Advisory Alert: FCC Clarifies That Competitive Cable Franchising Rules Do Not Preempt State Franchising Laws, and Affirms Application of Its 621 Order to Incumbent Cable Operators

Nearly eight years after issuing its so-called "621 Order" limiting local governments' actions and authority over competitive cable franchising, and its 2007 Second Report and Order which extended to incumbent cable operators many of those same findings, the Federal Communications Commission issued an Order on Reconsideration of the Second Report and Order on Jan. 21, 2015. The Commission clarified that the franchising rules and findings it extended to incumbent cable operators in the Second Report and Order do not apply to any state laws governing cable television operators, or to any state-level cable franchising process.

The primary effect of the Second Report and Order since its release has been to reinforce statutory limits on local franchising authority that were explained in the 621 Order. For example, the Commission clarified that various demands in franchises are to be considered franchise fees and thus counted against the statutory 5 percent cap set by Section 622 of the Communications Act. These include demands for consultant's and attorney’s fees, and the provision of free or discounted services. Likewise, payments for support of PEG programming—as opposed to payments for capex—are to be counted as franchise fees.

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