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complaints filed after this sunset date (but no later than 180 days after the
last CPST rate increase imposed prior to March 31, 1999), and will strictly
limit its review (and possible refund orders) to the time period predating the
sunset date.
     Under the FCC's rate regulations, most cable systems were required to
reduce their BST and CPST rates in 1993 and 1994, and have since had their rate
increases governed by a complicated price cap scheme that allows for the
recovery of inflation and certain increased costs, as well as providing some
incentive for expanding channel carriage. The FCC has modified its rate
adjustment regulations to allow for annual rate increases and to minimize
previous problems associated with regulatory lag. Operators also have the
opportunity to bypass this "benchmark" regulatory scheme in favor of traditional
"cost-of-service" regulation in cases where the latter methodology appears
favorable. Premium cable services offered on a per-channel or per-program basis
remain unregulated, as do affirmatively marketed packages consisting entirely of
new programming product. However, federal law requires that the BST be offered
to all cable subscribers and limits the ability of operators to require purchase
of any CPST if a customer seeks to purchase premium services offered on a
per-channel or per-program basis, subject to a technology exception which
sunsets in 2002.
     At December 31, 1998, LFAs covering approximately 42% of the systems'
subscribers were certified to regulate basic tier rates. The 1992 Cable Act
permits communities to certify and regulate rates at any time, so that it is
possible that additional localities served by the systems may choose to certify
and regulate rates in the future.
     The FCC and Congress have provided various forms of rate relief for smaller
cable systems owned by smaller operators. If requisite eligibility criteria are
satisfied, a cable operator may be allowed to rely on a vastly simplified
cost-of-service rate justification and/or may be allowed to avoid regulation of
CPST rates entirely. Under FCC regulations, cable systems serving 15,000 or
fewer subscribers, which are owned by or affiliated with a cable company serving
in the aggregate no more than 400,0000 subscribers, can submit a simplified
cost-of-service filing under which the regulated rate (including equipment
charges) will be presumed reasonable if it equates to no more than $1.24 per
channel. Eligibility for this relief continues if the small cable system is
subsequently acquired by a larger cable operator, but is lost when and if the
individual system serves in excess of 15,000 subscribers. The 1996 Telecom Act
immediately deregulated the CPST rates of cable systems serving communities with
fewer than 50,000 subscribers, which are owned by or affiliated with entities
serving, in the aggregate, no more than one percent of the nation's cable
customers (approximately 617,000) and having no more than $250 million in annual
     As noted above, FCC regulation of CPST rates for all systems (regardless of
size) sunset pursuant to the 1996 Telecom Act on March 31, 1999. Certain
legislators, however, have called for new rate regulations if unregulated cost
rates increase dramatically. The 1996 Telecom Act also relaxes existing "uniform
rate" requirements by specifying that uniform rate requirements do not apply
where the operator faces "effective competition," and by exempting bulk
discounts to multiple dwelling units, although complaints about predatory
pricing still may be made to the FCC.
     CABLE ENTRY INTO TELECOMMUNICATIONS.  The 1996 Telecom Act provides that no
state or local laws or regulations may prohibit or have the effect of
prohibiting any entity from providing any interstate or intrastate
telecommunications service. States are authorized, however, to impose
"competitively neutral" requirements regarding universal service, public safety
and welfare, service quality, and consumer protection. State and local
governments also retain their authority to manage the public rights-of-way and
may require reasonable,