Cable Franchising: Current Issues and Developments

Transcription

1 Cable Franchising: Current Issues and Developments Matthew K. Schettenhelm Best Best & Krieger LLP 76th Annual IMLA Conference Chicago

2 Negotiating a cable franchise today = No easy task 1984

3 Added Title VI

4 (the Cable Act) > 25 years

5 Cable-related community needs and interests Until 2025?

6 = no easy task +

7 In recent years: Changes in State law & New FCC rules Some operators = Increasingly resistant

8 = difficult task But...

9 H O P E 2

10 1984 Cable Act = Still effective

11 Recent law changes = Often can be overcome But to be successful:

12 Current issues and developments

13 Goals: Background Recent changes Current issues Background

14 rooted in 2

15 fundamental (a) (b) Property rights Police powers

16 1984 The Cable Act Can require franchise fee 5% of operator s gross revenues. Can establish customer service standards. Can require channels, facilities, and capital support for PEG channels. Can require cablerelated facilities and institutional networks. Can define areas in the community where a cable operator must serve.

17 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 & New FCC rules

18 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 Franchise fee audits

19 But: 1. Majority = local franchising 2. Legality questioned: e.g., Michigan FCC Rules Two orders in 2007 The first = new entrants The second = incumbents

20 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.

21 FCC Rules Preempted unreasonable buildout 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. The Cable Act only allows PEG capital costs to be collected separately from the franchise fee. Certain fees such as outside consultant fees are not incidental to the award of a franchise, and count against the franchise fee.

22 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).

23 Current issues 1. I-Net: Managed services?

24 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 can be used to purchase service

25 Risk: Could be offset against franchise fee as operating cost 2. Level playing field clauses

26 In the past, had two elements-- (a) (b) Protected local government system as advanced as that in nearby communities Protected cable operator preventing sweetheart deals to competitors. Many operators are now: Refusing (a)... And expanding (b).

27 3 Expanding Level Playing Field 1. Operators insist that franchise should terminate if State or federal law changes occur. (Avoids grandfathering.) 2. Operators attempt to undo the distinction the FCC drew between incumbents and new entrants. 3. Operators have suggested they must be treated equally to anyone providing video service.

28 3. System improvements Many operators are refusing

29 esp. In smaller communities

30 4. New PEG challenges 4

31 (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? 5. Franchise fee issues

32 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. Imp.

33 Strong definition of GR Audit rights

34 6. Other community networks e.g.

35 NYC Time Warner / Cablevision NYC Time Warner / Cablevision Free broadband access to low-income communities at public computing centers across the city; Free commercial-grade Internet service to all public libraries; and Wi-Fi networks in City parks.

36 Must be: carefully crafted (FCC limit on non-cable related franchise requirements) 7. Cellular backhaul and ethernet services

37 Cable operators beginning to use local property for purposes other than cable services. Imp.:

38 Cable franchise only authorizes: the provision of cable services. 8. Over-the-top services

39 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. Netflix / Hulu

40 Typically: cable service requiring franchise (no facilities) But what about cable operator itself?

41 Contact Information Matthew K. Schettenhelm Best Best & Krieger 1155 Connecticut Avenue, N.W. Suite 1000 Washington, D.C Phone: Fax: Website:

42 Credits 1984 Tigers photo -- Cable box: