**Before the**

**Federal Communications Commission**

**Washington, D.C. 20554**

In the Matter of: )

)

City of Antioch, California ) CSR-5239-R

)

Petition for Declaratory Ruling )

Regarding Senior Citizen Discounts in )

Local Franchise Agreements )

**MEMORANDUM OPINION AND ORDER**

**Adopted: January 29, 1999 Released: February 2, 1999**

By the Chief, Cable Services Bureau:

**I. INTRODUCTION**

1\. The City of Antioch, California (\"Antioch\" or \"City\") filed a
Petition for Declaratory Ruling (\"Petition\") requesting the Commission
to make a determination regarding the enforcement of local franchise
agreements with respect to senior citizen discount requirements in such
agreements. Specifically, Antioch, a certified franchise authority,
states that Tele-Vue Systems, Inc. (\"Tele-Vue\"), the cable franchisee
in Antioch,[^1] unilaterally terminated a reduced senior citizen rate in
its franchise agreement because Tele-Vue believed that the Cable
Television Consumer Protection and Competition Act of 1992 (\"1992 Cable
Act\")[^2] preempted local franchise agreements on the issue of reduced
rates for qualified senior citizens. In its Petition, Antioch seeks to
have the Commission determine whether the 1992 Cable Act supersedes
local franchise provisions regarding: 1) the eligibility standards for a
senior citizen rate; and, 2) the formula for adjusting the senior
citizen rate.[^3]

**II. THE FACTS**

2\. On September 11, 1984, Antioch and Tele-Vue entered into a franchise
agreement.[^4] The agreement, which was reached as a settlement of
litigation between the parties, was later extended in 1991 for an
additional 10 year term.[^5] The controversy regarding the senior
citizen rate discount arises from paragraphs 5 through 8 of the 1984
franchise agreement. Those paragraphs, in pertinent part, are as
follows:

(5). In settlement of litigation between the parties in Case No. 231497
. . . the parties have elected to establish rate regulation . . . it
being recognized that \[cable operator\] cannot waive its right to
deregulate . . . .

(6). \[Cable operator\] shall offer a \"tier\" of basic service . . . .
For the period of May 1, 1984, to May 1, 1985, the monthly rate for this
level of service shall be \$8.65. Persons who are 62 years of age or
older and who qualify for the special water rates specified in Antioch
Municipal Code §6-5.01(f) shall be eligible for this basic tier of
service at the monthly rate of \$7.35.

(7). CITY will maintain rate regulation only on the above-referenced
lowest level of service, or Basic Service. \[Cable operator\] shall have
the right . . . to increase . . . its discounted Basic Service rate for
senior citizens by an amount of \$.25 annually cumulative since \[cable
operator\]\'s last rate increase; or by a rate equal to 50% of the
increase in the Consumer Price Index for the San Francisco Bay Area for
All Urban Consumers (1967=100), as published by the Bureau of labor
Statistics . . . whichever is the larger amount. Provided, however, that
no rate increase on basic service shall exceed \$.50 annually . . .
without City Council approval . . . .

(8). The qualifications for eligibility for the discounted monthly rate
for Basic Service for senior citizens may be renegotiated at \[cable
operator\]\'s request at any time following the fifth anniversary date
of the execution of this Agreement.[^6]

3\. Despite these provisions, Antioch states that on or about July 7,
1994, Tele-Vue announced an increase in its senior citizen rates from
\$7.50 to \$11.83 per month.[^7] According to Antioch, this increase
affects approximately 1,000 eligible senior citizens within the
city.[^8] In addition, Antioch also states that Tele-Vue announced that
effective September 1, 1994, the senior citizen eligibility standards
would be revised so that \"only persons receiving SSDI and SSI benefits
will be eligible for the senior discount.\"[^9] According to Antioch,
this change in the senior citizen eligibility requirements also reduces
the number of seniors eligible to receive the senior discount.[^10]

