DOJ Backs Bells on Franchising

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The U.S. Department of Justice supports federal regulations that would bar local governments from dragging out cable-franchise negotiations with phone companies and other firms seeking to compete with cable incumbents like Comcast Corp. and Time Warner Cable.

At a minimum, Justice attorneys are supporting adoption of Federal Communications Commission rules that would impose a deadline on local governments to act on cable-franchise applications to bring certainty to the process.

“Such delays in the franchising process effectively deny consumers the benefits of additional video competition and advanced services for a significant period of time,” said Thomas O. Barnett, chief of the DOJ’s Antitrust Division, in a May 10 filing at the FCC.

On a key matter for AT&T Inc. and Verizon Communications Inc., the DOJ also called for restrictions on the ability of local governments to require the buildout of new cable facilities within a specified period of time, saying that those kinds of mandates can deter entry.

“The department believes that [local governments] should not be allowed to impose any such requirements except where necessary to prevent income discrimination, which [federal cable law] prohibits,” the DOJ said.

Further, the DOJ said it disagreed with the National Cable & Telecommunications Association’s view that the buildout of an entire franchise area was necessary to prevent income discrimination.

“This argument is flawed,” the DOJ said. “The fact that a franchise applicant does not plan to build out to cover either the [local government’s] entire jurisdiction or the whole area served by an incumbent does not necessarily evidence income discrimination.”

A phone company that did not want to extend video facilities beyond its phone-network footprint would be an example of a situation where income discrimination was not involved, the DOJ said.

Under federal law, a cable system must acquire a local franchise. The FCC, under chairman Kevin Martin, is considering rules that would put some teeth into the law that says local franchising authorities “may not unreasonably refuse to award an additional competitive franchise.”

AT&T and Verizon have complained that their ability to rush into cable markets has been stymied by foot-dragging at the local level. Questioning those claims, cable operators have said that phone companies are acquiring franchises faster than they can deploy facilities.

Last month, Martin floated a six-month deadline for action. “It didn’t mean it had to be granted, but it has to be approved or denied,” Martin said.

In the filing, the DOJ said local governments often do not act because the applicant is refusing to embrace all of the conditions met by the incumbent or the incumbent is promising to sue the local government under level-playing-field laws if new entrants are subject to less stringent requirements, which could range from the size of franchise fees to the pace of facilities deployment.

“Faced with this dilemma, [local governments] may be inclined to avoid either approving or denying the applications,” the DOJ said. “The establishment of maximum time limits should at least force a decision that can be judicially reviewed pursuant to [federal cable law].”

The DOJ also attributed franchising delays to local governments that make demands that “are not relevant to providing cable service.” Citing FCC filings by AT&T and BellSouth Corp., the DOJ said examples include requests for space in telecommunications conduits for governmental use and the planting of flowers and trees.

Promoting the entry of new cable providers would help consumers, the DOJ said, because direct-broadcast satellite providers, while offering "important intermodal competition" to cable, were "not fully effective in constraining incumbent cable providers."

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