FCC to Let Cable Companies Raise Rates Without Local Government Approval

Thursday, Jun 04, 2015

The Federal Communications Commission approved a change on Wednesday that lets cable companies raise rates on consumers without first seeking approval from local governments.

The vote is a victory for the cable industry, which has been on a losing streak at the FCC in recent months on a host of major issues put forward by Chairman Tom Wheeler. The change has also drawn fire from Democrats, who argue it could allow cable providers to charge consumers higher rates for local programming.

Historically, cable companies were required to seek approval from local municipalities before raising rates. The cable providers could avoid that requirement by proving to the FCC that they face effective competition locally. Such waiver requests were typically granted by the FCC. Mr. Wheeler’s plan will force local officials to prove there isn’t local competition for cable operators, replacing the current system where the burden is on cable operators to prove that there is.

An FCC official said the change reflects the agency’s belief that competition is more likely to result in lower prices than rate regulation.

Mr. Wheeler said a recent report on cable industry prices by the agency found that average price for basic cable service is lower in communities that have already received a waiver for having effective competition.

“This is not surprising since competitive choice is the most efficient market regulator,” he said.

A cable industry official said the change is a response to shifts in the pay-TV market, particularly the nationwide availability of satellite television as an alternative to cable.

“Consumers today enjoy the benefits of a rapidly evolving and increasingly competitive video marketplace that is offering a huge array of choices from cable, satellite, telco and Internet video providers,” National Cable and Telecommunications Association spokesman Brian Dietz said. “The growth in competition over the past two decades provides clear evidence that the effective competition threshold established by Congress has been met and surpassed in every DMA [designated market area] across the country.”

Last year Congress directed the FCC to streamline the waiver procedure for small cable companies as part of legislation concerning satellite providers. However, the proposal approved Wednesday would impact all cable providers, not only small cable companies, drawing criticism from Democrats and consumer advocates.

The decision is a rare instance of Mr. Wheeler relying on Republican votes over objections from his fellow Democratic commissioners. Democratic Commissioners Jessica Rosenworcel and Mignon Clyburn both dissented in part on the proposal, supporting the change for small cable operators but not large cable companies.

The broadcast industry has also opposed the change, arguing that without regulations, cable companies could move some broadcast channels off their basic tier of service, forcing consumers to pay extra for local TV programming.

“It’s disappointing and surprising that as cable customer-satisfaction ratings plunge to a record low, the FCC believes it is wise to gut the one protection that allows local municipalities a chance to protect consumers from abusive treatment and consistently skyrocketing rates,” National Association of Broadcasters spokesman Dennis Wharton said in a statement.

An FCC official said there is no evidence in previous findings that the shift will result in changes to the tier placement of local broadcast stations.