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FCC's Video-Franchise Order Garners Mixed Reception

The Federal Communications Commission adopted and released its Report and Order and Further Notice of Proposed Rulemaking regarding video franchising, and the fur has begun to fly.

In the Order, the commission concludes that the current operation of the franchising process constitutes an "unreasonable barrier to entry that impedes the achievement of the interrelated federal goals of enhanced cable competition and accelerated broadband deployment." Here are a few of the "unreasonable barriers" cited in the Order:

>>Negotiations that extend beyond certain time frames

>>Unreasonable build-out requirements

>>Demanding more than the statutory 5-percent cap on franchise fees unless certain specified costs, fees, and other compensation required by local franchising authorities are counted toward that cap

>>Denying an application based on a new entrant's refusal to undertake certain unreasonable obligations relating to public, educational, and governmental ("PEG") and institutional networks

>>Preempting local laws, regulations, and requirements to the extent they impose greater restrictions on market entry than the rules adopted herein.

The 100-plus-page document comes 75 days after the FCC approved the rules late last year (TelecomWeb news break, Dec. 21, 2006). So far, there hasn't been any blowback from the telecom industry, but local governments look likely to mount a legal challenge to the order, with The National Association of Telecommunications Officers and Advisors (NATOA) retaining legal counsel in January. A spokeswoman for the National League of Cities, which is working with NATOA, said the staff currently is reviewing the document. Mayor Ken Fellman of Arvada, Colo., says, "I have big concerns about local control. The FCC went great lengths to explain why they have the legal authority to do this. Clearly, they're overstepping their authority."

The National Cable & Telecommunications Association (NCTA) also is reviewing the order. It's not clear if the cable industry will sue, but NCTA has been vocal in its displeasure, saying the order creates "an unlevel playing field" by not applying the new rules to all providers. Under the rules, the FCC tentatively concludes cable operators will have to wait until their franchises expire to be entitled to lesser regulation and the 90-day shot clock. The FCC has committed to issuing an order within six months on how the rules should apply to cable operators and what effect the order may have on most-favored nation clauses that may be included in some franchises. NCTA has expressed concern that it may mean pre-emption of those clauses, which take effect if a new entrant comes in under better terms.

Here's what others had to say about the order:

>>FCC Chairman Kevin Martin: "The ability to deploy broadband networks rapidly...is intrinsically linked to the ability to offer video to consumers. As the commission stated in the notice in this proceeding, 'the construction of modern telecommunications facilities requires substantial capital investment and such networks, once completed, are capable of providing not only voice and data, but video as well.' As a consequence, the ability to offer video offers the promise of an additional revenue stream from which deployment costs can be recovered."

>>FCC Commissioner Michael Copps: "I have been troubled at the lack of a granular record that would demonstrate that the present franchising system is irretrievably broken and that traditional federal-state-local relationships have to be so thoroughly upended. If we are going to preempt and upend the balances inherent in long-standing federal-state-local jurisdictional authorities, we should have a record clearly demonstrating that those local authorities are not up to the task of handling this infrastructure build-out and that competition can be introduced only by preempting and upsetting these long-standing principles of federalism. Many people questioned, and continue to question, the Commission's legal authority to do what it is doing today. It is clear that those questions remain and that the Commission has been asked by those with oversight powers to more conclusively demonstrate our authority to undertake the actions we initiate today. I believe it is the better course of wisdom in so far-reaching a proceeding, in light of the concern being expressed by those with oversight responsibilities of this Commission, to thoroughly answer those questions, to lay out the basis of our claimed legal authority, and to explain what legal risks this action entails before taking action."

>>FCC Commissioner Jonathan Adelstein: "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. It substitutes our judgment as to what is reasonable - or unreasonable - for that of local officials - all in violation of the franchising framework established in the Communications Act. Today's Order is certain to offend many in Congress, who worked long and hard on this important issue, only to have a Commission decision rushed through with little consultation. The result will be heavy oversight after-the-fact, and a likely rejection by the courts. It will solve nothing, create much confusion, and provide little certainty or progress on our shared goal of promoting real video competition and universal broadband deployment."

>>FCC Commissioner Deborah Taylor Tate: "I ultimately support today's item because I believe that, by streamlining timeframes for action and providing practical guidelines for both LFAs and new entrants, the item encourages the development of competition in the video marketplace and speeds the deployment of broadband across the country in a platform-neutral manner. Additionally, I am pleased that we recognize - and do not preempt - the actions of those states that have reformed their franchise rules."

>>FCC Commissioner Robert M. McDowell: "This order strikes a careful balance between establishing a de-regulatory national framework to clear unnecessary regulatory underbrush, while also preserving local control over local issues. It guards against localities making unreasonable demands of new entrants, while still allowing those same localities to be able to protect important local interests through meaningful negotiations with aspiring video service providers. Local franchising authorities are still free to deny deficient applications on their own schedule, but we are imposing a "shot clock" to guard against unreasonable delay."

>>The Video Access Alliance: The group reaffirms its support for the recent FCC policy change that will speed up the process companies go through to enter the video services market. The VAA feels this procedural adjustment will directly lead to more opportunities for aspiring content providers. The VAA is dedicated to improving opportunities for independent, emerging and minority networks and video content providers.

>>Robert K. Johnson, president, Consumers for Cable Choice: "Cable television competition received a shot in the arm today, thanks to the FCC's decision to streamline the local regulatory approval process. Consumer wallets and video choices will be healthier because of this foresight."

>>Gary Lytle, senior vice president/federal relations, Qwest: "A streamlined franchising process would encourage companies like Qwest to quickly deploy video services and promote the end of the cable monopoly."

>>Barbara Kasoff, president, Women Impacting Public Policy: "On behalf of our half-a-million members, WIPP applauds the FCC's efforts to increase competition in the telecommunications marketplace. Small business owners believe competition in the industry will result in better pricing, technology and accessibility that will allow them to grow their businesses and create new jobs. This decision moves us in the right direction. We do not view this as a battle between industries; this is a chance for business owners -- and all consumers -- to choose what is best for them in a marketplace less encumbered by regulations."