CABLE TELEVISION FACT SHEET
SMALL CABLE OPERATORS AND
THE 1996 TELECOMMUNICATIONS ACT
Pursuant to the Telecommunications Act of 1996 ("1996 Act"), many small cable operators are now exempt from rate regulation with respect to some or all of their programming services. These provisions became effective February 8, 1996, the day on which the statute was signed into law.
This fact sheet provides general answers to common questions regarding the new statutory provisions governing smaller systems. Although these provisions are already effective, in the near future the Federal Communications Commission will evaluate to what extent it needs to establish rules providing more specific guidance as to their implementation. As decisions are made by the Commission, additional questions & answers will be provided.
Q: What systems are affected by the new statutory provisions?
A: To qualify for deregulation under the 1996 Act, the cable operator must serve fewer than 1% of all cable subscribers in the United States and must not be affiliated with any entity or entities whose gross annual revenues in the aggregate exceed $250 million. If a cable operator meets these criteria, it qualifies for rate deregulation in any franchise area in which it serves no more than 50,000 subscribers.
Q: If a cable operator qualifies under these standards, is the operator deregulated as to all of its programming services?
A: To explain the scope of deregulation under the 1996 Act, it is necessary to summarize the regulations that were in place prior to its enactment.
As mandated by a 1992 cable statute, the Federal Communications Commission has promulgated rules governing the rates charged by a regulated cable operator for its basic service tier and its cable programming services tiers, also known as enhanced basic services. All regulated cable operators must offer a basic service tier. The basic service tier includes all of the local broadcast television stations carried by the cable operator and all of the public, educational, and government access channels that the operator is required to carry under the terms of its local franchise agreement. These are minimum requirements; the operator may add additional channels to the basic service tier. At its option, an operator also may offer one or more expanded tiers of programming known as the cable programming services tiers. In general, a cable programming services tier is any package of programming other than the basic service tier. Only the basic service tier and cable programming services tiers are subject to rate regulation. Thus, rate regulation does not apply to programming offered on a per-channel basis, such as premium channels, or to programming offered on a per-event basis, such as pay-per-view movies and sporting events.
For a cable operator that qualifies under the subscriber and revenue criteria of the 1996 Act, the scope of deregulation depends upon how many tiers of cable service the operator offers. If the operator offers both a basic service tier and a cable programming services tier, the cable programming services tier is deregulated. If the operator has only a single tier (which by definition is a basic service tier), which was the only tier offered and subject to rate regulation as of December 31, 1994, then that tier is deregulated.
Q: How do these new statutory provisions affect existing rules that the Commission previously adopted with respect to smaller cable operators?
A: Prior to enactment of the 1996 Act, no cable system was subject to rate deregulation based solely upon its size. However, the Commission had established separate regulatory methodologies for certain smaller cable operators. Among other things, the Commission created the small system cost-of-service approach to rate regulation. This approach relaxes some of the substantive and procedural restrictions that apply to larger cable operators. Under this approach, an eligible cable operator establishes rates by submitting a streamlined one-page form (FCC Form 1230) to the appropriate regulatory authority. To qualify for this method of rate regulation, the cable system must serve no more than 15,000 subscribers and must not be owned by an operator that serves over 400,000 subscribers across all of its systems. A system that does not qualify under these criteria, but that bears relevant similarities to qualifying systems, may file a petition for special relief seeking authority to establish rates under the small system cost-of-service approach.
The 1996 Act does not mandate any modifications to the small system cost-of-service approach or to any of the other pre-existing rules applicable to smaller cable operators, except to the extent such operators are now deregulated in the manner described above.
- FCC