FCC Defends Its Bell Franchise Order in 6th Circuit Filing
Defending a franchising order, the FCC said several parts of the Communications Act give it oversight of most aspects of cable TV service and limit cities’ power to award or deny franchises. The filing said the FCC acted under congressional authority to limit how long municipalities can take to review franchise applications and the types of fees they can charge. FCC limits on public access channel support, data network fees and requirements for video system build-outs will make future franchise talks easier, the agency said in a brief to 6th U.S. Appeals Court, Cincinnati. The filing in Alliance for Community Media v. FCC couldn’t tout a similar order giving cable operators franchise deregulation because the FCC missed its self-imposed Sept. 5 deadline to issue it (CD Sept 13 p2). The order is still circulating on the eighth floor, FCC officials said.
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The 6th Circuit case pits the FCC and Bells against cities and cable operators. Last month, the court said it would expedite the oral argument (CD Aug 27 p3). In a joint filing, AT&T, Qwest, Verizon and USTelecom supported the commission. The FCC comments expanded on arguments in its June 29 filing asking that the court not grant a municipal request to stay the franchise order. “This is where they try to lay out their full case, which we don’t think has any merit,” said lawyer Alan Fishel, representing the Alliance for Community Media. “We're hoping to have oral argument in the very near future.” Plaintiff reply briefs are due to the 6th Circuit Oct. 4, with final “proof briefs” due Nov. 1, Fishel said. The FCC got its wish when the court declined several months ago to issue the stay, saying the plaintiffs needed to ask the commission for a stay before requesting one from the court.
Like the FCC, the Bells’ joint filing cited section 621 of the Act as giving the commission authority to place limits on local franchise authorities (LFAs). The Bells said the FCC was right to address escalating cable rates and paltry wireline video competition. The companies said their rollout of broadband service is paid for partly from pay TV revenue. “Would-be competitive entrants are impeded, however, by burdensome requirements imposed by LFAs that Congress meant to constrain long ago,” said the filing. The FCC’s franchise order is a “reasoned effort, relying on an expansive record” and section 621 “to address this situation,” it said.
There are only several hundred “competitive franchises” in the U.S., 15 years after Congress amended section 621 to encourage cities to solicit video competition, said the FCC. In 1992, Congress barred cities from granting exclusive franchises or “unreasonably” refusing to award additional contracts. Because most cities don’t have wireline video competition, consumers are paying billions of dollars extra annually in cable bills, the FCC said, citing a Phoenix Center 2006 study. “At least some portion of the immense annual cost of foregone competition was attributable to the operation of the cable franchising process,” the agency said, “either directly as a result of the time that process takes, or indirectly because LFA demands deterred potential competitors from entering the market.” The commission said its 90-day limit on franchise negotiations between cities and companies with local rights of way helps keep LFAs from acting unreasonably.
FCC limits on fees that new video providers can be charged without their counting toward a 5 percent nationwide franchise fee cap “will help simplify future franchise negotiations, thereby facilitating entry of the cable competitors into the video services market,” the agency said. Section 622(g)(2)(C) of the act lets cities charge video providers for costs to build public, educational and government (PEG) access channel facilities without applying those fees to the franchise fee cap. That section doesn’t let cities exclude from the cap PEG operating expenses, said the FCC. “This is consistent with the legislative history, which makes clear that Congress intended the franchise fee exclusion in section 622(g)(2)(C) to extend only to capital costs associated with the construction of (PEG) access facilities,” not operating costs.
Similarly, the FCC said it acted within its congressional authority to limit I-Net fees municipalities can require Bells to pay to run city data and other networks. It said LFAs can’t make new video entrants pay for municipal networks that won’t be built. FCC public access fee caps didn’t exceed the agency’s authority, either, the commission said. “An LFA may not impose ‘more burdensome PEG carriage obligations” on new franchisees than are placed on incumbent operators, said the FCC. “LFAs may not impose ‘completely duplicative’ requirements on new entrants, although they may require new entrants to ‘provide additional capability'” for public safety use.
The agency largely was silent on the franchise order’s effect on cable operators, perhaps because an order giving cable operators franchise deregulation hasn’t been voted on. FCC Chairman Kevin Martin pulled the cable franchise order from consideration at the Sept. 11 meeting, though commissioners were ready to vote, said agency sources. The FCC Office of General Counsel had advised commissioners that the regulator’s arguments in the 6th Circuit would be bolstered if commissioners voted on the cable franchise order before Monday’s filing, said agency sources. No commissioners besides Martin had voted on the order by Monday, they said. A vote on the order may have been delayed because some commissioners want “minor” changes, an FCC source said.