SCAN NATOA Reprises Cable and Telecommunications Issues
The States of California and Nevada chapter of NATOA (SCAN NATOA) recently held a one-day introductory seminar on cable and telecommunications technical and legal issues led by city attorney Paul Valle-Riestra and technical consultant Jonathan L. Kramer. The seminar was webcast from Foster City, Calf., with a big screen viewing in Cerritos, Calif. It was attended by about 50 regulators, a handful of industry representatives, and an unknown number of participants who signed up to receive a streaming video feed on their PCs.
Billed as Telecommunications 101, the seminar reviewed the technical and legal issues associated with telephony, cable television operations, open video systems, and wireless communications. The webcast was only partially successful; by early afternoon, the Cerritos group turned off the stream and allowed municipal consultant Michael Friedman and Altrio Communications Vice President of Public Policy Brenda Trainor to finish the session for the Southern California audience.
The most noteworthy discussions focused on Section 7901, cable modem fees, PEG requirements for OVS operators and franchise fees. According to Amy Brown, an attendee at the Foster City session, city representatives have been talking to Sacramento legislators about amending Section 7901. Ms. Brown claimed that the cities have support for their effort but that no legislator has been willing to spearhead the effort. It is unclear whether the cities have actually developed draft legislation. Valle-Riestra, in his overview, noted that Section 7901 seemed to be limited to voice communications and other incidental uses. However, he said, in the absence of voice communications, local authorities may be able to impose franchise requirements.
Regarding cable modem fees, Mr. Riestra-Valle explained that the FCC has classified cable modem service as an information service. However, as long as the jurisdictional boundaries of information services remain undefined and, more specifically, the FCC’s latest notice of proposed rulemaking on cable modem services is not concluded, local franchising authorities have a “hook” that can be used in franchise negotiations to assert some authority over cable modem fees. Certainly, according to Valle-Riestra, they can raise the issue in franchise negotiations. See In the Matter of Inquiry Concerning High-Speed Access to the Internet Over Cable and Other Facilities, 17 FCC Rcd 4798 (March 15, 2002).
Jonathan Kramer explained that node size affects Internet speeds (he reminded everyone of the SBC bandwidth hog campaign), and he commended one operator for bringing its node sizes down to the 100-200 subscriber range. However, he noted that every node needs a power supply and that these large power supply units generate complaints. He pointed out that smaller node size requires more nodes and more nodes increase the number of power supply units. He also said that, although an underground system works just as well as an aerial system, it was harder, though not impossible, to build a reliable underground cable system.
In a discussion about system upgrades, Ms. Trainor said that cities should hold off until after the 2006 federal deadline for transition to digital broadcast before seeking any system upgrades. On the issue of PEG obligations for OVS providers (such as Altrio), she referred to an FCC decision regarding a system in Rice Lake, Wisc., that resolves the issue of PEG comparability in favor of a cost per subscriber analysis. In other words, according to Ms. Trainor, an OVS provider is only obligated to pay the LFA the equivalent of what the incumbent is presently paying in PEG facilities and operational support on a per subscriber basis. However, Rice Lake does not stand for the proposition that OVS operator need only pay to the franchising authority a pro rata portion of the PEG payment based on the number of OVS subscribers. Rather, the franchising authority may require exact dollar for dollar matching of the operator’s annual PEG payments. See In the Matter of: CTC Telcom, Inc. v. City of Rice Lake, Wisconsin, 17 FCC Rcd. 13767 (July 15, 2002) (OVS operator must match, rather than share, the annual PEG access financial contributions of the local cable operator).
Finally Michael Friedman claimed that operators are misleading their subscribers by identifying the franchise fee payment as high as, in some cases, a 5.75 percent fee. He described the 5th Circuit’s decision in City of Dallas v. FCC (5th Cir. 1997) to permit a fee on franchise fee requirement as well as the latest appeal to the 5th Circuit on the right of cable operators to itemize franchise fees paid on ad sales and home shopping revenues. See City of Pasadena, FCC 01-289, CSR 5441-R, Oct. 4, 2001, appeal docketed Texas Coalition of Cities for Utility Issues v. FCC, No. 01-60804 (5th Cir. Jan. 22, 2002). Here, the FCC held that if a franchising authority chooses to collect franchise fees on ancillary revenues, like advertising and home shopping, then cable operators have a right to flow those franchise fees back to cable subscribers as an identified line item on the customer bill. NATOA has joined with the Texas cities to appeal the FCC decision arguing that those portions of the franchise fee payment derived from nonsubscriber sources should not be charged to subscribers. However, Congress provided for itemization of the actual amount of franchise fees paid in order to educate consumers about the actual fees their elected officials are collecting. [One week after the SCAN meeting, the 5th Circuit Court of Appeals issued its decision in Texas Coalition of Cities v. FCC, unanimously upholding the FCC’s “Pasadena” decision halting local franchising authorities’ efforts to hide from subscribers the franchise fees they collect from cable operators on nonsubscriber revenues. See our advisory on the “Pasadena” Decision (March 31, 2003).