CPUC Amends Video Franchising Rules: Extension applications, bonding requirements, broadband reporting affected
On July 14, 2008, the California Public Utilities Commission (CPUC) issued a Decision amending its rules applicable to video franchise holders. The Decision Amending General Order 169 (“Decision”) was issued in response to the Assigned Commissioner's Ruling and Scoping Memo for Phase III (“Phase III Scoping Memo”), which identified three issues for resolution.
These issues concerned requests for extensions of build-out deadlines, the CPUC's bonding requirement for video franchise holders, and broadband reporting requirements. The Decision, which addresses all of these issues, and a brief background and discussion of the Decision are included in this advisory.
In its Decision, following input from numerous interested parties, the CPUC ruled as follows:
- Franchisees requesting extensions of their build-out deadlines should follow the CPUC's general application procedures, prescribed by Rule 2.1 of the CPUC's Rules of Practice and Procedure, rather than the application procedures pertaining to the grant of a video franchise.
Any applications for extension must be filed as soon as practicable after the franchisee determines that it will be unable to meet a deadline, but in no event, sooner than two years after the applicant began providing service, and in no event later than the earliest deadline for which the extension is sought.
- The cumulative bonding requirement for franchisees holding multiple franchises is $500,000.
- Franchisees are required to submit to the CPUC the same information regarding subscribership to broadband services that is required by the FCC Form 477 Order.
Applications for extensions
Pursuant to Public Utility Code § 5890, video franchise holders are prohibited from discriminating against any class of potential customers and are required to meet various build-out obligations that require services to be available to specified percentages of households within the franchise territory by specified deadlines. After two years of providing service, a franchise holder is permitted to apply for an extension of its build-out requirements, which may be granted if the franchisee's build-out is impeded by circumstances beyond its control.
At issue in the Decision was the application process applicable to extension requests and the timing of an extension application. The CPUC determined that it did not make sense to adapt its video franchise application form to handle requests for extensions and that extension applicants should, instead, follow the CPUC's general application procedures, prescribed by Rule 2.1 of its Rules of Practice and Procedure.
The CPUC further determined that although a franchisee must wait at least two years from the date it begins providing service to file for an extension, such extension must be made as soon as practicable after the franchisee determines that it will be unable to meet a deadline and in no event later than the earliest deadline for which the extension is sought.
Under the CPUC's previously adopted rules, a franchisee could be required to post a bond of no less than $100,000 and no more than $500,000 for each franchise granted. For historical reasons, some video providers in California operate through several different entities, each of which has a separate state franchise. Other video providers operate under a single entity that obtains a single franchise.
Thus, under the previous rules, a multiple-franchise holder could be required to post a succession of bonds that greatly exceeds $500,000, while a single-franchise holder would be capped at $500,000. This is true regardless of whether the multiple-franchise holder had more subscribers than the single-franchise holder. Recognizing that this disparate treatment could have unintended, anti-competitive effects, the new rule limits at $500,000 the cumulative bonding requirement of any one holder of multiple franchises.
The Phase III Scoping Memo sought comments on whether the CPUC should require franchise holders to report, on a Census Tract basis, the number of households that have available and that actually receive certain broadband speed tiers. On June 12, 2008, after the Phase III Scoping Memo was released, the Federal Communications Commission (FCC) issued its Form 477 Order, which requires each company offering broadband service to report, by Census Tract, the speed of service purchased by customers in a matrix format that includes 64 variations of upstream and downstream speeds.
As a result, industry comments generally argued that the CPUC's reporting requirements should track those imposed by the FCC. Comments by consumer groups argued for more granular reporting, by Census Block rather than Census Tract. The CPUC agreed with the industry position, finding it “reasonable to require service providers to report on the services to which customers subscribe in exactly the same way that the FCC requires providers to report on the number of subscribers in each Census Tract in each of the broadband tiers and reporting requirements imposed by the FCC.”
In so doing, the CPUC recognized the cost-savings and efficiencies of tracking the FCC procedures. The CPUC also determined that broadband data submitted to the CPUC is competitively sensitive and therefore would receive confidential treatment under the CPUC's rules.