DA 9~·66 Federal Communications Commission Record 11 FCC Red No. 5 
Before the 
Federal Communications Commission 
Washington, D.C. 20554 
LETTER 
January 24, 1996 
Released: January 24, 1996 
IN REPLY REFER TO: 
Omnicom Cablevision of Illinois, Inc. 
clo Stuart F. Feldstein, Esq. 
Fleischman and Walsh, L.L.P. 
1400 Sixteenth Street, N.W. 
Washington, DC 20036 
Dear Mr. Feldstein: 
DA 96-66 
This is in response to your letter of November 7, 1995, 
on behalf of Omnicom Cablevision of Illinois, Inc., d/b/a 
Post Newsweek Cable ("Omnicom"). requesting confirma­
tion that ce~tain rate. and service restrUcturings implement­
ed by Omnicom on its cable system serving Highland Park, 
Illinois do not violate the Commission's prohibition against 
negative ?Ption billing. In addition, Omnicom requests 
confirmation that, to. the extent Illinois law would have 
required it to seek affirmative consent from subscribers to 
accomplish such restructurings, Illinois law is inconsistent 
with . feder_al . regulation and is, therefore, preempted. 
Omnicom rnd1cates that a copy of its letter was also sent to 
coun~el for !he plaintiffs in a class action lawsuit currently 
pendmg agamst Omnicom in Illinois state court concern­
ing alleged negative option billing practices (Greenberg et 
al. v. Post Newsweek Cable). Counsel for plantiffs filed a 
reply, _dated ~ece~ber 4, 1995, responding to arguments 
raised rn Omnicom s request for clarification. · 
O_mnicom alleges that _it restructured its service offerings 
on its cable system servmg Highland Park, Illinois on or 
about September l, 1993, the effective date of cable rate 
regulation rules adopted by the Commission pursuant to 
t?e Cable Television Consumer Protection and Competi­
!•on Act of l ?92 ~" 19?2 Cable Act"). These restructurings 
mcluded specific hne Item charges for a wire maintenance 
service plan and a monthly programming guide. According 
to Omnicom, prior to September l, 1993, the operator 
charged subscribers a set monthly rate for basic cable tele­
v_ision service. This basic monthly charge included provi­
s10n of the following services: basic cable programming, 
lease of a converter, maintenance of wiring and equipment 
on. the subscriber's premises, and a monthly programming 
g~·~~- Omnic?m seeks clarification of the federal rule pro· 
h1b1tmg negative option billing only in connection with its 
provision of two services -- maintenance of internal wiring 
and a programming guide. Omnicom states that both of 
these services were included in the monthly charge for 
basic cable service prior to September 1, 1993 and that 
subs_cribers received these services as part of the basic 
service package. In August of 1993, Omnicom transferred 
ownership_ of the internal wiring from the cable system to 
the subscribers at no cost to the subscribers. On September 
2492 
1, 1993, Omnicom began separately itemizing monthly 
charges on the bill for wire maintenance and the cable 
guide as well as for basic service programming and lease of 
equipment. Omnicom charged subscribers $1.75 per month 
for wire maintenance and $.75 per month for the cable 
guide. According to Omnicom, subscribers were informed 
that they could choose to decline the monthly wire main­
tenance charge and elect, instead, to pay an hourly service 
charge for actual visits to their home. Omnicom states that 
subscribers were also informed that they had the option to 
decline to receive the monthly programming guide. Pre­
~iously, subscribers had at least twice been given the op­
tion, through a check-off box on billing statements and 
through individual telemarketer contacts, of not receiving 
the cable guide. On those occasions, however, subscribers · 
who declined to receive the program guide did not receive 
a reduction in the overall. service charge. As of September 
1, 1993, subscribers who chose not to receive the cable 
guide were given a $.75 discount. 
Omnicom explains that it is the defendant in a class 
action lawsuit now pending in Illinois state court, 
Greenberg et al. v. Post Newsweek Cable. Plaintiffs in the 
Green_berg s~it allege that Omnicom's imposition of charges 
for wire mamtenance and a programming guide after Sep­
tember 1, 1993 violates Illinois consumer protection law 
because the plaintiffs did not affirmatively consent to con­
tinue to receive those services following restructuring. In 
its letter, Omnicom contends that it correctly interpreted 
federal rules and policies concerning negative option bill­
ing. Omnicom relies on the· Colllmission's Letter of In­
quiry Orders (Comcast Cablevision, Tallahassee Florida 
LOI-93-2, 10 FCC Red 2106 ( 1995) and Parag~n Cable' 
Irving, Texas, LOI-93-25, 10 FCC Red (>012 (1995)) t~ 
support its claim that its restructurings do not violate the 
prohibition against negative option billing and comply with 
Commission regulations regarding the unbundling of 
offerings and charges. Omnicom argues that subscribers 
continued to receive on September 1, 1993 the same ser­
vices and equipment that they had ordered and received 
prior to restructuring. Omnicom seeks confirmation that 
its. unbundling ~f ':"ire. maintenance and programming 
guide c?arges begmnmg m September of 1993 is permitted 
by Section 623(f) of the Communications Act, 47 U.S.C. § 
543(f) and Section 76.981 of our rules, 47 C.F.R. § 76.981. 
