Policy

Draft Legislation Would Ease Franchising

9/16/2005 8:00 PM Eastern

Washington— Within a few days of filing some paperwork and putting up a bond, phone companies would be able to waltz into cable markets and offer video programming with minimal local interference, according to House draft legislation circulated last week.

In addition to light franchising requirements, the House legislation would also impose network-neutrality requirements on cable and other high-speed Internet-access providers out of concern that network owners might discriminate against Web-based merchants.

The 77-page draft is designed to overhaul the Telecommunications Act of 1996 and create a statutory scheme that reflects the advent of Internet-protocol voice and video services that enable consumers to tap oceans of information and the inventory of markets around the globe.

MANY HANDS SEEN

The draft appeared to reflect the preferences of House Energy and Commerce Committee chairman Joe Barton (R-Texas) and Telecommunications and the Internet Subcommittee chairman Fred Upton (R-Mich.). But based on numerous consumer safeguards that were included, it also appeared that key Democratic Reps. John Dingell (Mich.) and Edward Markey (Mass.) had a hand in the drafting.

SBC Communications Inc. and Verizon Communications Inc. issued statements welcoming the bill, calling it a sign of progress, without addressing specific provisions. The National Cable & Telecommunications Association said it was studying it.

In another development, SBC last Tuesday asked the Federal Communications Commission to declare that IP-video networks were exempt from local franchising because those networks would be fundamentally different from traditional cable systems.

Paul Gallant, a media analyst with Stanford Washington Research Group, said SBC’s filing would at a minimum keep “pressure on local franchising authorities to work cooperatively with the Bells on franchising.”

Gallant, in a client report, said it was unlikely the FCC would approve SBC’s request when franchising reform is a key feature of House and Senate legislation.

“Franchise reform is the marquee issue in the Telecom Act rewrite, and it is possible that key congressional leaders would discourage the FCC from taking that issue out of Congress’s hands,” he said.

Under the bill’s franchising rules, a provider of “broadband-video services” could begin offering service after 15 days if it has made franchise bond payments to local governments; has given the local government a promise to carry public, education and government channels; and has designated a local agent.

Although local governments could manage street construction, the bill would vest oversight of broadband-video providers with the FCC. Local governments may collect 5%-gross-revenue franchise fees. The FCC would enforce anti-red-lining rules.

SOME RULES APPLY

Like cable companies, broadband-video providers would need to comply with must-carry, retransmission-consent and program-access rules. Cable privacy and consumer-protection rules would also apply, according to the draft.

Under the bill, states could not bar their subdivisions from providing broadband-voice and video services, except that local governments that offer service can’t exempt themselves from requirements that apply to commercial entities.

The FCC would have to complete numerous rulemakings to implement the draft bill. But the agency would have only 180 days to issue all regulations.

Senate legislation (S. 1504) introduced in July by Sen. John Ensign (R-Nev.) was more sweeping on franchising. Ensign’s bill would eliminate any need to obtain local approval and to wire entire communities to prevent cream skimming.

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