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File pnmc5021 (.txt & .wp) is in directory \pub\Public_Notices\Miscellaneous. ***************************************************************** ******** FOR RECORD ONLY $//MO&O, Lawton Cablevision, Lawton, OK, DA 95-1187//$ $/76.981 Negative option billing/$ Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 DA 95-1187 In the Matter of: ) ) Lawton Cablevision, ) CSC-363 Lawton, Oklahoma (OK0037) ) ) Petition to Show Cause ) Negative Option Billing Issue ) MEMORANDUM OPINION AND ORDER Adopted: May 30, 1995 Released: June 2, 1995 By the Chief, Cable Services Bureau I. Introduction 1. This proceeding involves a Petition for an Order to Show Cause and Request for Initiation of Forfeiture Proceeding ("Petition") filed on behalf of 13 subscribers ("Petitioners") of Lawton Cablevision, Inc. ("Lawton"), in Lawton, Oklahoma. Pursuant to Section 76.9 of the Commission's rules, the Petitioners request the issuance of an order requiring Lawton to show cause why it should not be directed to cease and desist from allegedly violating the negative option billing provision of the Communications Act of 1934, as amended. Based on the alleged violations, Petitioners also ask the Commission to initiate a forfeiture proceeding against Lawton. Lawton opposes the Petition. We conclude that Lawton's conduct with regard to automatically subscribing its customers to a wire maintenance service plan did not violate the negative option billing provision of federal law. Consequently, we deny the Petition. II. Facts 2. According to the Petitioners, Lawton informed its subscribers of certain changes in its services and rates in an August 30, 1993, advertisement in the Lawton Constitution, a local newspaper. The advertisement stated that Lawton had previously provided "free" maintenance service on home residential wiring. It announced that effective September 1, 1993, Lawton would continue to maintain subscriber home wiring for an optional monthly fee of $.47, or subscribers could decline the monthly maintenance and pay for service to home wiring at an hourly rate of $45.00. According to the advertisement, subscribers would be automatically charged the maintenance fee unless they notified Lawton otherwise. Petitioners allege that they were automatically subscribed to the home wiring maintenance plan and assert that the imposition of the home wiring maintenance fee violates the negative option billing provision of the Communications Act of 1934, as amended, and the Commission's rules. In its Opposition, Lawton clarified that the home wiring maintenance fee is not a new charge, but is instead an itemization of a new cost-based price for a charge which was previously bundled with program service prices. Lawton contends that its action does not violate the federal negative option billing provision. III. Background 3. In the Cable Television Consumer Protection and Competition Act of 1992 (the "1992 Cable Act"), Congress created a process for regulating cable programming and equipment rates. Section 3(f) of the 1992 Cable Act adds a new provision to the Communications Act which states that "[a] cable operator shall not charge a subscriber for any service or equipment that the subscriber has not affirmatively requested by name." It further specifies that "a subscriber's failure to refuse a cable operator's proposal to provide such service or equipment shall not be deemed to be an affirmative request for such service or equipment." This prohibited billing practice is commonly referred to as negative option billing. 4. In implementing this Section of the 1992 Cable Act, the Commission explained that the prohibition against negative option billing applies to "additions of a new tier of service or a new single channel of service without the affirmative assent of a subscriber." It also stated that restructuring of tiers and equipment will not bring the prohibition into play if the subscribers continue to receive the same number of channels and the same equipment unless the restructuring effects a fundamental change in the nature of the service. 5. The rule adopted, with subsequent revisions, states: Section 76.981 Negative Option Billing (a) A cable operator shall not charge a subscriber for any service or equipment that the subscriber has not affirmatively requested by name. A subscriber's failure to refuse a cable operator's proposal to provide such service or equipment is not an affirmative request for service or equipment. A subscriber's affirmative request for service or equipment may be made orally or in writing. (b) The requirements of paragraph (a) of this Section shall not preclude the adjustment of rates to reflect inflation, cost of living and other external costs, the addition or deletion of a specific program from a service offering, the addition or deletion of specific channels from an existing tier or service, or the restructuring or division of existing tiers of service, or the adjustment of rates as a result of the addition, deletion or substitution of channels pursuant to Section 76.922 of this Subpart, provided that such changes do not constitute a fundamental change in the nature of an existing service or tier of service and are otherwise consistent with applicable regulations. (c) State and local governments may not enforce state and local consumer protection laws that conflict with or undermine paragraph (a) or (b) of this Section or any other sections of this Subpart that were established pursuant to Section 3 of the 1992 Cable Act, 47 U.S.C. 543. IV. Discussion 6. The Commission's rules under the 1992 Cable Act required a variety of changes in the nature of the services to be marketed by cable operators. One such change is the requirement to unbundle equipment and installation from programming. The Commission stated, "unbundling rates for equipment, installation, and additional outlets from the rates for basic service best comports with our Congressional mandate." Because the statute sets out different standards for evaluating equipment and basic cable service rates, the Commission required that the rates for each must be unbundled from each other. Section 76.923(b) of the rules states "[a] cable operator shall establish rates for remote control units, converter boxes, other customer equipment, installation, and additional connections separate from rates for basic tier service. In addition, the rates for such equipment and installations shall be unbundled one from the other." 7. While the reasonableness of an operator's equipment and service charges is within the jurisdiction of the local franchise authority, here the issue is solely whether Lawton complied with the negative option billing prohibition when it billed its customers for the wire maintenance plan. Lawton claims that prior to September 1, 1993, wire maintenance service was included in Lawton's charges for the basic service tier. After September 1, 1993, Lawton charged subscribers separately for a wire maintenance service plan priced at $.47 per month. We believe that Lawton's separate itemization of this charge on subscriber bills simply reflects Lawton's efforts to comply with Commission rules requiring unbundling. Lawton's subscribers continued to receive the same level of service before and after Lawton unbundled its equipment rates. We have confronted this issue in two other instances. In our Memorandum Opinion and Order in Comcast Cablevision, Tallahassee, Florida, LOI-93-2, DA 95-61 (Cab. Serv. Bur., released January 20, 1995), we determined that the negative option billing restrictions were not violated where the cable operator began separate itemization of a wire maintenance service plan on subscriber bills where the costs for the service were previously bundled with its charges for the basic service tier. We reached the same result in our Consolidated Memorandum Opinion and Order In the Matter of Letters of Inquiry on Negative Option Billing, LOI-93-1, et al., DA 95-106 (Cab. Serv. Bur., released January 25, 1995). In accordance with our previous decisions on this issue, we conclude that Lawton, with respect to its wire maintenance service plan, did not violate the federal negative option billing restriction, Section 3(f) of the 1992 Cable Act. V. Ordering Clauses 8. Accordingly, IT IS ORDERED that the Petition for an Order to Show Cause and Request for Initiation of Forfeiture Proceeding IS DENIED. 9. Furthermore, IT IS CONCLUDED that Lawton Cablevision, Inc., has not, with respect to its wire maintenance service plan, violated Section 623(f) of the Communications Act of 1934, as amended, 47 U.S.C.  543(f), or Section 76.981 of the Commission's rules, 47 C.F.R.  76.981. FEDERAL COMMUNICATIONS COMMISSION Meredith J. Jones Chief, Cable Services Bureau