Cox seeks relief from service, price regulations

Cox Communications has told federal regulators that Hampton Roads consumers have enough options for paid-television services that it no longer needs certain restrictions on its service and pricing.

Cox filed a petition in late August asking the Federal Communications Commission to declare that most of the region enjoys "effective competition" from TV service providers, including telephone giant Verizon Communications, satellite broadcasters DirecTV and Dish Network, and Cavalier Telephone, which offers an Internet-based package.

With FCC approval, Cox hopes to free itself from some regulations, including a requirement that it offer the same rates and services within a given franchise area, said Leigh Woisard, Cox's vice president of government and public affairs in Hampton Roads. A franchise area usually covers a single city.

Under that rule, Cox cannot target a particular neighborhood with discounted rates or special packages to counter a competitor's marketing. Verizon and other competitors have no such restrictions on where they can pitch certain services or prices, Woisard said.

"We want to have more flexibility to be able to match the offer that our competitor might have in the marketplace," she said. "In some instances, we're competing with one hand tied behind our back, and it doesn't seem fair."

The cities of Virginia Beach, Chesapeake, Norfolk and Hampton have filed comments with the FCC opposing Cox's request. They argue that the removal of regulations on Cox's rates could hurt consumers, "particularly senior citizens and other individuals living on fixed incomes" and would allow the company to charge different prices even within the same neighborhood.

"We felt it important to preserve our authority, which would be taken away otherwise, to protect our citizens through rate regulation if it becomes necessary in the future," said Ron Hallman, Chesapeake's city attorney.

To gain FCC approval, Cox must show - city by city - that its competitors have taken a significant chunk of TV customers. Among ways to determine whether "effective competition" has taken place, the FCC requires that at least 15 percent of households in a given city subscribe to TV service from a competing provider, Woisard said.

Today, only some sections of some cities can get Fios TV, the Verizon service that most closely competes with Cox.

Verizon has franchise agreements with Virginia Beach, Chesapeake, Portsmouth, Newport News and Hampton to sell TV service in those cities.

Harry Mitchell, a spokesman for Verizon, said he was unable to provide the number of Hampton Roads households where the company now is selling its TV service.

In Virginia Beach, Cox cites Verizon's service as its sole source of competition and never mentions satellite providers, as it does for other cities, according to the city's filing with the FCC.

"What Cox fails to provide is any evidence regarding where Verizon service is actually available in the city or any evidence of the number of (Verizon) subscribers in the city," wrote Brian Grogan, a Minneapolis attorney representing the four local cities in the Cox case, in Virginia Beach's petition. "Without this information, Cox has failed to meet its burden of demonstrating that the city is subject to effective competition."

Cavalier Telephone, another competitor cited by Cox, has sold IPTV in some Hampton Roads cities, but it has stopped marketing the video service, said Francie McComb, general counsel for Cavalier. The company has less than 3,000 subscribers between Hampton Roads and Richmond, she said, and is waiting to develop high-definition technology that's compatible with its service before moving forward.

Already, cable companies enjoy minimal regulations on their rates and services for most service "tiers," or packages of channels. They can raise rates or change the lineups as they choose. The exception is the "basic" or "limited" tier of mostly broadcast networks and about a dozen other channels.

To set basic rates, which vary from city to city, Cox must apply to the FCC, which uses a specific formula to determine the appropriate price for each locality. City officials can request an FCC form if they want to dispute those rates.

If the FCC approves Cox's petition, the company would no longer face regulation on those basic rates. However, Woisard said Cox's basic rates in Hampton Roads already are below the amount the FCC's formula would allow, and the company has competitive reasons to continue to offer its basic service at low rates.

Cities also have some control through the franchise agreements that TV providers must negotiate in order to use the public rights of way to run their cables for service. Franchise terms typically include a fee per subscriber that the company pays to the city, as well as provisions for public access channels and other support for government or educational programming.

Any change in federal regulations would not change the terms of or eliminate the need for any of those franchise agreements, Woisard said.

Carolyn Shapiro, (757) 446-2270, carolyn.shapiro@pilotonline.com