Omnicom seeks further confirmation that insofar as Il­
linois law would have required Omnicom to seek affir­
mative subscriber consent to accomplish the September 1, 
1993 restructurings described above, Illinois law is incon­
sistent with federal regulation and is preempted thereby. 
In its reply to Omnicom's clarification request, counsel 
for ~he plaintiffs in the Greenberg suit argues that 
<?mnic~m h~s ~iolated the federal prohibition against nega­
tive option b1lhng by charging for a wire maintenance plan 
an~ program magazine not affirmatively requested by sub­
scnbers. Specifically, plaintiffs' counsel disputes 
Omnicom's claim that the itemization of the wire main­
tenance charge on consumer bills is unbundling in compli­
ance with Commission requirements. Plaintiffs' counsel 
contends that Omnicom did not simply begin itemizing for 
previously provided maintenance service on subscriber 
owned equipment but, instead, transferred ownership of 
the inside wiring. Plaintiffs' counsel argues that a transfer 
of ownership is "fundamentally different from a mere 
unbundling". Plaintiffs' counsel likens the case at hand to 
Monmouth Cablevision, Monmouth County, New Jersey, 
LOI-94-1, 10 FCC Red 9438 (1995) in which the Commis-
11 FCC Red No. 5 Federal Communications Commission Record DA 96-66 
sion found that the automatic billing of subscribers for the 
sale of a previously leased remote control unit violated 
federal negative option billing provisions. Our finding in 
Monmouth was based on the belief that, in the circum­
stances present there, changing the way in which an exist­
ing service or equipment was offered, i.e., from leasing to 
selling, constituted a. fundamental change in service so as to 
invoke the prohibition against negative option billing. 
Plaintiffs' counsel argues that "by transferring ownership of 
the wiring and then automatically enrolling its subscribers 
in a maintenance plan to cover subscriber-owned equip­
ment, Omnicom did something far different from a mere 
unbundling' of a previously-provided service, in violation 
of the federal prohibition against negative option billing ... " 
Plaintiffs' counsel distinguishes the instant case from 
Comcast Cablev'tsion, Tallahassee, Florida, LOI-93-2, 10 
FCC Red 2106 (1995), maintaining that in Comcast there 
was no change in equipment ownership. As to the pro­
gramming magazine, counsel for plaintiffs contends that 
itemization of the guide charge was not unbundling re­
quired by Commission rules, specifically, Section 76.923, 
47 C.F.R. § 76.923. Counsel for plaintiffs also points out 
that subscribers who elected not to receive the program­
ming magazine prior to September of 1993, did not receive 
any reduction in their cable bill. Plaintiffs' counsel cites 
this fact to undermine Omnicom's claim that it was merely 
unbundling a previously included charge, as did the oper­
ator in Paragon Cable, Irving, Texas, LOI-93-25, 10 FCC 
Red 6012 (1995), rather than charging a new fee through 
negative option billing. 
Section 623(f) of the Communications Act, 47 U.S.C. § 
543(f), states that "[al cable operator shall not charge a 
subscriber for any service or equipment that the subscriber 
has not affirmatively requested by name." It further speci­
fies 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. In the Implementation 
of Sections of the Cable Television Consumer Protection and 
Competition Act of 1992: Rate Regulation, MM Docket 
92-266, Report and Order and Further Notice of Proposed 
Rulemaking ("Rate Order"), 8 FCC Red 5631 (1993), the 
Commission explained how the prohibition against nega­
tive option billing applies to changes in the mix of pro­
gramming services and further stated that restructuring of 
tiers and equipment, including restructuring appropriate 
for implementing the Cable Act's provisions, would not 
bring the prohibition into play if subscribers continued to 
receive the same number of channels and the same equip­
ment unless the restructuring effects a fundamental change 
in the nature of the service. Rate Order at ~ ~ 440-441 & 
n.1105. The Commission's rule on negative option billing 
is set forth in Section 76.981, 47 C.F.R. § 76.981. 
