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from: Lasar Letter

Cities, states, and non-profits line up against Martin's video franchise agenda

by Matthew Lasar Dec 18 2006

They're all but calling it the Magna Carta of video franchise reform: Federal Communications Commission Chair Kevin Martin's proposal to set limits on the power of cities and counties to grant video franchises. The FCC will vote on the matter on Wednesday.

"I strongly urge the Commission to stand for free markets and competition by supporting preemption of local franchising authority in a manner that creates a level playing field for all providers," tax-cut crusader Grover Norquist wrote to the FCC on December 13th. "To do so will be of great benefit to taxpayers and consumers."

The outline for what the Commission will rule on comes from a speech by FCC Chair Kevin Martin on December 6th. Noting the entrance of telephone companies into the video marketplace, Martin argued that more needs to be done to streamline the process by which Local Franchising Authorities (LFAs) grant companies the right to provide video service in a region.

"When LFAs unreasonably delay action on a franchise application, they obstruct and in some cases completely derail a new entrant’s attempts to bring video competition to an area," Martin told a symposium on telecommunications issues, and proposed the following reforms:

* A ninety day limit on the process by which an LFA grants a video franchise.
* Caps on what video providers can pay LFA's in exchange for a franchise.
* Restrictions on "in-kind" payments for a video franchise. "In comments filed with the Commission, one company reported a locality’s request for a new recreation center and a swimming pool," Martin disclosed. Another entry "was asked for a franchise fee of $110 million and a $50,000 scholarship—with annual contributions."
* A halt to "unreasonable build out requirements." Martin argued that "it would appear unreasonable to require a new entrant to do more than was required of the incumbent cable operator in that community."

Not surprisingly, big incumbents like AT&T and Verizon, the new contenders in the video business, strongly support these reforms. The established cable companies question them.

But often lost in the debate are the concerns of the cities and counties whose franchising authority will be curtailed by the changes the FCC may vote in on Wednesday.

Density problems

LFAs worry that the FCC's proposals will deny them the ability to require video providers to roll out service not just in big cities, but in outlying areas, where people are often poorer.

The Vermont Public Service Board (VPSB), for example, filed comments with the FCC emphasizing that it must retain the power to require video providers to roll out services in low density areas, where profitable, and not just allow them to "cherry pick" the most profitable regions.

"In a state with demographics and topography like Vermont, such requirements are reasonable and necessary, and should not be preempted," the board wrote on December 13th.

Ditto, says the State of Hawaii.

"Hawaii is home to many low income and minority residents, many of whom reside in geographically insular communities," the state wrote to the FCC on December 14th. "It is critically important to make available to as many people as possible the benefits of this country's modern telecommunications infrastructure."

Dan Coughlin, Executive Director of Manhattan Neighborhood Network public access TV, met with three FCC Commissioners on December 13th and warned that Martin's proposals lack "a remedy for geographic discrimination."

If the FCC intends to streamline the franchising process, Coughlin argued, it has to create standards for "identifying an imbalance in service," a party responsible for fixing the imbalance, and a means for fixing the problem, none of which appear in Martin's proposals.

The 90 day cap

Region after region has filed comments with the FCC warning that 90 days is not enough to time negotiate a franchise.

The problem with a 90 day limit, Vermont's board explained, is that it is unfair to the incumbent provider. Often when granting a new franchise, the Vermont board changes the incumbent's contract to give them the same benefits as the new entrant. In addition, the board has to ensure that the new entrant can take on the same town-by-town responsibilities as the incumbent.

"Not only are the issues complex, but the Board has used negotiation whenever possible," Vermont wrote to the FCC. "This takes more time than would be possible under a strict temporal deadline. In many cases the Board has found it possible to develop a consensus solution wherein no party is forced to accept a quasi-judicial determination."

The Community Media Center of Santa Rosa, California, filed comments asking the obvious question: what will happen if the 90 day deadline passes without an agreement?

"If the city and the provider do not come to agreement within 90 days, the provider can proceed without an agreement. They can then make billions of dollars using our public land without considering local needs," representatives of the Center told the FCC on December 12th. "This framework would be unreasonable."

Filers warn that Martin's proposal creates an incentive for franchise-seekers not to cooperate with LFAs and just wait out the process.

Statutory authority

Chances are that if the FCC decides to implement Martin's ideas on Wednesday, various groups will challenge the FCC's legal right to act on this issue.

The FCC's original Notice of Proposed Rulemaking on this matter "tentatively" concluded that the Communications Act empowers the agency to "ensure that the local franchising process does not serve as an unreasonable barrier to entry for competitive cable operators."

In his December 6th speech, Martin cited Section 621 of the Act as evidence of Congressional intent: “A franchising authority may not grant an exclusive franchise and may not unreasonably refuse to award an additional competitive franchise.”

But given the number of municipalities, counties, non-profit groups, and states that have filed oppositions to Martin's proposals, it seems likely that they will meet at least one legal challenge, if not more, a fate hinted at in the Manhattan Neighborhood Network filing.

"The changes being proposed to the law are dramatic," Coughlin warned. "We believe that such changes to the law should be made by Congress, not the FCC. These changes will slow competition by confusing the legal framework. Such changes should be decided by law-makers, not the courts."