The
FCC Got It Wrong on Cable TV Competition in New Jersey
By
Seema M. Singh, Esq.
Director, Division of the Ratepayer Advocate
To protect New Jersey
consumers, the Ratepayer Advocate and the Board of Public Utilities have
taken the unprecedented action of joining together for the first time
to ask the Federal Communications Commission to overturn a decision that
could lead to higher basic cable television rates for thousands of state
residents.
What prompted our two separate and independent agencies to team up together
for the first time to challenge the FCC?
New Jersey is among only a handful of states that empowers its regulatory
agency – in this case the BPU – to regulate basic cable service to ensure
that rates remain low and service quality high for subscribers. The BPU
does this by serving as the local franchising authority for all cable
franchises operating in New Jersey.
Last year, Cablevision Systems, which serves 940,000 customers in New
Jersey, asked an agency within the FCC – the Mass Media Bureau – to declare
that effective competition now exists for 200,000 of its customers in
49 communities in 10 northern counties because at least 15 percent of
the households in those towns subscribed to Direct Broadcast Satellite
(DBS) service.
Under FCC regulations, a cable company must prove effective competition
by demonstrating that it is served by at least two unaffiliated multi-channel
video programming distributors, each of which must offer comparable video
programming to at least 50 percent of the households in the franchise
area, and that the number of households subscribing to program services
offered by the multi-channel video programming distributors exceeds 15
percent of the households in the franchise area.
The Ratepayer Advocate opposed the request, arguing that Cablevision relied
on mismatched data by using household data figures from the 2000 Census
along with a 2002/2003 DBS customer data. We maintain that using mismatched
data is inadequate to show effective competition.
On April 15, 2004, the FCC’s Mass Media Bureau revoked the BPU’s authority
to regulate basic service tier rates for approximately 200,000 subscribers
of Cablevision Systems in 49 communities, primarily located in northern
New Jersey. The Basic Service Tier (BST) rates are the rates that Cablevision
charges its 940,000 total subscribers in New Jersey for just basic cable
TV service.
In its decision, the Mass Media Bureau “rubber stamped” Cablevision’s
contention that the cable company had satisfied the “competitive provider
test” by providing data which the company claimed proved that effective
competition now exists in the 49 towns.
To translate this into simple terms, Cablevision claimed that there was
now competition to its cable television service, primarily from satellite
dishes. This ruling means that Cablevision is no longer subject to the
BPU’s review of BST rates. Cablevision can now raise rates for their 200,000
subscribers in the impacted towns.
If this ruling is allowed to stand, it will have a serious impact on all
New Jersey cable television consumers.
On May 14, 2004, the Ratepayer Advocate and the BPU filed a joint application
with the FCC asking the federal agency’s five commissioners to overturn
the Mass Media Bureau’s decision. We maintain that the Mass Media Bureau
got it wrong. Our basic argument is that using mismatched data should
not satisfy the FCC’s “competitive provider test.”
The two-to-three year differential on the data significantly impacts the
case because some of the communities are close to the 15 percent threshold.
If new household data were used, certain communities would fall below
15 percent, thereby preventing the deregulation of basic service tier
rates.
The Ratepayer Advocate, using certificates of occupancy and tax records,
did just that. In the proceeding before the Mass Media Bureau, the staff
compiled updated household census data in eight of the impacted communities.
Our research showed that, based on the increased number of households,
the Direct Broadcast Satellite penetration fell below 15 percent in all
eight of the communities. They are: Aberdeen, Bound Brook, Sayreville,
Old Tappan, Kinnelon, Interlaken, Manasquan, and Washington.
We argued that the research emphatically supports our contention that
only by comparing properly matched data can the FCC satisfy the legal
requirements for finding effective competition.
The BPU and the Ratepayer Advocate have joined together with the full
support of Governor James E. McGreevey and legislative leaders like Sen.
President Richard J. Codey, as well as the New Jersey League of Municipalities
and AARP, because of the significance of this decision. This action goes
beyond the immediate impact on consumers in these 49 communities.
If decisions on effective competition are made using mismatched data,
then the ability of the BPU to regulate BST rates and the Ratepayer Advocate’s
ability to represent the interests of consumers will be improperly eliminated.
We are pro-consumer and pro-competition because we believe consumers benefit
with better service and better prices where a healthy competitive environment
exists. Until competition occurs, then BST rates must remain regulated
by the BPU in order to protect the consumer.
My office will work diligently to ensure that basic cable rates remain
regulated in non-competitive areas. Many residents throughout the state,
particularly senior citizens and low-income customers, need basic cable
as an essential service. We will do all we can to preserve and protect
consumers from the premature deregulation of BST rates. We are hopeful
that the full FCC agrees with our position and vacates and reverses the
Mass Media Bureau’s decision.
*
The Division of the
Ratepayer Advocate is an independent state agency that represents the
interests of utility consumers and serves as an active participant in
every case where New Jersey utilities seek changes in their rates or services.
The Ratepayer Advocate also gives consumers a voice in setting long-range
energy, water, and telecommunications policy that will affect the delivery
of utility services well into the future.
Additional information
on this and other matters can be found at the Division of Ratepayer Advocate’s
website at http://www.rpa.state.nj.us
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