Verizon Is Cause for Deregulation

The Federal Communications Commission last Wednesday released a batch of orders that removed local price controls on basic-cable service — including two cases that involved Cablevision Systems in communities where Verizon Communications is deploying its FiOS TV all-fiber 180-channel video system.

In the vast majority of cases, the FCC has granted cable operators’ “petitions for effective competition” based on satellite competition. If EchoStar Communications’ Dish Network and DirecTV combined serve 15% of the households in a franchise area, the local cable incumbent is price deregulated.

But Cablevision sought relief in two New York communities — Nyack and Hempstead — based on a different competition test that applies when the terrestrial video provider is a local phone company, also called a local-exchange carrier (LEC).

Under the so-called LEC test, all the cable incumbent has to do is demonstrate that the phone company has the capability and intent to compete for video subscribers.

When the FCC grants a petition for effective competition, the local government loses authority to cap the price of the basic tier, which all cable subscribers must buy. In addition, cable operators do not have to offer a uniform rate structure and may require subscribers to purchase any number of programming tiers before they may access premium and pay-per-view offerings.

The FCC, based on satellite competition, also deregulated:

  • Comcast systems in 42 Southern California franchise areas;
  • Bright House Networks systems in Farmington Hills, Livonia, and Novi, Mich.; and
  • Charter Communications systems in seven California communities, including Long Beach, Hidden Hills and Malibu.