4\. Under the terms of the disputed franchise agreement, Antioch notes
that for only a \$1.00 more than the basic service rate, seniors could
receive a satellite package for the total senior rate of \$8.50.[^11]
Antioch states that now for seniors to continue that former level of
service with a satellite package included, the payment increases to a
senior rate of \$19.84 per month.[^12] In addition, Antioch states that
Tele-Vue\'s new senior eligibility standards eliminate most Antioch
senior subscribers from receiving a senior rate and will force them into
paying the standard cable rate of \$24.80 per month.[^13] Antioch states
that the majority of its senior citizens would then have to pay an
increase of \$16.30 per month for the same cable television service that
they previously received when they qualified for the formerly reduced
senior rate.[^14] Antioch states that, in light of the franchise
provisions at issue, it objects to Tele-Vue\'s practices regarding
senior citizen cable rates.[^15] Tele-Vue responds by stating that the
1992 Cable Act preempts these issues.[^16]

**III. ARGUMENTS OF THE PARTIES**

5\. Antioch argues that enforcement of the franchise agreement between
the City and Tele-Vue to provide a senior citizen discount for cable
rates is a matter of state contract law, not rate regulation, and
therefore is not preempted by the Communications Act or the
Commission\'s rules.[^17] Antioch notes that on February 19, 1997, the
Commission endorsed this same analysis and issued a Letter Ruling in
response to identical concerns raised by senior citizens of
Antioch.[^18] Antioch requests that the Commission reaffirm this
ruling.[^19] In pertinent part, the Letter Ruling states:

Your letter of February 4, 1997 asks a number of questions dealing with
enforcement of the terms of local franchise agreements, specifically
regarding senior citizen discounts in such agreements. Your principal
inquiry appears to be whether federal law or the Commission\'s rules
endorse or prohibit such terms. Our view is that federal law and the
Commission\'s rules do neither. Federal law, specifically the Cable
Television Consumer Protection and Competition Act of 1992 . . . ,
authorizes cable operators to offer senior citizen discounts but does
not require such discounts . . . . Federal law and the Commission\'s
rules are silent on enforcement of an agreement between a cable operator
and a local authority under which the operator has agreed to provide
discounts to senior citizens. *We regard such an agreement \-- its terms
and enforcement \-- to be subject to contract law and not federal
communications law.* (Emphasis added).[^20]

6\. In further support of its position, Antioch states that Section
623(e)(1) of the Communications Act[^21] confers discretion upon cable
operators to offer senior citizen rates lower than rates charged to
other subscribers.[^22] Antioch notes that Section 623(e)(1) of the Act
is an exception to the regulatory requirement for a uniform rate
structure throughout the franchise area.[^23] According to Antioch,
rather than mandate a discount rate less than the maximum permitted
rate, Congress devised a scheme through Section 623(e)(1) that permits
cable operators to agree contractually to offer such a rate to
economically disadvantaged groups, including senior citizens.[^24]

7\. Antioch argues that such contractual agreements cannot be considered
as rate regulation.[^25] Antioch states that Section 623(a)(1) of the
Communications Act provides that \"\[a\]ny franchising authority may
regulate the rates for the provision of cable service . . . but only to
the extent provided under this section.\"[^26] According to Antioch,
Section 623(e)(1) carves out an area removed from the regulatory power
of Federal, State or local franchising authorities because cable
operators are granted discretion in the matter of allowing for senior
rate discounts.[^27]

8\. Alternatively, Antioch contends that even if the senior citizen rate
requirement is found to be rate regulation, that senior rate can still
be enforced by Antioch.[^28] Antioch argues that the senior rate could
only be preempted if found to be *in conflict* with federal law.[^29]
Antioch notes that Section 636(c) of the Communications Act[^30] states
that \"any provision of law of any . . . franchising authority, or any
provision of any franchise granted by such authority, which is
inconsistent with this Act shall be deemed to be preempted and
superseded.\"[^31] Antioch argues that the disputed senior rate is in
harmony with the purpose and operation of the 1992 Cable Act.[^32]
Antioch contends that Section 623(e)(1)[^33] embodies an intent to
render cable services more accessible to those identified consumer
groups least able to afford maximum permissible rates as calculated
under the Commission\'s rules.[^34] Thus, Antioch argues that the senior
rate and the 1992 Cable Act can coexist together.[^35]

