Verizon Escalates Franchise Battle With Suit Against D.C. Suburb
Verizon sued a wealthy D.C. suburb over inability to reach a deal to sell fiber video service and the municipality’s insistence it pay taxes on broadband service. The Bell, in a complaint filed late Thurs. in U.S. Dist. Court, Greenbelt, Md., is seeking an injunction against a 1982 law it said gives Montgomery County, Md., officials nearly complete discretion over franchise awards. Many provisions of Montgomery County Code violate the Telecom Act, said Verizon. The county said its Code “is in full compliance with federal law and has been tested in the courts.”
Sign up for a free preview to unlock the rest of this article
Export Compliance Daily combines U.S. export control news, foreign border import regulation and policy developments into a single daily information service that reliably informs its trade professional readers about important current issues affecting their operations.
The complaint is Verizon’s first suit over franchising, according to assoc. gen. counsel John Frantz. Verizon has told the FCC the county’s franchise laws are an example of obstacles to getting local approval to sell pay TV (CD Feb 13 p2). The lawsuit echoes the company’s comments in the FCC’s franchising proceeding, which the Commission hasn’t taken action on as Congress considers franchise reform. “This case highlights the need for legislation,” Frantz told us: “This is a case of very significant demands.” Verizon’s tactic is similar to a separate AT&T suit against Chicago suburbs it claimed hindered plans to install gear to sell its IPTV service (CD April 10 p1), said a cable lawyer.
The county sought a series of concessions from Verizon. They include dedicating 13 analog or 65 digital channels to public access programming and 3% of revenue to subsidize the channels and other services. Verizon said it would have to give free cable service to municipal buildings, hospitals and community centers. Cable official Jane Lawton told the company April 21, the last time the 2 sides met, that it should “support” 100 Wi-Fi hot spots, Verizon said. Lawson didn’t return our calls.
Another example of the county overstepping its bounds, according to Verizon, is a 5% tax on broadband revenue it wants the Bell to pay - which it said violates FCC rules. Cable operators typically pay such a tax only on video. “Localities may not use their franchising authority to impose fees upon telecommunications and information services,” the suit said: “The FCC has exclusive jurisdiction to regulate interstate and international telecommunications service.”
“In the Washington, D.C., metropolitan area, Verizon affiliates have obtained or are obtaining a franchise everywhere they have sought one,” it said: “Montgomery County’s recalcitrance in preventing Verizon from competing with the incumbent cable operator stands in sharp contrast to the actions of other local governments.” Comcast is the largest pay TV provider in the county, with about 225,550 cable customers, said Verizon. FiOS is available to 142,000 homes in the county, or 41% of all households, said Verizon Senior Vp Marilyn O'Connell in a declaration filed with the suit.
The company may face some hurdles convincing a judge to stay county rules, said municipal cable lawyers we spoke with. “The county went out of its way to help expedite this deployment” by granting Verizon construction requests, said one lawyer. Another attorney said: “You can’t force Montgomery County to grant a franchise.” County Chief Administrative Officer Bruce Romer pointed out another possible problem. “Verizon has not yet submitted a franchise application to the county, so they are challenging a process which applies to their competitors but which they have not officially entered,” he said in a prepared statement.
Verizon expressed confidence it will prevail. “We're expecting some pretty quick action by the court,” said Frantz, adding that the next step is for a judge to discuss in the next several weeks setting a hearing about an injunction. “If you file a prelim[inary] injunction motion, that is acted on very quickly,” he said: “Within a couple of months we expect that that motion will be decided.”