LFAs Eye New Services as Renewals Loom

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It's the eve of big refranchising renegotiations. And as
local authorities approach their side of the table, they're beginning to realize that
their old franchise languages and strategies are woefully outdated.

Around 10 to 15 years ago, city and county officials wrote
documents that only addressed the provision of video. The refranchises, however, may
direct the deployment of telephony, Internet services, facilities siting and other related
issues.

At a recent meeting of the National Association of
Telecommunications Officers and Advisors, targeted toward municipal lawyers, there were
more questions than answers.

Local franchising authorities have a fiduciary duty to
protect -- and recover funds for the use of -- rights of way.

But because of the changing face of information providers,
LFAs have had a tough time determining which services are covered under Title II of the
Telecommunications Act and defined as cable services, and which are Title VI, or telephony
services.

Cities need to know, as they have had an easier time
defending their regulatory efforts in court on Title II services than on Title VI
services. Also, Title II services are subject to franchise fees, while classification of
services as Title VI will cost LFAs revenue.

Of course, the most hotly debated issue is open access to
the high-speed-data platform.

Some attorneys expressed concern that telecommunications
providers will successfully argue that high-speed data is Title II use if LFAs force the
platform open, costing local governments millions of dollars in future franchise fees.

But others argued that this is not an access issue so much
as an issue of the rights of local governments and of regulatory fairness.

"We can't have asymmetrical legislation. Why have all
of these rules for a 19th century copper pipe, and not this robust,
technological one?" asked David Olson, cable-communications director for the Mount
Hood Cable Regulatory Commission in Portland, Ore.

His community has spearheaded the drive to open cable's
high-speed-data platform, and it recently won the first judicial round against AT&T
Broadband & Internet Services.

Olson said he hoped that other communities would file amicus
curiae
briefs in support of Portland during AT&T Broadband's appeal, and he urged
other LFAs to act now on the issue.

The DOCSIS (Data Over Cable Service Interface
Specification) standards under development will "ensure a bottleneck" blocking
competitive access, Olson said. Regulatory delay on the issue will result in "10
years of re-engineering," he added.

But many cities look to Los Angeles for leadership on the
issue, and its staff's recent report advocated a wait-and-see stance.

Paul Janis, Los Angeles' telecommunications-regulatory
officer, said the city found that there is competition in high-speed access, including DSL
(digital subscriber line), Hughes Electronics Corp.'s DirecPC and multipoint microwave
distribution services (wireless cable).

Prices have dropped on those services, which is the best
testament of competition, he added.

Los Angeles also found that there is no technological
barrier to open access, and that given market pressures, area operators would still invest
in their infrastructures even if adverse regulation were in place.

Further, the document noted that content subsidizes the use
of the high-speed platform. Los Angeles officials expressed concern that the open platform
could cause the price of the service to rise to consumers because that subsidy would be
diluted.

Elating competitors, the report did declare that
distribution policies by @Home Network jeopardized diversity, Janis noted. @Home's master
distribution agreements provide no guarantee for "click-through" access to a
consumer's preferred content carrier.

Under the agreement, operators have the option to block
access to competitors' Internet sites, and @Home requires operators to block video streams
of more than 10 minutes.

A Los Angeles City Council committee has yet to act on the
report.

But the most repeated inquiry at the NATOA meeting regarded
protecting streets and easements. Officials envisioned miles of streets trenched to allow
facilities-based telecommunications access. Who pays for the repairs, and what is a fair
price?

Speakers said some cities would consider a requirement that
the public works department do the trenching, repair and resurfacing, with the
telecommunications company billed for the work. That might be the best way to establish a
true cost that is defendable in court.

Another option: A consortium could hire an independent
accounting firm to develop cost standards.

Liability is of concern, too. Cities have been handed
repeated defeats in court regarding regulating the actions of telephone companies, yet
communities need to protect themselves from lawsuits related to facilities deployment in
case something goes wrong.

For instance, early last month, a utilities subcontractor
ruptured a water main in Auburn, Mich. Basements were flooded, and local universities and
colleges, along with the headquarters of DaimlerChrysler, were shut down for two days.

The subcontractor, working for MCI WorldCom, caused
millions in dollars in damages. Speakers said municipalities need to do whatever is
necessary to make sure that telecommunications vendors pay for such disasters.

But the most important task for LFAs, according to attorney
Nick Miller, is to educate judges on the fundamental issue of what a franchise is: a
privilege to use an underlying property right.

The privilege is revocable and personal, Miller added. Some
recent court rulings indicated that cities' rights to regulate are derived only from the
Cable Act, and cities need to agitate against this ignorance of "500 years of common
law," he said.

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