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Time Warner Cable Seeks Manhattan Deregulation

Washington -- Citing 160-channel competition from Verizon Communications FiOS TV, Time Warner Cable is seeking total price deregulation in Manhattan from the Federal Communications Commission.

In 1992, Congress slapped price controls on cable operators until they could prove they faced “effective competition,” as that term is defined in federal law, within a specific community. Some, but not all, rate controls were lifted in March 1999.

With Verizon invading Manhattan and other densely populated New York City boroughs with its all-fiber FiOS TV service, Time Warner Cable said in a Sept. 17 filing at the FCC that the competitive test had been met and that the last vestiges of price controls had to be removed.

“Verizon's cable service meets all components of the [FCC's] [phone-company] effective competition test in the community of Manhattan,” Time Warner Cable said in a nine-page written filing, supplemented by 267 pages of exhibits.

The FCC notified the public Friday of Time Warner Cable's request.

According to Pali Research, Time Warner Cable has 600,000 video subscribers in Manhattan, serving 81% of households.

When phone companies seek deregulation, their petitions are deemed granted if not rejected by the FCC within fifteen months.

No such deadline hangs over the FCC when reviewing similar cable petitions; some cable operators have waited up to four years for the FCC to act.

If the FCC approved Time Warner Cable's petition, local regulators in Manhattan could not put a price ceiling on the rates charged for basic cable.

Basic cable is the introductory package that all subscribers must purchase by law before buying any other programming service from a cable operator. The basic tier must include local TV stations. Often local governments demand inclusion of public, governmental and educational channels.

If totally deregulated, Time Warner Cable would no longer be required by the FCC to offer a uniform rate structure, which would allow the company to experiment with new pricing and packaging options.

Time Warner Cable would also be liberated from the FCC's so-called tier-buy-through rule, which bars a cable operator from requiring the purchase of multiple programming packages before a customer may buy a premium service like HBO or pay-per-view event like boxing.

Cable operators may demonstrate that they face effective competition by proving that their pay-TV rivals combined serve more than 15% of households in a community, officially known as a "franchise area."

Many cable operators have been deregulated under this test based on satellite-TV competition alone.

In 1996, Congress modified the effective competition test when the pay-TV competitor is a phone company using its own wires to provide video programming. Under this test, no subscriber penetration requirement applies.

The FCC, however, requires the cable operator to demonstrate that the phone company is physically able to provide a comparable video service; doesn't face any technical or other impediments to offering service; and has potential subscribers who are reasonably aware of the new service.

Verizon obtained a cable franchise in Manhattan on May 27, 2008.

"According to this franchise, Verizon has already completed construction in a large portion of Manhattan, specifically passing 98% of all single-family homes and 57% of all multiple dwelling units," Time Warner Cable said.