Local Governments Worried About FCC Order

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Washington -- Local regulators are worried that cable
operators might have the upper hand when they sit down to negotiate technology terms in
franchise renewals.

Jane Lawton, president of the National Association of
Telecommunications Officers and Advisors, said the Federal Communications Commission has
weakened the bargaining power of local governments with a decision that it released two
weeks ago.

"They have introduced doubt that was not there
before," said Lawton -- who is also the cable administrator in Montgomery County, Md.
-- in an interview last week.

The rivalry between cable operators and local governments
is as long as it is fierce.

In 1996, cable operators convinced Congress that local
regulators' demands had escalated out of control, particularly with regard to costly
equipment and transmission technologies associated with network upgrades.

Congress responded by passing a provision of the
Telecommunications Act of 1996 that said: "No state or franchising authority may
prohibit, condition, or restrict a cable system's use of any type of subscriber
equipment or any transmission technology."

But this provision was attached to pre-existing provisions
that give local governments autonomy to regulate cable facilities and to request network
upgrades.

In an order late last month, the FCC interpreted the 1996
provision in a broad rulemaking.

With regard to the phrase, "subscriber
equipment," the commission said the issue was not complicated: Local governments had
no right to tell a cable operator that all subscribers, for example, had to have a digital
set-top.

The tougher issue was interpreting "transmission
technology," which is not a defined term in the Communications Act

The FCC addressed it by saying that "transmission
technology" referred to at least two things. The first was the medium --
"microwave, satellite, coaxial cable, twisted-pair copper telephone lines and fiber
optic systems." And the second was "the specific modulation or communications
format, i.e., analog or digital communications."

Lawton said NATOA was disappointed not by what the FCC
said, but by what it didn't say.

NATOA wanted the FCC to declare that local governments were
within their rights to mandate megahertz levels, homes served per fiber optic node and
amplifiers per cascade.

Only FCC commissioner Gloria Tristani, in a statement
supportive of NATOA, said it "would tread on the legitimate rights of local
authorities" to say that they could not require a 750-MHz upgrade and 500 homes per
node.

Wes Heppler, a cable attorney with Cole, Raywid &
Braverman, said his reading of the FCC's order was that "there is a pretty
strong argument that megahertz and node size have been pre-empted."

The big question hanging out there is: Will cable operators
that have signed renewals since 1996 use the FCC's decision to remove specific
upgrade conditions?

"That's going to be a difficult issue. There are
arguments on both sides of that," Heppler said.

In the order, the FCC acknowledged that during the
three-year period when it was deciding how to interpret the provision, cable operators and
local governments had likely inked new franchise agreements that ended up being
inconsistent with the ruling. But the commission said it would not allow its ruling to
pre-empt existing contracts.

Heppler, however, said the FCC's order would not
"preclude [a cable operator] from seeking pre-emption by going to court and saying,
'This is no longer enforceable.'"

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