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72 COUNCIL CHA2vtBER- October 19, 1994 Council met in special session on this date with the following members present: Ms. Daugherty, Rev. Edwards, Ms. Slaughter, Mr. Toscano. Absent: Mr. Vandever. RESOLUTION: CABLE TELEVISION RATE REGULATION: "A LA CARTE" OFFERINGS (AND WHETHER THEY OFFER SUBSCRIBERS A "REALISTIC SERVICE CHOICE" AS DEFINED BY FCC CRITERION) Mr. Clyde Gouldman, City Attorney, reviewed the recent history of cable regulation. In 1992, Congress passed the Cable Act, charging local governments with regulation of the basic tier of cable service, and the Federal Communications Corporation (FCC) with regulation of the second and third tiers of service. In April of 1993, the first set of FCC regulations were adopted. In August of 1993, Adelphia attempted to remove all the channels from their second and third tiers of services by labeling them "a la carte" offerings. At that time, Adelphia notified its customers that if the customers took no action their service would remain the same. To date only .003% of Adelphia's customers have opted for "a la carte" or per channel selection. City Council voted to regulate Adelphia's basic tier of service in April of 1994, and reserved the fight to revisit the issue of FCC regulation of the second and third tiers. In May of 1994, the FCC adopted revised regulations and benchmarks. Adelphia was required to file new forms in August of 1994, and a new revised basic tier amount of $8.55 was set by such filing. Mr. Gouldman stated that the question before Council at this time is whether Adelphia's "a la carte" offerings should be regulated by the FCC, with the main issue being whether Adelphia's "a la carte" offerings are a realistic service choice. Responding to a question from Ms. Slaughter about the structure of the new taw', Mr, Gouldman replied that should Council decide that the service tiers above the basic level do not provide a realistic service choice to the consumer, Adelphia wilt have 14 days to appeal that decision to the FCC. Mr. Toscano asked for public comment on the matter. Mr. Randy Fisher, Vice President and General Counsel for Adelphia, stated that Adelphia's position on the proposed resolution is that the current service offerings do offer a realistic choice. In approving the resolution, Council would be effectively saying that the form 1200 had been filed incorrectly and Adelphia would be forced into a "cost of service" filing, an alternative which Mr. Fisher did not think would be productive. Mr. Fisher stated that questions which remain unanswered are whether Adelphia could initially charge less than the cost of service and then phase in an increase and whether Adelphia could restructure its service offerings. Mr. Fisher stated that it would be administratively easier for Adelphia to have the same cost and same service offerings throughout its system; Adelphia would most assuredly appeal if Council approves the resolution; Adelphia's corporate structure is based on an a la carte offering. Mr. Fisher stated that a settlement agreement offered by Adelphia to the City had not been acceptable to the City, and he was disappointed to have to be at this meeting in this position. There was no other public comment. Ms. Slaughter asked ifAdelphia could restructure its offering and Mr. Fisher replied that had not been decided on, but was one option that Adelphia would look at. Mr. Fisher stated that if they go to cost of service it would be required at all levels and would involve significant administrative time and expenses for lawyers and accountants who would have to appear before both the FCC and City. Mr. Fisher stated that Adelphia might throw everything into one tier and bring only that before the City. Mr. Fisher stated that restructuring offerings could have many implications, including copyright, costs, and contractual considerations. Ms. Slaughter asked whether or not the potential existed for restructuring of a la carte offerings rather than putting channels into different tiers.