City Loses Struggle to Stop Cable TV Rate Hike

A Superior Court judge ruled Wednesday that the City of San Diego has no authority to limit rate increases for basic cable TV service, thereby leaving in effect increases imposed June 1 by the city’s two main cable systems.

At the request of Cox Cable, Judge Mack Lovett dismissed a claim by the city that the company’s recent rate increase violated its franchise agreement. Lovett ruled that the city’s authority in the matter--based on provisions for rate regulation in the cable systems’ franchise agreements--had been preempted by a state law permitting deregulation of the cable industry.

Deputy City Atty. Alejandro Mutak had argued that, under the franchise agreement Cox Cable signed with the city in 1979, increases in basic monthly service charges could not exceed the San Diego inflation rate unless approved by the City Council.

Cox Cable “knowingly entered into a contract that said that,” Mutak said. “They can’t just come in later and change the rules of the game.”

Nonetheless, in April, Cox Cable informed its 255,000 San Diego customers that the monthly rate for basic cable service would increase from $11.78 to $14.95, an 11.7% rise. Southwestern Cable followed suit, announcing an 11% rise in its basic service rate, from $11.94 to $13.29 a month. At the behest of the City Council, the city attorney’s office sent letters to both companies, warning them that the increases were illegal.

Cable officials said they were exempted from city rate regulations by Section 53066.1 of the California Government Code, approved in 1983 by the state Legislature, which holds that deregulation of the cable television industry is a statewide matter, beyond the purview of local governments’ franchise agreements.

“The city is a political subdivision of the state and thus has to follow state law,” said Robert McRann, vice president and general manager of Cox Cable.

In his ruling, Lovett held that the amendment nullified the rate control provisions of the franchise agreement between the city and Cox Cable. Although Wednesday’s action did not directly involve Southwestern Cable, company officials said they were “pleased with the ruling” since it confirmed the legality of their firm’s rate increase.

McRann said that the increase in charges reflected increased costs for programming. He said Cox did not plan to raise rates any higher in the wake of the court ruling.

McRann also said that the company enacted “a rate realignment, not a rate increase” since the price of additional “pay” channels has been cut by $1 a month. However, he acknowledged that the average consumer will pay an additional $2.64 a month under the new, “realigned” rates.

Mutak said an appeal of Wednesday’s decision is likely because of the city’s conviction that the cable companies are bound by their franchise agreements. He added that the city attorney’s office must defend the right of local government to regulate businesses that use public rights-of-way, such as the streets under which television cables are laid.

“We feel that it is an important right and that we owe it to the citizens of San Diego to pursue this issue on their behalf,” Mutak said, adding that such a move could cost the city money.

“The effect to the city in practical terms is that the more money Cox Cable collects, the more the city’s (franchise) fee will be. So in effect, the city is fighting to take in less money. But we feel there is a higher principle involved.”

However, even if the city overturns Wednesday’s ruling, the victory may be short-lived. In April, the Federal Communications Commission ruled that all local rate regulation of cable systems will end in October, 1986.