9\. Tele-Vue responds by noting that Antioch does not dispute that the
1992 Cable Act vests discretion with cable operators, rather than
franchise authorities, to offer senior discount rates.[^36] According to
Tele-Vue, however, Antioch errs by insisting that cable operators can be
forced to offer senior discounts found in a franchise agreement made at
a time when basic rates were entirely unregulated pursuant to the Cable
Communications Policy Act of 1984 (\"1984 Cable Act\").[^37] Tele-Vue
contends that when the parties reaffirmed their franchise agreement when
they amended it in 1991, to the extent that Tele-Vue agreed to continue
the senior discount rate found in that agreement, it did so in an
environment where it had discretion to set, change, and increase its
other rates, including its basic service rate.[^38] Tele-Vue argues that
it did not agree to provide the senior discount now in dispute in the
current regulatory environment where its basic cable rates are capped
pursuant to the 1992 Cable Act.[^39] According to Tele-Vue, Antioch\'s
attempt to enforce those disputed discount provisions has the effect of
establishing rates for its cable system that are below the maximum
permitted under the current regulatory scheme.[^40]

Tele-Vue notes that when Antioch applied for certification to regulate
basic rates under the 1992

Cable Act, it agreed to regulate rates consistent with the Act.[^41]
Thus, Tele-Vue contends that Antioch is violating its certification
agreement by insisting on regulating Tele-Vue\'s basic rates while at
the same time requiring Tele-Vue to provide a steeply-discounted rate
for seniors.[^42]

10\. Tele-Vue argues that the senior discount that Antioch now attempts
to enforce was preempted and superseded by the 1984 Cable Act, and
therefore could not have been enforced at any time after the designated
sunset period in 1986.[^43] Specifically, Tele-Vue notes that rates set
forth in franchise agreements were explicitly nullified and preempted by
Section 636(c) of the 1984 Cable Act, which stated that the preemptive
effect of the 1984 Act applied both to \"any provision of law\" and to
\"any provision of any franchise.\"[^44] Tele-Vue disputes Antioch\'s
contention that the senior discount rate which it seeks to enforce is
not rate regulation subject to preemption by federal telecommunications
law because the senior discount is set forth in a franchise
agreement.[^45] Tele-Vue argues that the relevant text of Section 636(c)
did not change when the Communications Act was amended in 1992.[^46]
Thus, Tele-Vue argues that for purposes of Section 636(c), whether under
the 1992 Cable Act or under the 1984 Cable Act, local rate regulation
which is inconsistent with what is permitted under the federal scheme is
preempted and superseded whether found in a provision of law or in a
provision of a franchise agreement.[^47] Accordingly, Tele-Vue argues
that the senior rate discount found in the parties\' franchise agreement
is clearly subject to preemption by the 1992 Act.[^48] Tele-Vue further
argues that the provisions of the franchise agreement are not among
those grandfathered by Section 623(j) of the 1992 Cable Act[^49] and
notes that Antioch does not argue otherwise.[^50]

11\. In response, Antioch argues that the senior discount provisions of
the franchise agreement were never void, but merely unenforceable
between 1984 and 1992, and the relevant contractual provisions were
revived as a matter of state law upon the passage of the 1992 Cable Act,
which Antioch claims removed the preemptive impact of federal law.[^51]
Antioch also argues that no inequity results from allowing the
enforcement of the senior discount provisions. Antioch claims that
absent the City\'s enforcement, Tele-Vue admits that it would only
continue the disputed senior discounts if it could pass along those
costs to the remainder of its customers.[^52] Antioch argues that such
an admission accentuates the need for permitting enforcement of
voluntary agreements as a necessary means of effectuating the intent of
the 1992 Cable Act to provide increased access to cable services to
disadvantaged segments of the population.[^53]

**IV. DISCUSSION**

12\. For the reasons discussed below, we uphold the Bureau\'s February
19, 1997 Letter Ruling which addresses the same senior citizen discount
issues raised in the instant Petition for Declaratory Ruling. As a
general rule, the Commission considers franchise agreements to be within
the jurisdiction of the local franchising authority, and not the
Commission. The Bureau\'s February 19, 1997 Letter Ruling confirms that
general proposition and goes further by stating that the specific senior
citizen rate provisions in the agreement are solely within the purview
of local law.

