Bill Would Give States Cable-Franchise Control


Sen. Kay Bailey Hutchison (R-Texas) introduced a bill last week that would require state governments to become cable-franchising authorities in lieu of thousands of cities and towns that have been exercising that authority for decades.

The bill (S. 2989), modeled after a Texas law passed last year, appears designed to speed phone-company entry into local cable markets, as state governments would have 17 business days to grant valid franchise applications and could not impose market-buildout requirements on new entrants.

The National Cable & Telecommunications Association would not comment until it had time to study the legislation, called the Franchise Reform Act of 2006. In the past, the NCTA has voiced support for placing time constraints on the franchise-approval process, but it has raised concerns about new entrants not having to comply with buildout requirements that apply to cable incumbents.

“We commend Sen. Hutchison for recognizing the need to streamline the cable-franchising process so that all Americans can experience what many Texans enjoy today -- more choices in the video marketplace,” Verizon Communications Inc. senior vice president Peter Davidson said in a prepared statement.

Also last week, a draft bill prepared by staff to Senate Commerce Committee Democrats would allow a telephone company to obtain a local cable franchise within 30 days if it agreed to the terms and conditions of the franchise most recently granted to the market’s cable incumbent.

That bill, designed to update the Telecommunications Act of 1996, would phase in franchisewide-buildout requirements on phone companies and impose Internet-nondiscrimination mandates on broadband-access providers. It would also bar cable operators under many conditions from withholding programming not delivered via satellite.

Under the staff draft bill, a phone company unwilling to sign the incumbent’s franchise agreement could negotiate different terms with local regulators during a 60-day window.

If those talks failed, the phone company would be allowed to enter the video market within 30 days by using a “standard franchise” -- a default mechanism that includes a 5% franchise fee and other conditions specified in the bill.

Cable incumbents could escape their local franchises and obtain a standard franchise after another video provider with a standard franchise offers service to more than 5% of homes in the same franchise area.

Hutchison, a member of the Senate Commerce Committee, might offer her bill as an amendment to a major telecommunications bill (S. 2686) sponsored by Sen. Ted Stevens (R-Alaska) when the panel meets June 20 to vote on Stevens’ bill.

Under the Stevens bill, local governments would retain the right to serve as cable-franchising authorities, but they would generally need to approve new cable-franchise applications within 30 days under a streamlined process crafted by the Federal Communications Commission.

Hutchison’s bill would allow large incumbent cable operators to obtain state franchises only following the expirations of their local agreements. A small cable incumbent -- defined as having fewer than 40% of subscribers in a franchise area -- could terminate its local agreement and seek a state franchise not later than 120 days after the Hutchison bill became law.

Stevens’ bill would allow any cable operator to use the FCC’s streamlined approach if a new competitor, such as AT&T Inc. or Verizon, had made clear its plan to enter the same local franchise area with a wireline-video service. Stevens would also permit cable incumbents with expired franchises to use the new franchising system. His bill did not include explicit buildout requirements.

In her bill, Hutchison would allow providers of cable service or IPTV to apply for a state franchise. State franchisees must pay 5% of gross revenue -- which would not include income from advertising -- to compensate local governments for use of public rights of way.

State franchisees would be barred from denying cable service or video service to “any group of potential residential subscribers” based on income. Individuals denied service and local governments would be eligible to file complaints with the state to seek enforcement.

State regulators and the courts would be required to give state franchisees that run afoul of the nondiscrimination ban “a reasonable period of time to become capable of providing cable or video service to all households within a designated franchise area.”

In terms of compliance, franchisees could extend their wireline facilities or make “use of an alternative technology that provides comparable content, service and functionality.”