FCC Punches the Clock

12/29/2006 7:05 PM Eastern

Washington— Local governments will have 90 days to act on cable-franchise applications filed by AT&T, Verizon Communications and other entities with existing rights to access city-owned conduits, the Federal Communications Commission ruled Dec. 20 in an action that split the agency along partisan lines.

With support from major phone firms, FCC chairman Kevin Martin championed franchise reform as his proclaimed antidote for rising nominal cable rates and for spurring the deployment of high-speed Internet-access facilities across the country.

AT&T senior vice president of federal relations Bob Quinn said, “The FCC has wisely determined that the pace of video competition and broadband deployment should not be held hostage to the administration of a franchising process created for monopoly cable providers.”

Because cable incumbents were not granted similar 90-day guarantees, National Cable & Telecommunications Association president Kyle McSlarrow called the FCC vote a rejection of a “level playing field” for cable providers. Needing more time to evaluate the agency’s order in full, McSlarrow declined to promise that the trade group would take the agency to court.

“We have not made a decision. All we got today was a sketch,” McSlarrow said.

Paul Gallant, a former FCC Media Bureau official who is now a media analyst with Stanford Washington Policy Research, said to expect litigation.

“The FCC’s legal authority to take … action is questionable and appellate litigation is likely to put a cloud over the legitimacy of the [FCC’s] order,” he said.

While fellow Republicans Deborah Taylor Tate and Robert McDowell backed Martin, Democrats Michael Copps and Jonathan Adelstein refused to go along, making Gallant’s point that the FCC was on shaky legal ground to think it could boss thousands of cities and towns on how to charter new cable entrants.

The FCC’s ruling also included mandates related to the calculation of cable-franchise fees, network-buildout requirements, contribution of public-access channels and local oversight of non-cable services, such as high-speed data and voice-over-Internet Protocol phone service. The specifics in these areas won’t be known until the FCC releases a final order.

More than anything else, Martin wanted to ensure that large phone companies could get cities to act promptly.

If no franchise is granted within 90 days, AT&T, for example, could provide cable service under an “interim authorization,” according to FCC Media Bureau deputy chief Rosemary Harold. If the city were to reject the application later, AT&T’s interim authorization would lapse and the company would have to take the city to court, Harold added.

McSlarrow called the process “awkward” because a city could reject the application on “day 89” in order to move the process to court immediately and without triggering the interim authorization.

“It doesn’t necessarily encourage good-faith bargaining,” he added.

The new franchise rules are expected to take legal effect early next year. For the 90-day shot clock to toll, the applicant must make “a filing of some sort in writing,” Harold said.

Martin asserted that competition was “desperately needed” in local cable markets and that only the presence of a second cable company had caused the rates of the cable incumbent to decline, in some cases by as much as 17%.

Along with Copps, Adelstein insisted that the FCC was intervening based on little evidence that local governments had unreasonably refused to award competing cable franchises.

At one point, Adelstein mocked Martin’s plan as “faith-based rulemaking,” promising that it would “offend many in Congress” and likely face “rejection by the courts.”

Martin did cite a few cases where cities had evidently sought unrelated and unreasonable in-kind contributions from would-be cable-service providers.

According to Gallant, the FCC is stopping cities from “forcing the new video entrant to build parking lots or provide other facilities or services unrelated to their video offerings.”

McDowell came to Martin’s defense by arguing that the FCC was “on safe legal ground” in attempting to check the excesses of local governments in cable negotiations.

McDowell said Martin promised to issue an order in about six months on whether cable incumbents should be entitled to the 90-day shot clock in the case of franchise renewals. The agency has tentatively concluded that they should.

“No one can say how that’s going to turn out,” said McSlarrow, who has been putting heat on the Martin FCC for failing to meet deadlines established by Congress.

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