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F I S C A L I M P A C T R E P O R T

SPONSOR Lujan, B.

ORIGINAL DATE

LAST UPDATED

2/26/07

HB 1129

SHORT TITLE

CABLE TV PROVIDER RATE CHANGE

EXPLANATIONS

SB

ANALYST Earnest

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY07

FY08

NFI

NFI

(Parenthesis ( ) Indicate Expenditure Decreases)

REVENUE (dollars in thousands)

Estimated Revenue

Recurring

or Non-Rec

Fund

Affected

FY07

FY08

FY09

$0.1*

$0.1* Recurring General Fund

(Parenthesis ( ) Indicate Revenue Decreases)

*Unknown but possible positive revenue impact from assessment of new penalties.

SOURCES OF INFORMATION

LFC Files

Responses Received From

Public Regulation Commission (PRC)

Office of the Attorney General (AOG)

SUMMARY

Synopsis of Bill

House Bill 1129 enacts a new provision of the New Mexico Telecommunications Act, Section

63-9A-1 to 63-9A-20, to require cable television service operators to deliver written notice of

House Bill 1129 – Page

2

any increase in cable television rates to the Public Regulation Commission (PRC) within thirty

days of the effective date of that increase. The notice must request that the PRC set a date, time

and place for a public meeting where the cable operator shall explain and discuss the need and

rationale for the increase. If that notice is not given, then PRC must, by its own motion or upon

the request of an interested party, order the cable operator to appear at a public meeting.

PRC shall impose civil penalties of $1,000/ day, up to $10,000 on a cable operator who fails

without good cause to comply with the notice requirements or fails to attend a public meeting as

required and for each day the operator does not contact the Commission to schedule another

meeting. The operator may appeal the imposition of a penalty to the District Court.

FISCAL IMPLICATIONS

The fiscal impact would be limited but potentially positive due to new penalties for non-

compliance.

SIGNIFICANT ISSUES

Under federal law, regulation of rates and service quality of the cable television industry is

shared between the Federal Communications Commission (FCC) and the local franchising

authority, typically local governments in New Mexico. The local government is allowed to

determine and collect a "franchise fee" consisting of a percentage of the cable company's annual

revenues; that franchise fee may vary from one local government to another.

Both OAG and PRC question whether the state has authority under federal law to regulate the

cable television industry. Although not directly prescribing state regulation, this bill gives

additional authority to the PRC, including the imposition of penalties, over cable providers.

According to OAG:

The authority of the state to regulate cable television rates or to punish cable operators for

failing to comply with state laws attempting to regulate those rates is questionable.

However, this bill appears to be an attempt to confer authority on the Public Regulation

Commission to regulate the imposition of rate changes by compelling attendance by cable

operators at “meetings" and imposing other requirements on those operators with regard

to rate changes.

Title III of the Federal Telecommunications Act of 1996 eliminated regulation of “non-

basic" (e.g. pay-per-channel, tiered channel services beyond basic cable rates, or pay-per-

view) cable television. Neither the Federal Communications Commission, nor the state,

has the authority to regulate those rates, or to punish cable operators for failing to comply

with state laws regarding those rates. Furthermore, small cable operators are also exempt

from state or federal rate regulation. (

http://www.fcc.gov/mb/facts/csgen.html

.) However,

this bill does not distinguish between basic cable rates and non-basic rates, and does not

refer to small cable operators which are not subject to any regulation.

Furthermore, the authority of the Public Regulation Commission to regulate any cable

television rates or the conduct of cable operators with respect to any rate changes is

uncertain. Regulation of basic cable services rates has been delegated to “local

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3

franchising authorities" who are certified by the Federal Communications Commission. It

does not appear that the Public Regulation Commission has received that designation.

Furthermore, Section 301 of the federal act amended 47 U.S.C. 552 to govern notice to

subscribers of rate changes. That amendment provides “A cable operator may provide

notice of service and rate changes to subscribers using any reasonable written means at

its sole discretion". Given the possible preemptive effect of that amendment, it is unclear

as to the authority of the state to require that a cable operator provide additional notice to

the Public Regulation Commission of a rate change, or to require a cable operator to

attend a “meeting" regarding a rate change, or to impose penalties on a cable operator

who does not comply with those requirements.

The bill allows the Commission to impose a penalty on a cable operator who fails to

attend a public “meeting" for the day of the scheduled hearing, and “for each business

day after the date of the meeting that the cable operator does not contact the commission

to schedule another meeting". However, it does not appear to consider those “meetings"

to be hearings involving usual due process protections. It does not provide any right to a

hearing before imposition of penalties. Referring to mandatory hearings as “meetings"

does not exempt those proceedings from due process requirements.

Imposing a penalty based upon failing to attend a “meeting", or failing to contact the

Commission to schedule a meeting, may be construed as an improper exercise of the

state’s police power to penalize certain conduct implicating the right of free association

and other individual rights. This is especially significant considering the PRC’s apparent

lack of authority to regulate cable television rates.

PRC indicates that the only authority it has over cable television is the power to assess a penalty

upon a cable provider for each occurrence of cramming or slamming or for each disconnection or

threat to disconnect (Sections 63-9G-1 through 9 NMSA 1978). PRC staff understands that the

FCC refers any questions or complaints regarding rates for basic service and equipment,

installation and service charges to a customer's local government/franchising authority. This

shared jurisdiction between the FCC and the local government may call into question the

authority of the PRC to enforce the civil penalties provided for in this bill. Furthermore, it is not

clear whether the duty of the cable company to report the increase to the PRC "within 30 days of

the effective date of an increase of its rates" is a requirement for the cable company to file 30

days before or after the effective date. This question is raised because the daily penalty liability

commences on the "effective date of the increase."

ADMINISTRATIVE IMPLICATIONS

PRC indicates that any administrative implications could be managed with current resources.

TECHNICAL ISSUES

According to PRC, the definition section of the New Mexico Telecommunications Act

specifically exempts "one-way cable television service" from its regulation of "public

telecommunications service", the critical phrase that defines the scope of regulation under the

NM Telecommunications Act. Also, rural telecommunications companies are exempted from

regulation under the NM Telecommunications Act and are regulated pursuant to the Rural

House Bill 1129 – Page

4

Telecommunications Act of New Mexico (Sections 63-9H-1 et al); would that mean that a cable

company that operates in a rural telecommunications company's territory is not subject to the

provisions of this bill.

OTHER SUBSTANTIVE ISSUES

PRC questions whether this bill gives PRC authority to regulate cable rates or simply provides a

forum for the airing of public grievances.

ALTERNATIVES

PRC offers the following alternative:

A more effective remedy may be a bill that mandated local governments/franchising

authorities to have a public hearing before they would allow a cable company to

implement any price increases. In that type of context, the local government/franchising

authority would have to acknowledge the conflict between the rationale for the increase

and the ultimate result of the increase: i.e. an increase in

revenue to the cable television provider and more revenue coming into the local

government through an increase in revenues upon which the local government bases its

franchise fee percentage.

BE/nt