City Planning to Appeal Cable TV’s Rate Ruling

The San Diego City Council, deciding Tuesday to appeal a Superior Court ruling that says the city has no authority to limit cable TV rate increases, took steps aimed at attracting competing cable companies.

Meeting in closed session, the council also authorized the city attorney’s office to conduct an antitrust study of the city’s two largest cable TV companies, Cox Cable and Southwestern Cable, and to study the feasibility of city ownership of new subdivisions’ cable lines, according to Mayor Roger Hedgecock’s office.

The council’s action came in response to a ruling last week by Superior Court Judge Mack Lovett that upheld rate increases of 11.7% and 11% that Cox and Southwestern, respectively, imposed on June 1. The increases raised Cox’s monthly charge for basic cable service from $11.78 to $14.95, and Southwestern’s rate from $11.94 to $13.29 per month.

In the Superior Court case, Deputy City Atty. Alejandro Mutak had argued that, under the 1979 franchise agreement that Cox signed with the city, increases in basic monthly service could not exceed the San Diego inflation rate without the council’s approval. Cox officials, however, contended that they were exempted from city rate regulation by a 1983 state law specifying that deregulation of the cable television industry is a statewide matter, beyond the purview of local governments’ franchise agreements.

Siding with Cox Cable, Lovett ruled that the state law nullified the rate control provisions of the franchise agreement between the city and the cable company. Although the suit did not directly concern Southwestern, it confirmed the legality of the firm’s rate increase.

In addition to voting to appeal Lovett’s ruling, the council Tuesday ordered city officials to examine the franchise agreements with Cox and Southwestern to determine whether the companies have violated any technical or reporting requirements. The council also directed the city attorney’s office to investigate whether the two cable firms have committed any antitrust violations. Information gathered in both studies conceivably could be used to attempt to terminate the cable firms’ franchises.

Seeking to enhance competition in the cable TV market, the council also approved development of requests for proposals from new cable companies. The city might help new firms to get started in the cable business through city industrial development bonds, the mayor’s office said.

The city also will examine the possibility of retaining ownership of new subdivisions’ cable lines, which would be paid for by developers and leased back to cable companies.

Robert McRann, vice president and general manager of Cox Cable, said he was not surprised by the city’s appeal, adding that he believes that the investigations of Cox and Southwestern approved by the council “just reflect the city’s disappointment with having lost the court case.”

“We welcome that kind of scrutiny, because it makes a cable company stand on its toes,” McRann said. “If anything is technically not up to snuff . . . we would correct it. But we’ve had no indication from the city for the last three years that there’s anything wrong with our adherence to the contract.”