FCC ruling halts regulation of Hawaii isle’s cable rates

The Federal Communications Commission has ordered the deregulation of basic cable rates on Hawaii island, ruling in favor of Oceanic Time Warner Cable and against the state of Hawaii.

The cable company applied with the FCC for "effective competition (status) for Oahu and Hawaii island in 2011," said Oceanic President Bob Barlow. "Hawaii is one of the very few places in the country that still regulates rates."

The finding that the cable company had effective competition from another multichannel video programming distributor, in this case satellite TV services DISH Network and DirecTV, released Oceanic from regulation of the rates it charges for its basic tier of service on Hawaii island. The state had argued the direct broadcast satellite companies did not represent effective competition to the cable company.

Barlow expects the FCC to issue a similar ruling on its Oahu filing.

Because of the complex rate structure formula set by government regulation, different rates are charged for Oceanic’s lowest tier of service in each of its service areas, which the state calls franchises.

It is cheaper to subscribe to basic cable in Hilo than it is in Kona, for instance.

Also due to the regulations, Oceanic was required to file annual documents with the state and the FCC explaining its rate structure for each of seven franchise areas using the complex formula, which the state would then hire a consultant to review, Barlow said.

Fewer than 10 percent of Oceanic’s subscribers opt for the basic service level, which complicated pricing in each franchise area.

"The majority take a level of service that includes Basic, CPST (Cable Product Service Tier) and digital," or what the Oceanic website calls standard service, he said. "Customers who take these services together pay exactly the same amount no matter where they live in Hawaii, including Kona and Hilo."

The ruling allows the cable company some flexibility in promotional pricing, but the soonest it is likely to make any changes will be April, he said.

It is likely to take "years" to even out pricing for basic service, Barlow said.

"We’re not going to take a $15 price in Hilo and make it $18 next year. That’s not going to happen," he said.

Rates charged by satellite TV providers such as DISH Network and DirecTV are not regulated, according to The Satellite Guy Inc. President Jason Gardner.

"We have to stay competitive with every cable company in the nation," said Gardner, whose company does installations for both satellite providers.

Current promotions by both providers offer special pricing for 12 months, for local broadcast programming as well as nationally known channels such as HBO, Showtime, Starz and Cinemax, though the aforementioned premium channels are included for three months as an introductory offer, Gardner said.

DISH Network starts its service at $29.99 a month for a package called "America’s top 120" channels.

DirecTV has an entry-level "Family Pack" of 50 channels but is currently offering its "Entertainment Pack" of 140 channels, including NFL Sunday Ticket, at $24.99 a month with a 24-month commitment.

Hawaiian Telcom offers TV service beginning at $63.95 a month for more than 175 channels, in select areas, according to its website.

Oceanic charges $63.30 for its standard service, which includes 17 basic channels and 47 other channels.

Deregulation of basic cable rates on Hawaii island and, potentially, Oahu may not address the practice of cord-cutting, which is one of the biggest problems for cable companies across the nation.

Given other entertainment providers such as Netflix, Hulu and Vudu, other services and the Internet in general, Barlow said, "We have lost more customers to cord-cutting than to DISH or Hawaiian Telcom."

Given Hawaii’s unique geography, most isle residents wishing to watch local broadcast stations cannot receive digital television signals over the air; therefore, it is necessary for most to subscribe to some sort of pay-TV service.

Reach Erika Engle at 529-4303, erika@staradvertiser.com or on Twitter as @erikaengle.

Oceanic FCC