1st Circuit Presses Maine on Cable Prorating Refunds
The 1st U.S. Circuit Court of Appeals repeatedly pressed Maine during oral argument Monday on the state's assertion that its cable TV charges prorating law isn't rate regulation. Judge Rogeriee Thompson challenged plaintiff-appellee Charter Communications to explain how the state law supposedly runs afoul of the Cable Act bars on regulating rates for provision of cable service if the law is about requiring prorated refunds when cable service is no longer provided. Maine is appealing a lower court's summary judgment in November supporting Charter's challenge (see 2010290039).
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Judge Timothy Dyk asked both sides whether the FCC should be consulted if the prorating law is rate regulation, with both demurring. “The statute is clear,” said Jenner and Block's Matthew Hellman, representing Charter. He said the agency's 1999 Southwestern Bell order said state laws barring mobile providers from billing in increments of minutes instead of seconds is preempted rate regulation.
Maine Assistant Attorney General Paul Suitter debated the judges on what kind of rates a cable company could legally charge customers. Judge David Barron asked if a monthly cable rate is a form of bulk rate that the state is prohibiting and thus regulating rates. Suitter said a cable company could charge a monthly, quarterly or even yearly or decadelong rate, but the question is whether Congress intended to stop states from protecting consumers from paying for cable service they don't receive.
Suitter and the panel debated the Southwestern Bell order's applicability. Dyk said if the case were about mobile service, the state's actions would constitute rate regulation. Suitter acknowledged the Communications Act would prohibit the prorating law but said it has different language than the Cable Act. He said unlike rate regulation, which would benefit customers every month, this prorating law affects subscribers only in that final month of service.
Hellman said Charter wants to sell its service in monthlong increments, and the daily rate requirement constitutes rate regulation. He said it's up to the market, not regulation, to determine if that's a good or bad pricing system, and the monthlong pricing system provides business predictability. All operators subject to the same pro rata rules would also provide predictability, Barron said. Hellman responded that the predictability comes from knowing if the company has a 22-day payment or a 30-day payment coming.
Cable service is an agreement in monthlong blocks: a month's worth of service for a particular price, Hellman told the three-judge panel. He said even if a subscriber cancels partway into that month, the agreement to pay for that month is still there. Hellman said Maine's law is problematic not just for requiring selling cable service in daily increments but for requiring it be sold by day at a prorata monthly rate. He said the per-unit price of many products is often higher when buying small amounts than in bulk. Hellman said consumer protection laws can safeguard a consumer when denied service because of outages or other problems, but the prorating law “is the inverse.”
Dyk and Hellman disputed whether Charter could just raise rates to make up whatever money is lost. Hellman acknowledged the company isn't barred from that, but this doesn't answer whether Maine is engaging in rate regulation. Not allowing that raised rate unquestionably would be rate regulation, Dyk said.
Barron said it could be argued Congress in the Cable Act was focused more on basic cable rate regulation and not on issues items termination of service costs. Hellman said the law's prohibition against rate regulation “is absolute.”
An oral argument earlier that morning was briefly delayed by Barron’s video freezing due to what he said was his residential internet connection.