Cities and towns will have a more difficult time imposing rate regulation on basic cable TV service because of a vote this week by the Federal Communications Commission.

The FCC yesterday released a report and order declaring that cable TV faces "effective competition" nationwide, mainly because of the widespread availability of satellite TV service like DirecTV and Dish. This decision helps cable companies, as we wrote when it was still in the proposal stage:

Local franchise authorities may regulate the rates cable TV providers charge for "basic" cable service and equipment, but only if the local cable company does not face what's known as "effective competition." Today, the burden of proof is on cable companies to show that they face effective competition, but the FCC is considering a change that would shift the burden of proof to local authorities by adopting a "rebuttable presumption" that cable operators face effective competition.

The move will help all cable companies regardless of size, despite arguments from two commissioners that only smaller providers should be granted relief from rate regulation.

This type of rate regulation affects only cable TV, not Internet service, and only entry-level cable TV packages. In practice, few cities and towns took advantage of their power to regulate cable TV rates. Because the nationwide presence of satellite makes nearly every community fit the definition of "effective competition," the FCC noted that it already "grants nearly all requests for a finding of effective competition."

An individual city or town could still regulate rates if it proves to the FCC that the local cable company doesn't face effective competition. The local authorities that regulate rates today will have to justify their decision to continue doing so to the FCC.

"Many franchising authorities were certified over 20 years ago to regulate the basic service tier rates and equipment based on the existing presumption of no Effective Competition," the FCC wrote. "Based on the changes in the marketplace that have occurred in the last 20 years, discussed above, we believe that the factual foundation for those findings is no longer valid in most cases. Therefore, all franchising authorities with existing certifications that wish to remain certified must file revised Form 328, including the attachment rebutting the presumption of Competing Provider Effective Competition, within 90 days of the effective date of the new rules." If they don't do that, their right to regulate rates will expire.

"This is our presumption: competition results in lower prices for consumers," FCC Chairman Tom Wheeler wrote. "However, any local franchising authority is free to come to the FCC and rebut this new presumption for its service area, and, where successful, regulate basic tier cable rates. In addition, nothing in this Order affects other franchising authority responsibilities including the collection of franchise fees, provisions relating to PEG [public, educational, and government access] channels and I-Nets, and the creation and enforcement of customer service standards."

Controversy over big cable companies escaping rate regulation

Wheeler, a Democrat, joined with Republican Commissioners Ajit Pai and Michael O'Rielly in supporting the change. "I commend the Chairman for working with me to provide this relief to cable operators and hope to identify even more areas where we can reduce or eliminate legacy regulatory burdens in response to the rapid evolution of the communications landscape," O'Rielly wrote.

Legislation passed by Congress last year required the commission to streamline the process in which smaller providers, particularly those in rural areas, can seek relief from rate regulation. Democratic Commissioners Mignon Clyburn and Jessica Rosenworcel said they approved of steps to reduce burdens on smaller providers but not for all regardless of size.

Rosenworcel wrote that "Congress charged the Commission with establishing 'a streamlined process for filing... effective competition petition[s] for small cable operators[.]' To the extent that we do so here, this Order has my support. However, the Commission inexplicably races past this straightforward statutory directive and instead provides all cable operators—from the biggest to the smallest—with an expedited process to avoid oversight."

Clyburn wrote that the move "may harm consumers with increased prices and it unnecessarily burdens local franchising authorities."

Consortiums that represent cable companies praised the FCC's decision.

“By eliminating a 22-year-old presumption that cable operators do not face effective competition, the FCC will save independent cable operators from incurring the large legal and data-collection costs to demonstrate to the FCC’s satisfaction that they face stiff competition from both Dish and DirecTV and in many cases from AT&T U-verse or Verizon FiOS," the American Cable Association said in a statement e-mailed to Ars.

Consumer advocacy group Public Knowledge argued that "the FCC has gone beyond Congress's directive, adopting a blanket presumption that all cable operators, large and small, are subject to effective competition. Any analysis that shows that the largest cable companies face effective competition in their local markets is flawed. These companies bundle cable television with high-speed broadband and often have control over valuable programming. They are in a fundamentally different marketplace position than the small cable operators that Congress is concerned with."