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Policy

Boston Seeks Basic Changes

5/16/2011 12:01 AM Eastern

Washington — The city of Boston
has served notice that it wants Comcast
to roll back cable prices, accusing the
company of overcharging local residents,
relative to surrounding communities.

Mayor Thomas Menino filed a petition
for basic-cable rate re-regulation with the
Federal Communications Commission,
citing three Comcast rate increases in the
city (most recently in February) and what
he called a lack of local cable competition.

Boston’s argument is that the FCC’s
2002 determination that effective competition
exists in the city (thereby removing
any local regulation of basic-level cable)
used a looser penetration standard that
applied to local-exchange carriers, or telephone
companies.

RCN, which has overbuilt Comcast in Boston, under its current
ownership no longer qualifies as a local-exchange carrier,
the city contends. Therefore, the determination should
be overturned.

‘LEC’ EXCEPTION

Should the argument succeed, other communities could be
inspired to seek similar rate rollbacks.

“You could argue that any commission order based
on the fact [that RCN was a LEC] disappeared when RCN
ceased to be LEC,” veteran cable attorney Dan Brenner of
Hogan Lovells said.

Private-equity firm ABRY Partners bought RCN in 2010.

Menino said the latest Comcast rate increase on basic service
“marks the third straight year of hefty increases, totaling
more than 60%, on a service that is supposed to be affordable.”

He added that Boston subscribers were being charged more
than customers in surrounding cities and towns.

The city said Comcast’s most recent rate change increased
by 18%, to $15.80 from $13.50, the charge for basic, “antennalevel”
service.

Comcast responded that its price for entry-level service is
half of what satellite-TV providers charge, and that with “more
than 35 channels of news, information, diversity and publicaccess
programming … we believe we continue to offer the
most affordable options and best values for consumers.”

Comcast said it would comment after its lawyers evaluated
the petition at the FCC.

Sen. John Kerry (D-Mass.) asked the FCC to look into the
Boston situation and other cable rates in the wake of Menino’s
petition. He said he shared the mayor’s concerns
“about the consequences of price increases on families
that can least afford it.”

Kerry wants an analysis of the price effects the effective-
competition determination has had on basic-cable
rates, using a sampling of markets where this determination
has been made over the last 10 years.

The FCC deregulated Boston after a request came from Cablevision
Systems, which later sold its cable systems there to
AT&T Broadband (now part of Comcast).

Cable operators are presumed to have a monopoly in a
market unless they can demonstrate that they are subject
to effective competition. The FCC looks at whether 50% of
the market is served by at least two providers with comparable
programming, and at last 15% opt for one of those alternatives.
When the competition comes from a local phone
company, though — RCN’s classifi cation at the time — the
standard does not require a specific market penetration.

‘THIS RULE DOESN’T APPLY’

Mike Lynch, director of Cable, Video and Web Services for the
city, said Comcast could come back and cite cable competition
in meeting the 15% test, but said the city wanted to seek
recertification again due to the change in RCN’s status.

“We have been operating for eight or nine years under
this rule, and this rule doesn’t apply,” Lynch said. “So we’re
asking for a change. Could they come back and do that?
Yes. Will they? I don’t know. Will they be successful? I don’t
know that either.”

It took four years for the FCC to act on the first determination
of effective competition in Boston.

Lynch said “we filed [this] as an emergency petition, which
should mean an expedited response.”

The presence of two satellite competitors in the marketplace,
along with RCN, would likely mean Boston meets the
competitive standard, a Comcast source said, speaking on
background.

September