.

In 1990, a federal district court dismissed all of TCI's claims on a motion for summary judgement, and TCI appealed the decision to the Fourth Circuit.

The decision is another indication that the courts are rejecting cable operators' claims that they have a first amendment right to occupy public property.

Copies of the Gillette and Morganton decisions may be obtained by calling Joseph Van Eaton at (202)785-0600.
COPYRIGHT 1992 National League of Cities
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1992 Gale, Cengage Learning. All rights reserved.

Article Details
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Author:Van Eaton, Joseph
Publication:Nation's Cities Weekly
Date:Jan 20, 1992
Words:686
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