Effective Competition Presumption Under Review

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The FCC has commenced a rulemaking proceeding to revise the effective competition standard that governs the regulation of basic cable rates.  Under the Communications Act, local franchising authorities  may regulate the rates charged for basic cable service in communities that are not subject to effective competition.  In implementing cable rate regulation, the FCC has presumed that effective competition does not exist in any community until the local cable operator demonstrates that effective competition is present in a particular community and obtains a ruling from the FCC to that effect.  Until such a ruling is procured, a local franchising authority which has been certified to regulate basic cable rates may continue to do so.  Based upon changes in market conditions that have occurred since cable rate regulation was enacted in 1992, and the fact that the FCC has granted over 99% of cable operator petitions seeking an effective competition finding in their communities, the Notice of Proposed Rulemaking (NPRM) released by the FCC  proposes to adopt a presumption that effective competition exists in all communities unless demonstrated otherwise.  The change is also attributable in part to the FCC’s obligation under the STELA Reauthorization Act of 2014, enacted on December 4, 2014, to provide an expedited process for small cable operators to obtain relief from local cable regulation.    The NPRM recognizes that changing the effective competition presumption might adversely impact local jurisdictions that have chosen to regulate cable rates in jurisdictions where the local cable operator has never sought an FCC effective competition ruling.  The NPRM requests comment on what procedures should be followed in these communities to give local regulators the opportunity to demonstrate the absence of effective competition in their communities without unduly disrupting the existing regulatory scheme.

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