******************************************************** NOTICE ******************************************************** This document was converted from WordPerfect to ASCII Text format. Content from the original version of the document such as headers, footers, footnotes, endnotes, graphics, and page numbers will not show up in this text version. All text attributes such as bold, italic, underlining, etc. from the original document will not show up in this text version. Features of the original document layout such as columns, tables, line and letter spacing, pagination, and margins will not be preserved in the text version. If you need the complete document, download the WordPerfect version or Adobe Acrobat version, if available. ***************************************************************** February 19, 1997 DA 97-382 CSB-ILR 97-1 Thomas J. Gundlach, Esq. Released: February 19, 1997 525 Market Street, Suite 3710 San Francisco, California 94105-2745 Dear Mr. Gundlach: You wrote to the Cable Services Bureau on November 22, 1996 and February 4 and 13, 1997 on behalf of your clients, Bert Robertson and Leonardo Balatbat, seeking a statement of the Bureau's position on the enforcement of local franchise agreements with respect to senior citizen discounts requirements in such agreements. The Cable Services Bureau has responded to inquiries made by Mr. Robertson concerning senior citizen discounts on at least two occasions previously. In one letter, we stated that the Federal Communications Commission's rules do not require operators to offer senior citizen discounts and that no federal, state, or local authority may prohibit a cable operator from offering such discounts. In a second letter, we addressed Mr. Robertson's concern that the then- proposed rate resolution between Viacom Cable, Inc. and the Commission may affect Viacom's provision of senior citizen discounts. We stated that the resolution should not affect those discounts. The resolution did not address senior citizen discounts at all. Incidentally, the Viacom resolution was adopted by the Commission on February 5, 1997. Your letter of February 4, 1997 asks a number of questions dealing with enforcement of the terms of local franchise agreements, specifically regarding senior citizen discounts in such agreements. Your principal inquiry appears to be whether federal law or the Commission's rules endorse or prohibit such terms. Our view is that federal law and the Commission's rules do neither. Federal law, specifically the Cable Television Consumer Protection and Competition Act of 1992 ("1992 Cable Act"), authorizes cable operators to offer senior citizen discounts but does not require such discounts. Section 623(e)(1) provides that "no Federal, state, or franchising authority may prohibit a cable operator from offering reasonable discounts to senior citizens." Federal law and the Commission's rules are silent on enforcement of an agreement between a cable operator and a local authority under which the operator has agreed to provide discounts to senior citizens. We regard such an agreement -- its terms and enforcement -- to be subject to contract law and not federal communications law. While the Commission's rules are silent on the enforcement of an agreement to provide senior citizen discounts, the rules are not silent on the terms of such discounts. Pursuant to the 1992 Cable Act, the Commission designed a system of rate regulation that ensures subscribers pay reasonable rates for regulated services. The Commission adopted a benchmark approach to rate regulation under which the highest rate an operator can charge its subscribers is its maximum permitted rate ("MPR"). The MPR, subject to adjustment subsequently for cost and inflation increases, is calculated by the operator pursuant to rate forms adopted by the Commission. An operator may assess cable rates that are equal to or below its MPR, but no subscriber may be charged more than the MPR. If an operator offers senior citizen discounts to a selected group of subscribers, the cost of those discounts may not be transferred to other subscribers whose rates would then exceed the MPR. The 1992 Cable Act and the Commission's rules also require that any such discount be applied uniformally to each of the selected group of subscribers. As we have noted, however, neither the 1992 Cable Act nor the Commission's rules dictate whether a cable operator and the local authority may or may not agree to provide such discounts. In your letter of February 4, you mentioned a petition for declaratory ruling filed by the City of Antioch, California by letter of August 19, 1994. This petition remains pending with the Bureau and is scheduled to be reviewed and acted upon shortly. Sincerely, Meredith J. Jones Chief, Cable Services Bureau