Cable Franchising: Current Issues and Developments

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IMLA – Chicago, IL September 10, 2011

Cable Franchising:

Current Issues and Developments

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Negotiating a cable franchise today =

No easy task

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(the Cable Act)

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Cable-related community needs and interests

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= no easy task

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In recent years:

Changes in State law

&

New FCC rules

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= difficult task

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H O P E

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1984

Cable Act =

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Recent law changes =

Often can be overcome

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Goals:

1.

2.

3. Background

Recent changes

Current issues

Background

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rooted in

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fundamental

(a)

Property rights

Police powers

(b)

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1984

The Cable Act

• Can require franchise

fee

≤ 5% of operator’s

gross revenues.

• Can establish customer

service standards.

• Can require

cable-related facilities and

institutional networks.

• Can define areas in the

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The Cable Act

• Established renewal process.

• Assures renewal only if:

• Cable operator’s proposal is “reasonable to meet the

future cable-related needs and interests” in light of their

costs.

• Its past performance has been adequate.

• It commits to comply with applicable law.

Recent challenges:

Changes in State law

&

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Some form of state franchise:

California, Connecticut, Florida, Georgia, Illinois,

Indiana, Iowa, Kansas,

Louisiana, Michigan, Missouri, Nevada, New Jersey, North

Carolina, Ohio, South

Carolina, Tennessee, Texas, Virginia, and Wisconsin

Limit:

PEG support

I-Net requirements and support

Build-out requirements

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But:

1. Majority = local franchising

2. Legality questioned:

e.g., Michigan

FCC Rules

• Two orders in 2007

• The first = new entrants

• The second = incumbents

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A local franchising authority may not . . .

unreasonably refuse

. . . to award an additional competitive franchise

FCC Rules

• Time limits (new

entrants) = 90 days if

existing access; 180

days for all others.

• If local government fails

to act = deemed granted.

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FCC Rules

• Preempted

“unreasonable”

build-out requirements (new

entrants).

• Ruling is very vague –

some new entrants have

claimed it preempts all

build-out requirements.

FCC Rules

• Franchise fee clarifications:

– Requirements that are not cable-related count

against the 5% franchise fee.

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FCC Rules

• PEG Requirements = new entrant cannot be

required to provide more than the incumbent.

• Mixed use networks = authority under the

Cable Act only extends to cable services.

FCC Rules

• Local governments can use non-Cable Act

authority to address operator’s use of local

property to provide other services (such as

telecommunications service).

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Current issues

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Cable Act Permits I-Nets

• The Cable Act contemplates that local governments may require

Institutional Networks and capacity on such networks.

• Institutional Network = “communications network which is constructed or

operated by the cable operator and which is generally available only to

subscribers who are not residential subscribers.”

• “[A] franchising authority may not require a cable operator to provide any

telecommunications service or facilities, other than institutional networks,

as a condition of the initial grant of a franchise, a franchise renewal, or a

transfer of a franchise.”

• A franchising authority “may in its request for proposals require as part of a

franchise, and may require as part of a cable operator’s proposal for a

franchise renewal, subject to section 626, . . . [that] channel capacity on

institutional networks be designated for educational or governmental use.”

Also: Some operators are urging

local governments to abandon

existing I-Nets for a grant that

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Risk: Could be offset against

franchise fee as operating cost

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In the past, had two

elements--Protected local government– system as

advanced as that in nearby communities

Protected cable operator – preventing

sweetheart deals to competitors.

(a)

(b)

Many operators are now:

Refusing (a) . . .

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3

Expanding Level Playing Field

1. Operators insist that franchise should

terminate if State or federal law changes

occur. (Avoids grandfathering.)

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3. System improvements

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esp.

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4. New PEG challenges

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(a)

(b)

(c)

What is a PEG channel in a digital

world?

Where will the channels be located?

How will the channels get from point

of origination onto the system?

(d) Will it be available on-demand?

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Local governments are entitled to:

5 % of gross revenues derived from

the operation of the system to provide

cable services. But . . ..

Some operators are insisting on a

narrow definition of “gross revenues” or

do not make full payments.

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Strong definition of GR

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6. Other community networks

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NYC – Time Warner / Cablevision

• Free broadband access to low-income

communities at public computing centers

across the city;

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Must be:

carefully crafted (FCC

limit on non-cable

related franchise

requirements)

7. Cellular backhaul and ethernet

services

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Cable operators beginning to use local

property for purposes other than cable

services.

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Cable franchise only authorizes:

the provision of cable services.

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Over-the-top:

Content that rides “over-the-top” of a

cable system, but over which the

cable operator has not (or may not)

exercise control.

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Typically:

≠ cable service requiring

franchise (no facilities)

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Matthew K. Schettenhelm

[email protected]

Best Best & Krieger

1155 Connecticut Avenue, N.W.

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Credits

• 1984 Tigers photo --http://www.flickr.com/photos/galaxyfm/4059522844/