Federal Communications Commission officials have ruled that Century Southwest Cable, which serves Los Angeles and Beverly Hills, is evading federal rate regulations and, as a result, may be overcharging customers.
The Cable Services Bureau, a branch of the FCC, alleges that Century, by taking some channels from its regulated cable packages and selling them individually, or "a la carte," has been dodging rate rules for nearly 18 months.
Century's a la carte tier, called Century Select, is a lineup of 12 channels that previously were part of Century's satellite package, which includes CNN and ESPN. Satellite packages and basic packages, which include ABC, NBC and CBS, are regulated by the FCC and city cable franchising authorities.
Because until recently FCC rate regulations have not applied to channels sold individually, Century has been able to charge as much as it wants for Century Select, forcing many of its customers to pay extra for channels that they had received as part of regulated packages.
"Turning a rate-regulated tier into an a la carte package is an evasion of rate regulation and that is exactly what Century did in Los Angeles," the FCC said. "Likewise, taking as many as 12 channels from regulated tiers, as it did in Beverly Hills, is such an evasion."
Century has appealed the decision to the full FCC for review. The company contends that the FCC has not been clear about its definition of permissible a la carte channels.
"We continue to believe that the Century Select services we introduced in 1993 met both the spirit and letter of the regulations as a la carte services," Century said in a prepared statement.
The FCC's Cable Services Bureau issued its ruling against Century last December after investigating complaints from the city of Los Angeles and Beverly Hills, which criticized Century's new a la carte channels and its higher rates for regulated packages.
If the FCC ultimately finds that Century has been evading rate regulations, the cable provider may have to make the a la carte channels part of a regulated tier. Century also might have to offset overcharges by giving customers rebates, retroactive to September, 1993.
Since passage of the 1992 Cable Act, which set the ground rules for cable rates, at least 30 other cable operators nationwide have begun offering a la carte channels. FCC officials have ruled that many of those companies are using the channels to evade regulation.
Overwhelmed by complaints from local franchising authorities about a la carte packages, the FCC last November ruled it would regulate all such packages created in the future. Existing a la carte packages, such as Century's, are subject to review.
At least seven other cable operators nationwide have been ordered by the FCC to give refunds to customers. In the largest of these rebates, Dimension Cable Services of Orange County was ordered last November to pay back more than $1.2 million to 107,000 subscribers.
Century's introduction of a la carte channels ushered in higher cable rates for subscribers in Beverly Hills and Los Angeles. Not only do customers have to pay extra for channels that they once received as part of Century's regulated cable packages, the cost of a basic package also has increased.
In its appeal, Century countered that customers are paying more for some cable packages but also are receiving more channels. In Beverly Hills, for example, customers can tune into 16 more channels with the basic package and, in Los Angeles, customers receive 10 more channels, according to FCC documents.
Whether Century owes refunds depends on the rates that officials from the FCC, Beverly Hills and Los Angeles deem appropriate under federal law.
Beverly Hills City Council members last year ordered Century to roll back rates on its basic package to $22.40, but Century appealed the reduction to the FCC. Should the commission decide that Century has been evading rate regulation and overcharging customers, Beverly Hills will require the cable operator to charge $22.40 for its basic service, said city spokesman Fred Cunningham.
Officials in Los Angeles, a step behind their counterparts in Beverly Hills, still are calculating what they consider the appropriate rate for basic cable service in the city.
"But a rate order is coming, it's definitely coming," said David Hankin, assistant general manager of the Los Angeles Department of Telecommunications.