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S-4/A
CHARTER COMMUNICATIONS HOLDINGS CAPITAL CORP filed this Form S-4/A on 06/22/1999
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<PAGE>   110
 
                           REGULATION AND LEGISLATION
 
   
     The following summary addresses the key regulatory developments and
legislation affecting the cable television industry.
    
 
   
     The operation of a cable system is extensively regulated by the Federal
Communications Commission, some state governments and most local governments.
The 1996 Telecom Act has altered the regulatory structure governing the nation's
communications providers. It removes barriers to competition in both the cable
television market and the local telephone market. Among other things, it also
reduces the scope of cable rate regulation and encourages additional competition
in the video programming industry by allowing local telephone companies to
provide video programming in their own telephone service areas.
    
 
   
     The 1996 Telecom Act requires the Federal Communications Commission to
undertake a host of implementing rulemakings. Moreover, Congress and the Federal
Communications Commission have frequently revisited the subject of cable
regulation. Future legislative and regulatory changes could adversely affect our
operations, and there have been calls in Congress and at the Federal
Communications Commission to maintain or even tighten cable regulation in the
absence of widespread effective competition.
    
 
   
     CABLE RATE REGULATION.  The 1992 Cable Act imposed an extensive rate
regulation regime on the cable television industry, which limited the ability of
cable companies to increase subscriber fees. Under that regime, all cable
systems are subject to rate regulation, unless they face "effective competition"
in their local franchise area. Federal law now defines "effective competition"
on a community-specific basis as requiring either:
    
 
   
          (1) low subscriber penetration, less than 30%, by the incumbent cable
     operator;
    
 
   
          (2) appreciable subscriber penetration, more than 15%, by competing
     multichannel video providers;
    
 
   
          (3) a municipally-affiliated multichannel video provider offering
     service to 50% of the community; or
    
 
   
          (4) a competing multichannel video provider affiliated with a local
     telephone company offering service to the community.
    
 
   
     Although the Federal Communications Commission has established the
underlying regulatory scheme, local government units, commonly referred to as
local franchising authorities, are primarily responsible for administering the
regulation of the lowest level of cable -- the basic service tier, which
typically contains local broadcast stations and public, educational, and
government access channels. Before a local franchising authority begins basic
service rate regulation, it must certify to the Federal Communications
Commission that it will follow applicable federal rules. Many local franchising
authorities have voluntarily declined to exercise their authority to regulate
basic service rates. Local franchising authorities also have primary
responsibility for regulating cable equipment rates. Under federal law, charges
for various types of cable equipment must be unbundled from each other and from
monthly charges for programming services.
    
 
   
     The Federal Communications Commission itself directly administers rate
regulation of any cable programming service tier which typically contains
satellite-delivered programming. Under the 1996 Telecom Act, the Federal
Communications Commission can regulate cable programming service tier rates only
if a local franchising authority first receives at least two rate complaints
from local subscribers and then files a formal
    
 
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