13\. In *Implementation of Sections of the Cable Television Consumer
Protection and Competition Act of 1992 \-- Rate Regulation,*[^54] the
Commission has, to a limited extent, addressed the issue of federal
preemption of local rate restrictions contained in local franchising
agreements. In interpreting the 1992 Cable Act, the Commission has
stated that \"all provisions in franchising agreements barring rate
regulations by franchise authorities are preempted by federal
law.\"[^55] It does not appear that the Commission specifically
addressed the issue of preemption regarding existing rate regulations as
they existed in local franchising agreements at the time. However,
Section 623(j) of the Act specifically \"grandfathered\" rate regulation
in local franchise agreements in existence before the enactment of the
1992 Cable Act unless there was effective competition in existence in
the community under the Commission\'s rules in effect on July 1,
1990.[^56]

14\. Antioch does not make any showing regarding the grandfathering of
the senior discount in its franchise agreement, but rather appears to
concede that effective competition was present given the provisions of
the Commission\'s then existing definitions of where competition did not
exist by noting that those provisions were \"exceedingly narrow and
inapplicable to the geographic region in which the City is
located.\"[^57] More basically, however, Antioch appears to be arguing
that it believes that the senior rate discount at issue falls outside of
the Commission\'s rate regulation scheme and was not intended to be
abrogated regardless of the specific requirement of the grandfathering
provision.[^58] Given the absence of any specific information
demonstrating that effective competition did not exist during the
relevant time period combined with the absence of specific rate controls
during the time period in question, we are not prepared to conclude that
the discount provision involved here is a \"grandfathered\" rate
regulation under Section 623(j).

15\. In making our decision here, we note that at the time the parties
entered into their franchise agreement, Tele-Vue had complete control
over its rate structure with Antioch, including setting variable rates
for categories of subscribers. In settlement of litigation between the
parties in 1984, Tele-Vue agreed to provide cable rate discounts to the
senior citizens of Antioch. On December 17, 1991, shortly before the
enactment of the 1992 Cable Act, Tele-Vue agreed with Antioch to amend
and extend the same franchise agreement, without alteration to the
senior citizen discounts. Despite Tele-Vue\'s claims that the 1992 Cable
Act barred it from providing these same senior discounts in a new
regulatory environment, it was not until July 1994 that Tele-Vue
unilaterally cancelled the senior rate. We note that for two years after
the enactment of the 1992 Cable Act, Tele-Vue continued to honor the
terms of its franchise agreement with Antioch.

16\. We believe that public policy requires that we avoid unnecessary
regulatory interference regarding contracts, such as franchise
agreements, entered into by consenting parties. In this instance, in
settlement of a private lawsuit, the parties agreed to establish
franchise provisions regarding the eligibility standards for a senior
citizen rate and the formula for adjusting that rate. We recognize
Tele-Vue\'s argument that it did not agree to provide the disputed
senior discount in the current regulatory environment. However, Tele-Vue
did agree to those terms of its own volition in 1984, and again amended
and extended the franchise agreement in 1991, for a ten year term.
Tele-Vue then continued to abide by the terms of that franchise
agreement well after the enactment of the 1992 Cable Act. We cannot
agree with Tele-Vue that the senior citizen discount provisions in that
franchise agreement should be rendered null and void and preempted by
federal law because those provisions are now financially undesirable for
Tele-Vue. We recognize that the regulatory environment has changed, but
we are unwilling to tamper with the terms of a local franchise agreement
mutually consented to by the parties.

