Expect Court Date Return Over Local Franchising Rules


Washington— Local governments are highly likely to appeal the Federal Communications Commission’s recent court victory in support of agency rules designed to speed phone company entry into the cable television market.

“I think it will be appealed. I certainly expect for there to be additional activity in this case,” Libby Beaty, executive director of the National Association of Telecommunications Officers and Advisors, whose members include local cable regulatory bodies.

On June 27, a panel of the 6th U.S. Circuit Court of Appeals upheld the FCC’s decision to regulate the local cable franchising process in five key areas.

Among other things, the Cincinnati-based court upheld a rule that gave local governments 90 days to act on cable service applications filed by entities that already have access to rights of way, such as incumbent phone companies.

<p><br>Feb. 28, 2008: D.C. Circuit Court of Appeals rejects National Cable &amp; Telecommunications Association effort to stay Federal Communications Commission ban on exclusive contracts in multiple dwelling units.</p>

May 16, 2008: D.C. Circuit Court of Appeals rejects Comcast’s set-top box waiver appeal.

May 22, 2008: 6th Circuit Court of Appeals stays FCC’s rules governing leased-access channels.

June 27, 2008: 6th Circuit Court of Appeals affirms FCC’s cable franchise reforms.

Sept. 15, 2008: D.C. Circuit Court of Appeals to hear oral arguments in dual-must-carry challenge filed by C-SPAN.

SOURCE: Court records, Multichannel News research

The FCC was upheld on rules designed to ensure the new entrants faced reasonable buildout schedules and weren’t forced to pay fees and provide certain network services that exceeded the requirements imposed on cable incumbents, such as Comcast Corp. and Time Warner Cable.

“The FCC decision was pro-consumer and pro-competition and encouraged the deployment of bigger and smarter broadband networks across our nation’s communities. We are heartened that the FCC’s decision was upheld,” said AT&T senior vice president of federal regulatory affairs Robert Quinn.

The ruling was a setback for NATOA, which was part of a six-member municipal coalition that filed suit against the FCC. The cable industry, represented by the National Cable & Telecommunications Association, joined the case as an intervenor.

The NCTA isn’t going to appeal the ruling, spokesman Brian Dietz said last week. The cable industry’s interest in the case waned after the FCC last October extended some of the franchise reforms to incumbent cable operators.

“The FCC order’s potential harm and unfairness was substantially mitigated when the [FCC] later applied much of the relief to all providers,” Dietz said.

Since Republican FCC chairman Kevin Martin took office in March 2005, the cable industry has initiated or joined 10 federal lawsuits designed to overturn Martin-initiated rulings.

So far, the courts have been affirming the FCC’s cable policies, with one exception: In May, the 6th Circuit refused to allow the agency’s new leased-access rates to take effect, based on cable’s claims that the rate structure in many cases produced zero revenue. Federal law requires large-capacity cable operators to set aside up to 15% of their channels for commercial entities that need to pay to lease time.

Under a 1984 Supreme Court ruling, courts are required to defer to the FCC, especially when the agency is attempting to fill voids in the law created by less than clear statutory language. In the NATOA case, the court found that the FCC had both the authority to act and crafted rules to fulfill the legal requirement that local governments do not “unreasonably refuse to award an additional competitive franchise.”

Martin pushed the FCC to place limitations on local governments in the area of cable franchising after AT&T and Verizon Communications complained that local governments had failed to bargain in good faith, impeding their ability to provide alternative pay TV services.

The FCC adopted the 90-day rule and the other regulations in December 2006. Since that time, Verizon has not relied on the three-month shot clock in signing more than 1,000 franchise agreements.

AT&T doesn’t even seek local franchising deals because it insists its U-verse Internet Protocol video-distribution system isn’t a cable service subject to local entry approval. AT&T, however, has secured permission to provide video in some of the 20 states that have seized the cable franchising process from their municipal subdivisions.

In appealing the FCC’s victory, the NATOA coalition can ask the three-judge panel to rehear the case or seek review by the entire 6th Circuit. The other possibility is to file an appeal in U.S. Supreme Court. NATOA’s group has 45 days to decide, Beaty said.

The FCC rules gave local governments 90 days to act on phone company video applications and six months to act on applications filed by entities that currently do not occupy rights of way. Failure to act would result in the award of an interim cable franchise.

Nothing in the FCC’s rules barred local governments from rejecting applications prior to the 90-day and six-month deadlines and nothing allowed companies to game the deadlines in order to win entry by default.

“It’s not the 90 days that’s the problem. It’s the small local governments that lack the resources to fight the AT&Ts of the world,” NATOA’s Beaty said. “There are local governments that are voluntary local governments that only convene every couple months to take care of a little bit of business here and there.”