The full FCC order on video franchising was released this week, just shy of three months after it was approved in a 3-2 vote. The rules are aimed at helping telcos break into the video delivery game in the name of competition with cable and satellite distributors. The order limits the power of local franchise authorities, which FCC Chairman Kevin Martin said was necessary because LFAs regularly overstep their purview.
"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," Martin said in his statement after the vote.
He went on to cite escalating cable rates as evidence that more competition was needed in the video marketplace.
As expected, the FCC order gives LFAs a set amount of time to cut an agreement with applicants. A 90-day window was set up for franchise applicants that already have access to public rights-of-way, as most telcos do. New entrants with no rights-of-way access get a six-month window. The order also enjoins LFAs from build-out requirements--i.e., providing service to every household in a given community. Under most video franchise agreements, cable operators are required to serve all homes. Additionally, the order limits the way LFAs impose franchise fees.
The statutory cap on franchise fees is 5 percent of video revenues, but the FCC said it found municipalities tacking on attorney fees, consultancy fees and "large acceptance fees." This, the FCC determined, would be a no-no.
The order will not pre-empt state legislation. By the end of last year, Texas, Virginia, Indiana, Kansas, Oklahoma, Connecticut, South Carolina, North Carolina, New Jersey, California and Michigan had passed video franchise laws. The legislation arose as telcos lobbied Capitol Hill for nationwide regulations. Last year's telecom reform package containing such a nationwide item came to a screeching halt in the Senate.
Each state has slightly different regulations, something the telcos wanted to avoid because they still have to negotiate with LFAs, although they just won't have to plant flowers in town squares or sink swimming pools. The FCC order does not relieve telcos from dealing with LFAs either, but it does provide certainty that a deal will get done. Verizon didn't release balloons over the order, but the company issued a thank-you note.
"This decision removes obstacles to the continued aggressive rollout of our all-fiber-optic network and our FiOS TV service," said Marilyn O'Connell, chief marketing officer of Verizon Telecom. "It would be difficult to invest so much into broadband and video deployment without common-sense decisions like this one."
Municipalities have resisted state and national franchise reform because they lose a measure of control in their own communities. In December, when the order was approved, the LFA lobby vowed to fight it. Libby Beaty, executive director of the National Association of Telecommunications Officers and Advisors, said the FCC scrooged local governments "when they changed the agency from a regulatory to a legislative body."
NATOA held a policy seminar March 8 and 9 in Alexandria, Va., where FCC Commissioner Jonathan Adelstein delivered the keynote. He and his fellow Democrat on the commission, Michael Copps, voted against the order. Adelstein said it exceeded FCC authority.
"I cannot support this order because the FCC is a regulatory agency, not a legislative body," he said after the vote. "In my years working on Capitol Hill, I learned enough to know that this is legislation disguised as regulation."
Congressman John Dingell (D-Mich.), chairman of the House Energy and Commerce Committee. In December, he warned Martin, "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."
Texas Republican Joe Barton, former chairman of the committee, gave the FCC points for "doing what it can on the municipal side." But he criticized the commission for not providing similar franchise relief for incumbent cable operators, which Barton said Republicans tried to provide in last year's telecom package before those darn Democrats kiboshed it.
"I was disappointed to see that the FCC granted relief to new entrants like the phone companies, but not also to existing cable companies, large and small," Barton said. "By contrast, our legislation would have extended regulatory relief to cable operators, as well, once a phone company entered their markets. Only when all providers are set loose to compete against each other will consumers get the lower prices and higher quality that real competition always generates in a free market. My hope is that the FCC will remedy this inequity quickly in its ongoing proceeding."
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