The 1992 Cable Amendments
(from the Maine Townsman, December 1992)
By Barbara L. Krause, Esq.
On October 15, 1992, the United States Congress enacted the Cable Television Consumer Protection Act of 1992, amending the Cable Act of 1984. Because the legislation requires the Federal Communications Commission (FCC) to issue implementing regulations in several areas, the full impact of the legislation will not be known for some time. The legislation has the potential, however, to bring significant benefits to consumers and municipalities. This article provides an overview of the major provisions of the 1992 amendments.
The 1992 amendments maintain the familiar concept of permitting franchising authorities (in most cases, municipalities) to regulate rates if the cable operator is not subject to effective competition. (If effective competition exists, the market will presumably act to control rates, and no regulation is allowed.) The new law, however, defines "effective competition" differently than did prior legislation. Under the 1992 amendments, effective competition exists if one of the following conditions is satisfied:
Fewer than 30% of the households in the franchise area subscribe to cable service;
The franchise area is served by two or more unaffiliated, multichannel video programming distributors, each of which offers service to 50% of the households in the franchising area, and the number of subscribers to the second largest multichannel programming distributor exceeds 15% of all households in the franchise area; or
A municipally-owned multichannel video programming distributor offers video programming to at least 50% of the households in the franchise area.
The new legislation, therefore, moves away from concepts like "unduplicated broadcast television stations" and focuses instead on more easily quantifiable concepts like percentage of households serviced by alternative cable programming.
Even under the 1992 legislation, rate regulation is limited to basic tier service and equipment necessary for the reception of basic tier service. "Basic service," as defined by the new amendments, must include all television broadcast stations provided to any subscriber (except those which are retransmitted by satellite); any public, education, and governmental (PEG) programming required by the franchise agreement; and any stations otherwise required by law to be carried.
If a franchising authority determines that effective competition does not exist, the authority may not simply begin to regulate rates. Rather, the franchising authority must file for certification with the FCC. The certification process examines whether the regulations adopted by the franchising authority are consistent with FCC guidelines for basic rates; whether the franchising authority has the legal right to adopt, and the personnel to administer, rate regulations; and whether the franchising authority's regulatory process provides sufficient opportunity for comment by interested parties.
The FCC must act on requests for certification within 90 days. If certification is not approved, or if it is later revoked, the FCC will regulate rates until a new certification request is filed and approved. It is important to recognize that neither the franchising authority nor the FCC may regulate rates unless a request for certification is submitted to the FCC.
The 1992 amendments direct the FCC to issue regulations for setting reasonable basic service rates. The regulations must be issued by April 3, 1993.
No Exclusive Franchises
The 1992 amendments add a new provision that prohibits the award of exclusive franchises. The provision also states that franchising authorities may not unreasonably refuse to award an additional franchise.
Despite this broad language, the amendments make clear that award of a franchise is not automatic. Franchising authorities retain the right to insist that cable operators demonstrate adequate financial, technical, and legal capacity to operate, and that they provide PEG access. The amendments also confirm that municipal authorities are permitted to operate cable systems.
Consumer Protection and Customer Service
The 1992 amendments require the FCC, by April 3,1993, to establish standards for customer service. The legislation also specifically states that the cable operator and franchising authority may agree to more stringent service standards than those promulgated by the FCC, and that the franchising authority may enforce customer service standards against the cable operator.
Protection from Indecent Programming
The new legislation requires the FCC, by April 3, 1993, to issue regulations that will allow a cable operator to prohibit the use of any PEG channel capacity for any programming that contains obscene material, sexually explicit conduct, or matter soliciting or promoting unlawful conduct. By January 31, 1993, the FCC must promulgate regulations designed to limit the access of children to indecent programming on leased access channels, by requiring at a minimum that: (1) all indecent programming be placed on one channel; (2) operators block the channel unless a subscriber requests access in writing; and (3) programmers inform cable operators if the program would be indecent as defined by FCC regulations.
Transfers of Cable Franchises
The 1992 amendments contain an important new provision that generally prohibits a transfer of ownership for three years after initial construction or acquisition of a cable system. There are limited exceptions to this general prohibition, but the provision should prove to be a benefit for municipalities. On the other hand, the amendments also set a new deadline for decisions on transfer requests; the franchising authority must now make a final decision within 120 days after receipt of a request (properly filed with all required supporting documentation), or else the request for transfer will be deemed granted. The parties may agree to an extension of time.
Immunity for Municipalities
The 1992 amendments provide a significant new benefit to municipalities: a new provision prohibits damages awards against municipalities in suits based on their regulation of cable service, or on their decision to approve, disapprove, renew, transfer, or amend a cable franchise. There are two exceptions to this immunity from damages: (1) claims involving alleged discrimination on the basis of race, color, sex, age, religion, national origin, or handicap, and (2) claims based on municipal action taken after such action has already been finally determined by a court to be unlawful, where all rights of appeal have been exhausted. With the exception of those two categories of claims, claimants will be limited to injunctive relief and declaratory relief against a municipality.
The myriad of regulations yet to be issued by the FCC will determine in large part how successful the Cable Television Consumer Protection and Competition Act of 1992 will be in meeting its objectives. If the FCC carries out what appeared to be a clear legislative mandate, the regulations should provide significant benefits to consumers and municipalities alike.
It is important to remember that this article is intended only to be an overview. Because developments in this area will continue as the FCC proceeds with its rulemaking, municipalities should consult with the Maine Municipal Association or with legal counsel if they have particular questions regarding their cable franchise agreements.
Barbara Krause is an attorney at Drummond, Woodsum, Plimpton & MacMahon in Portland. A significant amount of her time is devoted to representation of municipal clients, and she recently assisted the City of Biddeford in its review of a cable franchise transfer.