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FCC Applies Certain Competitive Franchising
Rulings to Existing Cable Operators
By James
F. Ireland
[October 2007]
On Oct. 31, 2007, the Federal Communications Commission (FCC)
adopted its Second Report and Order in the Section 621 franchising
proceeding and extended a number of cable franchising rules
that previously applied only to new video competitors to incumbent
cable operators.
On March 5, 2007 the FCC released its First Report and Order
and Further Notice of Proposed Rulemaking (“First Report
and Order” and “Further Notice” respectively)
in its cable franchising docket. The First Report and Order
adopted rules streamlining the local cable franchising process
for new video entrants (i.e., telephone companies) and also
clarified that certain payments often demanded by local franchise
authorities (LFA) would be considered franchise fees and therefore
counted against the 5 percent franchise fee cap. These payments
include non-capital payments for public, educational and governmental
(PEG) access, charges “incidental” to the award
or enforcement of a franchise (e.g., consultant and attorney
fees, and free or discounted services to the LFA), and in-kind
requirements unrelated to the provision of cable service. The
First Report and Order also clarified what PEG and I-Net requirements
are permissible (and therefore not subject to the franchise
fee cap) and that LFA authority over “mixed-use”
networks (i.e., telephone networks providing video) is limited
to regulating cable service. See the DWT
March 2007 Update for a full discussion of the First Report
and Order.
The Further Notice inquired whether the rules and policies
adopted in the First Report and Order for new video competitors
should also be applied to incumbent cable operators and, if
so, whether they should apply immediately or following the expiration
of existing franchises.
Based on statements made during the FCC’s Open Meeting
and in its Press Release, it appears the Second Report and Order
(the full text of which has not been released) will conclude
that the following rules and policies adopted in the First Report
and Order are applicable to incumbents:
- The findings regarding what costs, fees and other compensation
to LFAs are subject to the 5 percent franchise fee cap;
- The findings regarding PEG and I-Nets; and
- The findings regarding “mixed-use” networks.
The FCC refused to immediately preempt inconsistent provisions
in existing franchise agreements. Based on Commissioner comments,
incumbents seeking relief from existing franchise provisions
that are inconsistent with the FCC’s rulings will be required
to challenge such provisions on a case-by-case basis, substantially
lessening the benefit of this ruling—and undercutting
the Commission’s announced goal of providing incumbent
cable operators “parity” with new telephone entrants.
The incumbent will have the burden of proving that an existing
franchise provision should be rendered unenforceable. (The Commission’s
hesitation to impose federal rulings on existing franchise agreements
stands in marked contrast to the Commission’s simultaneous
decision, in an accompanying agenda item, to immediately void
all exclusivity terms in existing cable agreements to serve
multiple dwelling units.)
The FCC did not apply the streamlined franchising provisions
or the build-out limitations in the First Report and Order to
incumbents. In addition, the FCC decided that it did not have
the authority to preempt state or local customer service requirements
that exceed the FCC’s customer service rules.
As with the First Report and Order, an LFA appeal of the Oct.
31 decision is expected.
For more information, please contact:
Other DWT contacts:
Paul
Glist, Washington, D.C., (202) 973-4200,
paulglist@dwt.com
Wesley
R. Heppler, Washington, D.C., (202) 973-4200,
wesheppler@dwt.com
Robert
G.
Scott, Washington, D.C., (202) 973-4200,
bobscott@dwt.com
T.
Scott Thompson, Washington, D.C., (202) 973-4200, scottthompson@dwt.com
This advisory is a publication of Davis Wright Tremaine LLP.
Our purpose in publishing this advisory is to inform our clients
and friends of recent developments in the communications industry.
It is not intended, nor should it be used, as a substitute for
specific legal advice as legal counsel may be given only in
response to inquiries regarding particular situations.
Copyright
© 2007, Davis Wright Tremaine LLP.
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