In addition to the negative option billing prohibition, 
Commission rules adopted pursuant to the 1992 Cable Act 
required many changes in the way that cable operators 
charge subscribers for services, including the requirement 
that cable operators unbundle or separate equipment and 
installation rates from programming rates. Rate Order at ~ 
287. The 1992 Cable Act sets out certain standards for 
determining the reasonableness of equipment and installa­
tion rates and other criteria for evaluating basic service tier 
rates. Id. In order to apply the different standards for 
evaluating equipment and programming rates and to pro­
vide subscribers with additional service options, the Com-
2493 
mission required that the ratesfor each must be unbundled 
from each other. Id. Section 76.923(b), 47 C.F.R. § 
76.923(b), states that "[a] cable operator shall establish rates 
for remote control units, converter boxes, other customer 
equipment, installation, and additional connections sepa­
rate from rates for basic tier service. In addition, the rates 
for such equipment and installations. shall be unbundled 
one from the other." Section 76.923, 47 C.F.R. § 76.923, 
also describes the type of equipment which is subject to the 
unbundling requirement. The type of equipment operators 
are required to unbundle consists of "all equipment in a 
subscriber's home that is used to receive the basic service 
tier." Section 76.923, 47 C.F.R. § 76.923, states that such 
equipment includes converter boxes, remote control units, 
connections for additional television receivers, and other 
cable home wiring. 
The Commission's unbundling requirements have been 
the basis for its previous resolution of a negative option 
billing issue in the context of a wire maintenance service 
plan. In Comcast Cablevision, Tallahassee, Florida, LOI-
93-2, 10 FCC Red 2106 (1995), the Commission deter­
mined that the operator did not violate the prohibition 
against negative option billing when it began charging sub­
scribers separately for a wire maintenance service plan. In 
Comcast Cablevision, Tallahassee, Florida, the cable oper­
ator claimed that prior to September 1, 1993 it included 
wire maintenance service in the charges for the basic ser­
vice tier. The operator indicated that after September 1, 
1993, it restructured and billed separately for this service 
plan. The Commission held that the operator's separate 
itemization of this charge on subscriber bills was "simply 
compliance with Commission rules requiring unbundling" 
and did not constitute negative option billing. The Com­
mission pointed out that subscribers continued to receive 
the same level of service before and after the operator had 
unbundled its equipment rates. Our decision in Comcast is 
instructive with respect to the instant case. The fact that 
Omnicom transferred ownership of the inside wiring to 
subscribers is not relevant for the purposes of our negative 
option billing analysis. The transfer of ownership, accom­
plished at no cost to subscribers, was not a negative option 
billing practice. Furthermore, regardless of owns the inside 
wiring, subscribers paid for and received wire maintenance 
service prior to September of 1993 and continued to pay 
for and receive wire maintenance service after this date. · 
In Paragon Cable, Irving, Texas, LOI-93-25, 10 FCC Red 
6012 (1995), the Commission addressed the negative option 
billing issue in connection with programming guide 
charges. In that case, the cable operator eliminated a senior 
citizen discount package which included. among other 
things, receipt of a programming guide and began charging 
senior citizens a separate fee each month for the guide. The 
Commission determined that the itemization of a separate 
programming guide charge on the monthly bills of sub­
scribers who had previously received the guide as part of 
the discount package did not violate federal negative option 
billing requirements. The Commission concluded that 
"[ajlthough a program guide is not an item subject to the 
equipment or installation rate regulation, its unbundling 
from the regulated tier charge appears indistinguishable 
from such charges for purposes of our negative option 
billing analysis." That conclusion appears to be equally 
applicable here. Counsel for plaintiffs insists that the pro­
gram guide was not simply an unbundled component of 
the package of services previously provided because sub­
scribers who declined to receive the guide were not given a 
DA 96-66 Federal Communications Commission Record 11 FCC Red No. 5 
rate reduction prior to 1993. That subscribers received no 
rate reduction if the guide was not accepted does not 
necessarily establish that it was provided for free or that it 
was not part of the package of services ordered when 
initially subscribing. The guide was, in fact, a component 
part of the service offering that subscribers were entitled to 
receive when they ordered cable service. Therefore, when 
Omnicom began unbundling its cable services, the operator 
was permitted to itemize all services previously contained 
in its package, including the provision of a programming 
guide, and recover associated costs. 
Omnicom urges the Commission to find that the en­
forcement of Illinois consumer protection law against 
Omnicom under the facts of this case is preempted by 
federal cable rate regulation. In its reply to Omnicom's 
letter, counsel for plaintiffs in the Greenberg suit points out 
that there is concurrent state and federal jurisdiction to 
regulate negative option billing and argues that state con­
sumer protection law that is stricter than federal rules 
should not be preempted where it "does not interfere with 
the federal prohibition against local rate regulation." Plain­
tiffs' counsel also attempts to distinguish the present case 
from Doyle, asserting that Doyle involved only a minor 
adjustment in programming. 