17\. We cannot disagree, however, with Tele-Vue\'s argument that the
disputed senior discount rate does impact the general rate regulatory
scheme. While we recognize that the senior rate impacts, in part, how
Tele-Vue is affected by the system of rate regulation implemented by the
1992 Cable Act, we do not believe that the senior discount at issue is
preempted by Section 636(c).[^59] We agree with Antioch that the senior
rate could only be preempted if found to be *in conflict* with federal
law. By enacting Section 623(e)(1) into its system of rate regulation
pursuant to the 1992 Cable Act, Congress clearly intended to encourage
cable operators to offer, and to continue to offer through franchise
agreements, reasonable discounts to senior citizens or other
economically disadvantaged groups. Thus, we conclude that the disputed
senior rate does not conflict with federal law, but is consistent with
the purpose and operation of the 1992 Cable Act. Accordingly, we will
not interfere with Antioch\'s efforts to enforce the terms of its
franchise agreement with Tele-Vue regarding senior citizen discounts.

**V. ORDERING CLAUSES**

18\. Accordingly, **IT IS ORDERED** that the Petition for Declaratory
ruling filed by the City of Antioch **IS GRANTED** to the extent
indicated herein.

19\. This action is taken by the Chief, Cable Services Bureau, pursuant
to authority delegated by Section 0.321 of the Commission\'s rules.[^60]

FEDERAL COMMUNICATIONS COMMISSION

Deborah A. Lathen

Chief, Cable Services Bureau

[^1]:     ^?^After the Petition for Declaratory Ruling was filed, a
    transfer of control of the voting stock of Tele-Vue Systems, Inc.
    took place transferring the stock from Viacom, Inc. to
    Tele-Communications, Inc. (\"TCI\").

[^2]:     ^?^Pub. L. No. 102-385, 106 Stat. 1460 (1992).

[^3]:     ^?^Antioch Petition at 1.

[^4]:     ^?^Antioch Petition at 1; Antioch Comments at 4; Tele-Vue
    Reply Comments at 2-3. Antioch states that the 1984 franchise
    agreement extended the original franchise entered into by the
    parties in 1965. Antioch Comments at 4.

[^5]:     ^?^*Id.*

[^6]:     ^?^Antioch Petition, Exhibit A at 2-4.

[^7]:     ^?^Antioch Petition at 2.

[^8]:     ^?^*Id.*

[^9]:     ^?^*Id.*

[^10]:     ^?^*Id.*

[^11]:     ^?^*Id.*

[^12]:     ^?^*Id.*

[^13]:     ^?^*Id.*

[^14]:     ^?^*Id.*

[^15]:     ^?^*Id.* at 3.

[^16]:     ^?^Tele-Vue Reply Comment at 6.

[^17]:     ^?^Antioch Comments at 2.

[^18]:     ^?^*Id.* at 3.

[^19]:     ^?^*Id.*

[^20]:     ^?^*Id.*; Letter to Thomas J. Gundlach, Esq. from Meredith J.
    Jones, Chief, Cable Services Bureau, DA 97-382, CSB-ILR 97-1,
    released February 19, 1997.

[^21]:     ^?^DISCRIMINATION; SERVICES FOR THE HEARING IMPAIRED. \--
    Nothing in this title shall be construed as prohibiting any federal
    agency, State, or a franchising authority from \-- (1) prohibiting
    discrimination among subscribers and potential subscribers to cable
    service, except that no Federal agency, State, or franchising may
    prohibit a cable operator from offering reasonable discounts to
    senior citizens or other economically disadvantaged group discounts;
    or . . . . 47 U.S.C. § 543(e)(1).

[^22]:     ^?^Antioch Comments at 6.

[^23]:     ^?^*Id.* at 2. *See* 47 U.S.C. § 543(d); 47 C.F.R. §§ 76.983
    and 76.984.

[^24]:     ^?^*Id.* at 6.

[^25]:     ^?^*Id.* at 7.

