The FCC on Wednesday voted 3-2 down party lines to streamline video franchising for telephone companies. The order will establish a shot clock for local franchise authorities, or LFAs, to reach an agreement with applicants.
Under the new rule, LFAs have 90 days to cut a deal with applicants that already have rights-of-way; and 180 days for those without, according to several wire reports. (The FCC's own press release on the order mentioned nothing of the timeframes; and the agency's live Web stream during the meeting was dysfunctional.)
The order will not pre-empt state legislation, according to the reports. Eleven states now have video franchise laws in place--Texas, Virginia, Indiana, Kansas, Oklahoma, Connecticut, South Carolina, North Carolina, New Jersey, California and most recently, Michigan. Each of those state laws is crafted with slight differences, something the telcos wanted to avoid as they lobbied Capitol Hill for national legislation. But franchise reform on the Hill came to a screeching halt in late June after being voted through the Senate Commerce Committee.
The telcos, notably Verizon and to a lesser extent, AT&T, have agitated for video franchise reform since they decided to sink a battleship of money into the TV business. AT&T contends that it doesn't need franchise agreements because its U-verse video offering is not a cable service and therefore exempt. (The infrastructure bears a closer resemblance to a DSL network). Rather than seek legislative direction, AT&T is slugging it out in the courts with municipalities. The telco giant has sued communities in California and Illinois over video franchising, while the City of Milwaukee did the suing on Thursday to stop AT&T from building out until it had a franchise agreement.
Municipalities in general fought state and national franchise reform measures because they lose local control over such things as rights-of-way, fees and conditions. The LFA lobby in Washington, the National Association of Telecommunications Officers and Advisors, vowed to fight the FCC order.
"Today, the FCC played Scrooge to local governments when they changed the agency from a regulatory to a legislative body," said Libby Beaty, executive director of NATOA. "Unfortunately, unlike Scrooge, it's highly unlikely the FCC will see the error of its way absent court or congressional intervention. We will look forward to providing them both opportunities."
The cable lobby was equally unimpressed with the FCC's direction, which appears to make incumbent video providers wait until their current franchise agreements expire to get the same terms as new entrants. Kyle McSlarrow, chief of the National Cable and Telecommunications Association, said that for the last two years, the policy goals of the cable lobby were clear--a level playing field.
"There's no justification for treating the largest telecom companies on earth better in this marketplace," McSlarrow said. "If they had the authority today to provide conditions for new entrants, they had the authority to provide for all."
Commissioner Robert McDowell was down with that, even though he voted with his fellow Republicans.
"This order is not perfect. If it were, it would say that all of the deregulatory benefits we are providing to new entrants we are also providing to all video providers, be they incumbent cable providers, overbuilders or others," he said.
In his six months at the commission, McDowell has demonstrated he's no lap dog. He declined to give FCC Chairman Kevin Martin the majority vote on multicast must-carry, and he stayed recused on AT&T despite the chairman's efforts to the contrary. In this case, however, McDowell got behind the boss regarding the FCC's authority to do franchise reform, which has been questioned.
"A careful reading of applicable case law shows that the courts have consistently given the commission broad discretion in this arena," McDowell said. "I feel as though we are now on safe legal ground."
Not so fast, said Congressman John Dingell (D-Mich.), who will regain the chairmanship of the House Energy and Commerce Committee next year.
"It would be extremely inappropriate for the Federal Communications Commission to take action that would exceed the agency's authority and usurp congressional prerogative to reform the cable television local franchising process," he said in a letter to Martin dated Dec. 19.
The two Democratic commissioners expressed similar concerns.
"Under the circumstances, proceeding on such a controversial decision today does not put an end to this issue," said Commissioner Michael Copps. "It only invites more delay, more confusion, and more possibility of legal challenge."
Shyeah, Commissioner Jonathan Adelstein kind of said in his unabridged statement, which is not posted online.
"I cannot support this order because the FCC is a regulatory agency, not a legislative body," he said. "In my years working on Capitol Hill, I learned enough to know that this is legislation disguised as regulation."
Amid the flurry of uncertainty about the FCC's authority, the release announcing the order was less a description than an attempt to justify it.
"In the order, the commission concludes that the current operation of the franchising process constitutes an unreasonable barrier," it states. Among those, "negotiations that extend beyond certain time frames," "unreasonable build-out requirements" and unspecified charges not counted against the statutory 5 percent cap on franchise fees.
Wacky franchise conditions are nothing new; cable operators have been planting flowers in town squares for years. Martin cited such antics to support the rulemaking.
"The record collected by the commission in this proceeding cited instances where LFAs sat on applications for more than a year or required extraordinary in-kind contributions such as the building of public swimming pools and recreation centers," he said in his statement.
This had the cable lobby coughing somewhat vigorously in the corner, asking when a telco was ever asked to build a cement pond.
"The case that's been made is that telcos are being held back from getting franchises," McSlarrow said before the FCC vote. "There's no evidence to support that."
