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from: Massachusetts Municipal Association

FCC rules preempt local franchising authority

Tuesday, March 06, 2007

Two and a half months after announcing new cable franchising rules, the Federal Communications Commission yesterday formally published the rules, which significantly limit the role of local governments in the cable licensing process.

Citing the 1934 Communications Act as its authority, the FCC order limits the ability of municipalities to negotiate certain consumer benefits, such as adequate “build-out” within the community. The FCC says the rules are intended to expedite the local franchising process and promote competition.

The new rules significantly shorten the timeframe for local franchising authorities to negotiate new cable licenses, though Massachusetts is exempted because it has a specific negotiation timetable prescribed in state regulation. Even so, the new rules will significantly erode the ability of Massachusetts cities and towns to negotiate franchise agreements.

The FCC decision is expected to be challenged by opponents across the country who contend that it has questionable legal justification and runs counter to statutory requirements under current law. Many in Congress have also criticized the FCC for overreaching its jurisdiction in “legislating” these changes.

• Text of FCC ruling (700K PDF)

The new FCC requirements include the following:

• In communities with an incumbent cable provider, a local franchising authority would have 90 days to grant or deny a license application from the time it is filed.

• In communities without an incumbent provider, a local franchising authority would have 180 days to grant or deny a license application.

• A local franchising authority’s ability to impose build-out requirements is severely curtailed, eroding the assurance that all consumers in the community would receive state-of-the-art services, competition and lower prices.

• Certain fees, such as those negotiated for public, educational and government access, and other compensation in franchise agreements, must be counted toward the statutory 5 percent cap on franchise fees, resulting in a significant fiscal loss to the local franchising authority.

• Local franchising authorities cannot make “unreasonable” demands of cable applicants for public, educational and government access and I-Net, and they cannot deny a franchise agreement if the provider fails to commit to PEG access.

• “Level-playing-field” requirements that communities use to ensure comprehensive and balanced services in the multi-channel marketplace are preempted.

The FCC claims that local franchising authorities violate the Communications Act by “stand[ing] in the way of competitive entry” of cable providers. Offering little evidence, the FCC claims that communities cause unreasonable delays in acting on franchise applications, unreasonable build-out requirements, confusion concerning the meaning and scope of franchise fee obligations, and unreasonable demands for public, educational and government channel capacity and construction of I-Nets.

The MMA joins the NLC and other local advocates across the country in denouncing the FCC ruling as a preemption of local authority and the ability of communities to manage their own public rights-of-way.

Critics of the ruling say the restriction of local control over franchising is anti-consumer, anti-community and unnecessary because companies are already allowed to compete for cable franchises. They say the FCC rules ignore the fact that federal law already prohibits exclusive franchise agreements and municipalities cannot exclude qualified competitors from providing service. Verizon, for example, has negotiated agreements with more than 40 Massachusetts cities and towns and is in the process of negotiating about 20 additional local licenses.

In a dissenting view, one FCC commissioner said that while he supports competitiveness in the provision of video and broadband, “today’s item goes out on a limb in asserting federal authority to preempt local governments, and then saws off the limb with a highly dubious legal scheme.”

By MMA Legislative Analyst Matthew G. Feher