With regard to the issue of preemption, the Commission 
has made it clear that state and local laws relating to 
negative option billing are not preempted or displaced by 
the provisions of the 1992 Cable Act on a general basis. 
Sixth Order on Reconsideration, Fifth Report and Order, and 
Seventh Notice of Proposed Rulemaking ("Going Forward 
Order"), Docket Nos. 92-266 and 93-215, IO FCC Red 1226 
at 11 111 (1994); Section 632(c)(l) of the Communications 
Act. However, where there is a conflict between the rate 
regulation rules implementing the 1992 Cable Act and 
such state or local regulations, system operators are entitled 
to rely on the federal rules which must prevail over 
conflicting state or local requirements.' Going Forward Or­
der at 1111 112-119 ( 1994 ). See also Warner Cable Commu­
nications, Milwaukee, Wisconsin, LOI-93-14, IO FCC Red 
2103 (1995); Time Warner Cable v. Doyle, 66 F.3d 867 (7th 
Cir. Sept. 25, 1995); Letter to Charles S. Walsh (DA 
95-1527, released July 7, 1995 and Letter to Frances J. 
Chetwynd (DA 95-2203, released October 20. 1995). The 
objective of cable rate regulation is to ensure that cable 
rates are reasonable. Federal rules established pursuant to 
the 1992 Cable Act seek to achieve this objective, in part, 
by requiring operators to unbundle the rates charged for 
cable services. The unbundling and rate restructuring that 
took place in this situation was undertaken by Omnicom 
in an effort to bring its service offerings into compliance 
with the structure of the federal rate rules. We ·believe that 
the act of unbundling to comply with the federal cable rate 
regulatory scheme cannot be a basis for a state or local 
consumer protection law claim. We do not agree, as plain­
tiffs' counsel suggests, that Omnicom·s restructurings. de­
scribed above, are less related to compliance with the 
federal rate rules than were the restructurings at issue in 
the Doyle case. In Doyle, the operator implemented a 
channel restructuring not specifically required by our 
rules. In the instant case, Omnicom itemized wire main­
tenance and program guide charges in an effort to comply 
with the federal unbundling requirements. Additionally, in 
Doyle, the court determined that a Wisconsin consumer 
protection statute was preempted because its enforcement 
would interfere with the execution of the Commission's 
rate rules. We believe that, in the instant case, application 
2494 
of a state negative option billing law against Omnicom 
would similarly undermine implementation of federal ca­
ble rate regulation. 
We note, in addition, that the expeditious introduction of 
federal rate regulation and the consequent rate and service 
changes implemented by cable operators did not allow for 
the more normal interaction with subscribers that might 
ordinarily take place when marketing, billing, and service 
offerings are revised. On July 27, 1993, the Commission, 
pursuant to Congressional directives, issued an Order that 
moved the effective date of cable service rate regulation 
from October 1, 1993 to September 1, 1993. To support 
the transition to this new effective date, the Commission's 
July 27 Order also preempted state or local notice require­
ments and waived the Commission's own notice require­
ments contained in 47 C.F.R. Sections 76.932, 76.964, and 
76.309(c)(3)(i)(B) until September 1, 1993 to permit cable 
operators to restructure rates and services up until Septem­
ber 1, 1993 without prior notice to subscribers. The July 
27 Order is reflective of a unique episode in the im­
plementation phase of the rate regulation provisions of the 
1992 Cable Act. Congress was concerned that system oper­
ators had been and were continuing to charge rates that 
were not subject to appropriate regulatory controls and 
found it imperative that such controls be introduced with­
out delay. As reflected in the July 27 Order, administrative 
resource issues first delayed and then accelerated the effec­
tive date of the rules. Changes in billing practices asso­
ciated with the introduction of regulation and in particular 
with the restructuring and unbundling of service offerings, 
imposed heavy compliance burdens. To facilitate this 
unique implementation phase of the regulatory process, the 
July 27 Order of necessity suspended certain notice and 
billing practice requirements that would otherwise have 
been associated with these changes. State or local require­
ments in conflict were necessarily preempted to make com­
pliance with the introduction of both federal and local rate 
regulation possible. We recognize that the efforts described 
by Omnicom were associated with the effective date of the 
new rules. · 
Sincerely, 
Meredith J. Jones 
Chief, Cable Services Bureau 
cc: M.H. Berns (counsel for plaintiffs in Greenberg et al. 
v. Post Newsweek Cable)