February 22, 1994 QUESTIONS AND ANSWERS ON CERTIFICATION BY FRANCHISING AU THORITIES TO REGULATE BASIC CABLE RATES Q: What is "certification" and why should a franchising authority certify to regulate basic rates? A: Certification is the mechanism through which the FCC authorizes franchising authorities to regulate rates for basic cable service, equipment used to receive basic cable service, and installation and service charges related to basic service. "Basic service" is the lowest level of cable service you can buy, and is the program package that includes signals from local television stations (such as ABC, NBC and CBS affiliates and independent television stations) and public, educational and governmental access channels. Under the Cable Act of 1992, Congress gave franchising authorities, and not the FCC, primary responsibility for regulating rates for the basic service tier. If the franchising authority does not obtain certification and regulate rates, the rates for basic cable service will normally remain unregulated, and the franchising authority will be unable to order rate refunds or reductions. Q: What if the franchising authority and the cable system have a franchising agreement forbidding rate regulation? A: Franchising agreements that forbid rate regulation are void unless executed before July 1, 1990. Agreements between franchising authorities and cable operators in which the franchising authorities promise not to regulate, and "off the books" agreements inconsistent with federal or local obligations under the 1992 Cable Act, are forbidden. Q: Is there a deadline to request certification? A: No. Certification can be done at any time. However, the FCC encourages franchising authorities to seek certification as soon as possible for the following reasons: A franchising authority may order refunds for rates going back one year from the date it issues a rate decision. The sooner a franchising authority commences regulation, the more likely consumers will get the full benefit of the 1992 Cable Act. With regulation, increases in basic service rates are subject to local regulator approval and capped by inflation and changes in external costs. Without local certification, basic service rates will normally remain unregulated. Some charges can be reduced now. Under the provisions of the 1992 Cable Act, the charge for "leasing" specific equipment, such as converters and remote controls, must be based on the operator's actual costs of providing the equipment. In many cases this new requirement has already reduced these charges. Q: Is rate regulation expensive? A: The FCC is committed to keeping the cost for franchising authorities to regulate at a minimum. Indeed, the 1992 Cable Act mandates minimal administrative burdens of regulation for franchising authorities. The FCC constructed its regulations and certification process with this mandate in mind. Basic cable service regulation need not overwhelm franchising authorities' resources. In addition, the FCC allows and encourages joint certification as one method to reduce the costs associated with regulation. With joint certification, franchising authorities can pool resources and share the costs of data collection, hold joint hearings and share the administrative burdens associated with regulation. Joint certification is available regardless of whether rates differ in the franchise areas, or even whether different cable operators serve the franchise areas. Most importantly, joint certification does not prevent franchising authorities from issuing independent rate decisions. Franchising authorities may seek assistance in getting certified and in implementing their regulatory programs from the FCC, as well as various state and national organizations of cities and counties. In addition, the FCC will hold seminars in Boston, Chicago, Kansas City and San Francisco in March and April 1994 that will provide information on the rate regulation process. Materials from the seminars will be available for purchase by those unable to attend. For more information about these seminars, contact Cynthia Ward Jeffries in the Cable Services Bureau at (202) 416-0869. Q: How does a franchising authority certify? A: The FCC has designed a quick and simple certification process. To become certified, a franchising authority must complete an FCC Form 328. This form is a one-page document that asks the franchising authority: (1) to certify that it has or will adopt rate regulations consistent with the FCC's rules; (2) to certify that it has the legal authority to adopt, and sufficient personnel to administer, such rate regulations; (3) to certify that it has or will adopt procedural rules allowing for reasonable opportunity for consideration of views of interested parties; and (4) to certify that it reasonably believes that the cable system is not subject to effective competition. The franchising authority sends the form to the Commission by registered mail, and serves a copy on the cable operator. Certification becomes effective within 30 days of filing, unless the Commission notifies the franchising authority that certification cannot be granted. If certification is denied, the Commission will send a letter to the franchising authority specifying what it must do to obtain approval. Once certification is effective, the franchising authority has 120 days to adopt rate regulations consistent with Commission rules and adopt necessary procedural rules if not already in place. A rule stating that the franchising authority will follow the rate regulations promulgated by the Commission will suffice. Once the rules are in place, the franchising authority must notify the cable system of its intention to commence regulation. Franchising authorities who jointly certify must file an FCC Form 328 in the name of the association of joint authorities, and attach additional sheets for each franchise area listing and certifying to all information requested on the FCC Form 328. Q: Where do I obtain the form? A: Call (202) 416-0919 or write to: Federal Communications Commission, Cable Form Request 328, P.O. Box 18238, Washington, D.C. 20036. Q: Can I call the FCC for assistance if I have questions? A: Yes. The franchising authority assistance telephone number is (202) 416-0940.