The state’s legal authority to regulate the rates of cable operators faces a formidable new challenge from cable companies and the state’s Office of Consumer Counsel.
Low-cost basic, or lifeline, cable offerings long protected by regulation are particularly vulnerable.
In recent filings with the state Department of Public Utility Control, Comcast and Cox Communications argue that AT&T’s new U-verse video service, which is equivalent to cable, operates with virtually no regulation thanks to a 2007 state law.
That same law, Cox and Comcast argue, frees them from regulation as well if they can point to “effective competition.” And AT&T is now that competition.
Mary J. Healey, the consumer counsel, reluctantly agrees.
“The OCC continues to be alarmed that the have-nots are being run off the telecommunications highway in greater numbers as a result of the act,” Healey wrote in a May 21 filing with the DPUC.
A vocal opponent of the 2007 law that established very light regulation of AT&T’s U-verse, Healey said the DPUC now has no choice but to abandon rate regulation for cable operators as well.
The problem with the law, Healey argues in her filing, is that it created an uneven playing field for providers of video services. “By legislative fiat” it granted AT&T a competitive advantage in not requiring it to offer the same basic services Cox and Comcast are required to offer.
Level Playing Field
The only practical way to level that playing field, Healey argues, is to waive those requirements for Cox and Comcast, too.
The companies make similar arguments. AT&T, in a letter to the DPUC, declined to comment in detail on how its cable competitors should be treated.
The DPUC launched an inquiry in March into the legality of its rate regulations of cable, and it accepted written comments on the issue through last week. It hasn’t set a timetable for its decision, spokeswoman Beryl Lyons said.
The agency requires cable companies to offer basic cable service and sets limits on both the monthly fees and setup and installation charges. Basic cable typically includes about 20 channels, including the broadcast network stations and public access channels, but not stations like ESPN, the Weather Channel or HBO.
About 3 or 4 percent of cable subscribers opt for basic.
Several of those who responded to DPUC’s request for comment were people who expressed concern that their cable rates would rise if the regulation changed.
“Many of our residents have basic TV and that is all they can afford,” wrote Richard Ostop, chairman of the Hartford Area Cable Television Advisory Council. “As you are aware with the cost of gas, fuel and just plain food going up daily, an increase of cable service at this time would be very hurtful.”
Keeping Basic
But Kristen Roberts, Comcast’s regional senior director of community and public relations for Connecticut, said Comcast had no intention of eliminating its basic service tier, now available for about $15 per month.
And William Durrand, executive vice president and chief counsel of New England Cable and Telecommunications Association, said deregulation would not mean the end of basic cable.
“It’s in the best interest of the cable companies to offer the basic tier because it’s a competitive advantage,” Durrand said. “It’s something they can offer at a low cost to the consumer that AT&T does not. We’ve always had a low price tier before it was mandated.”
Even if the state doesn’t immediately buy the argument that the cable companies must be treated the same as AT&T, deregulation is inevitable, according to John Wolfe, vice president of government and public affairs for Cox Communications New England.
“The Federal Communications Commission will ultimately find that we are facing effective competition and it won’t matter what position the state takes,” Wolfe said. “If AT&T is unregulated, then cable should be afforded the same to have a level playing field.”
But even then, only regulation of basic tier cable would be eliminated.
“There are still maximum permitted rates defined by the FCC,” Wolfe said.
William Vallee, principal attorney for the OCC, said the consumer counsel had lobbied for 2007 legislation to cut cable costs rather than to give AT&T a special advantage.
“We know that cable rates are too high and something should be done, but the legislation didn’t accomplish that,” Vallee said.
