FCC Closing Loop On 2007 Franchise Decision

Item Resolves Petitions to Reconsider Extending New Entrant Rule

The FCC has circulated an item tying up some loose ends in a 2007 Second Report and Order to extend rules easing the awarding of franchises to new entrants, like telcos, to incumbent cable operators as well.

According to a source familiar with the item, which is only described as "Implementation of Section 621(a)(1) of the Cable Communications Policy Act of 1984 as amended by the Cable Television Consumer Protection and Competition Act of 1992," it confirms that FCC rule changes meant to prevent local franchising authorities from delaying the grant of franchises apply to incumbent cable operators as well, as telcos and other new entrants, and denies petitions to reconsider that decision in all but one part.

It has been circulated to the other commissioners for their vote, according to the FCC.

There had been some court challenges--in the Sixth Circuit Court of Appeals--to the FCC's decision. They have been on hold awaiting action on petitions at the FCC to reconsider the decision.

The practical impact is that the FCC won't have to keep telling the Sixth Circuit that it has not resolved those petitions yet.

The FCC launched the revamp of local franchising rules in 2006 to make sure localities were not "unnecessarily refusing" to award cable franchises to new entrants. In its first order, it eased the franchise path for those new entrants by, among other things, putting a shot clock on local franchise negotiations, limiting build-out requirements and franchise conditions, and capping public and government access channel investments.

It then issued a second Report and Order that extended most of those new rules to incumbent cable operators as well when their franchises came up for renewal, concluding that "to promote the federal goals of enhanced cable competition and accelerated broadband development, the Commission's rules regarding the local franchising process should be extended to incumbent cable operators."

The FCC also concluded that most favored nation clauses would also allow incumbents to adjust their franchise obligations if and when a new entrant obtained more favorable franchise conditions.

Some Local Franchising Authorities (LFA's) challenged the MFN clauses and the applicability of the second order to statewide franchising. They also filed suit, which was consolidated in the Sixth Circuit, which was already hearing a challenge of the first order--which it ultimately upheld.

The item circulated last week clarifies that the order extends to incumbents with state-level franchises.

The FCC said it would review and revise its regulatory flexibility analysis, which is the one part of the petitions to reconsider it grants, but denies them in all other respects.