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S-4/A
AVALON CABLE OF MICHIGAN INC/ filed this Form S-4/A on 05/28/1999
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                                   REGULATION

Overview

   We face regulation from federal, state and local governments because we own
and operate cable television systems. Most of the federal laws governing our
cable systems arise from the Cable Communications Policy Act of 1984, the Cable
Television Consumer Protection and Competition Act of 1992 and the
Telecommunications Act of 1996. These statutes amended the federal
Communications Act of 1934 and added provisions specific to cable television.
Many of the cable television provisions of the Communications Act require the
FCC to adopt and enforce regulations. The FCC has done so and regulates many
aspects of our cable systems and our business. Local franchise authorities also
regulate our cable systems through local cable franchise agreements and
ordinances and, in some municipalities, through the local rate regulation
process. In some jurisdictions, state agencies also regulate our cable systems.
The substantial regulation of our cable systems adds additional costs and risks
to our business.

   We provide in this section a summary of federal laws and regulations that
could materially affect our cable systems and the cable industry. We also
describe certain state and local laws.

Rate regulation

   Rate regulation under the Cable Television Consumer Protection and
Competition Act. The Cable Television Consumer Protection and Competition Act
establishes cable rate regulation at two levels. Local franchise authorities
can obtain authority to regulate rates for equipment and basic service (the
lowest tier of service usually including broadcast signals, public access
programming and some cable satellite services). The FCC regulates rates for
cable programming services tiers, typically the next levels of cable service
after basic service. The Cable Television Consumer Protection and Competition
Act directs the FCC to promulgate regulations to govern the rate regulation
process at both the federal and local level. The Cable Television Consumer
Protection and Competition Act also deregulates rates for any cable system
subject to effective competition, meaning that the cable system faces specified
thresholds of competition in their franchise areas. Generally, the rate
regulation process imposes substantial administrative burdens and costs on
regulated systems and reduces cable rate increases. Rate regulation has forced
some cable systems to reduce rates and make refunds to subscribers.

   Changes under the Telecommunications Act of 1996. The Telecommunications Act
of 1996 makes several significant changes to cable rate regulation. The
Telecommunications Act of 1996:

  . deregulates rates for cable programming services tiers after March 31,
    1999;

  . deregulates all rates for certain small cable systems;

  . allows non-predatory, bulk discount rates for service to commercial
    residential developments;

  . allows aggregation of costs for regulated equipment rates at the
    franchise, system, regional or company level;

  . eliminates individual subscriber rate complaints to the FCC;

  . authorizes local franchise authorities to file complaints with the FCC
    concerning cable programming services tier rates after receiving multiple
    subscriber complaints within prescribed time frames; and

  . permits certain cable operators to include prior year losses occurring
    before September 1992 in rate calculations.

   The changes to cable rate regulation resulting from the Telecommunications
Act of 1996 provide cable systems some relief from the administrative burdens
and costs of rate regulation.

   FCC regulations. Following the Cable Television Consumer Protection and
Competition Act, the FCC adopted detailed regulations governing cable service
and equipment rates and the rate regulation process. Those

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