[^26]:     ^?^*Id.* at 7; 47 U.S.C. § 543(a)(1).

[^27]:     ^?^*Id.* Antioch states that similar franchise provisions
    have been found to be contractual agreements falling outside
    governmental regulatory powers and, therefore, not preempted by
    federal legislation. Antioch notes that in *Nashoba Communications
    v. Town of Danvers*, 893 F.3d 435 (1st Cir. 1990), in addressing a
    claim of federal preemption of a negotiated franchise agreement,
    cable license applicants were asked if they would honor a \"rate
    freeze\" for the first two years of operation and the court
    determined that this was not an issue of rate regulation, but rather
    a matter of enforcement of a contractual commitment.

[^28]:     ^?^*Id.* at 9.

[^29]:     ^?^*Id.*

[^30]:     ^?^47 U.S.C. § 556(c).

[^31]:     ^?^Antioch Comments at 9.

[^32]:     ^?^*Id.* at 10.

[^33]:     ^?^47 U.S.C. §543(e)(1).

[^34]:     ^?^Antioch Comments at 10.

[^35]:     ^?^*Id.*

[^36]:     ^?^Tele-Vue Reply Comments at 4.

[^37]:     ^?^*Id.* at 3. *See* Pub. L. No. 98-549, 98 Stat. 2779
    (1984).

[^38]:     ^?^*Id.*

[^39]:     ^?^Tele-Vue Reply Comments at 3, 8.

[^40]:     ^?^*Id.* at 3-4.

[^41]:     ^?^*Id.* at 3, 10.

[^42]:     ^?^*Id.*

[^43]:     ^?^*Id.* at 5.

[^44]:     ^?^Tele-Vue Reply Comments at 5, citing 47 U.S.C. § 556(c).

[^45]:     ^?^*Id.*

[^46]:     ^?^*Id.* at 6.

[^47]:     ^?^*Id.*

[^48]:     ^?^*Id.* Tele-Vue contends that Antioch\'s citation to
    *Nashoba Communications v. Town of Danvers*, 893 F.2d 435 (1st Cir.
    1990) does not support Antioch\'s claim that franchises are immune
    from preemption analysis and are governed exclusively by state law.
    Tele-Vue argues that *Nashoba* does not address the preemption
    issue, but instead applies the \"well-pleaded complaint\" rule and
    found that the court had no subject matter jurisdiction over that
    question. 893 F.2d at 437-438.

[^49]:     ^?^47 U.S.C. § 543(j).

[^50]:     ^?^Tele-Vue Reply Comments at 8.

[^51]:     ^?^Antioch Surrebuttal at 3-4. *See also* Antioch Comments at
    11-12 and *In Re Marriage of Barnes*, 43 Cal.3d qt 1377 (1987) (When
    a federal statute overrides a state statute under the supremacy
    clause the repeal of the federal statute reinstates or revives the
    state law without an express reenactment by the state legislature.
    The result is the same regardless of whether the federal statute is
    repealed or its repealing effects on state law are expressly
    rescinded by other Congressional action).

[^52]:     ^?^Antioch Surrebuttal Comments at 6.

[^53]:     ^?^*Id.*

[^54]:     ^?^8 FCC Rcd 5631 (1993).

[^55]:     ^?^*Id.* at 5680.

[^56]:     ^?^RATE REGULATION AGREEMENTS. \-- During the term of an
    agreement made before July 1, 1990, by a franchising authority and a
    cable operator providing for the regulation of basic cable service
    rates, where there was not effective competition under Commission
    rules in effect on that date, nothing in this section (or the
    regulations thereunder) shall abridge the ability of such
    franchising authority to regulate rates in accordance with such an
    agreement. 47 U.S.C. § 543(j).

[^57]:     ^?^Antioch Comments at 10-11. *See also* Antioch Surrebuttal
    at 4-5.

[^58]:     ^?^Antioch Surrebuttal at 5.

[^59]:     ^?^47 U.S.C. § 556(c).

[^60]:     ^?^47 C.F.R. § 0.321.