With Ruling, FCC Levels the Cable TV Franchising Field?

A little late on my part, but very relevant to the discussion about FairPoint Communications’ entrance into the NH/VT/ME cable television market via IPTV.

Thanks to The Benton Foundation for posting this, and gathering a bevy of coverage and reaction links. Rather than paraphrase them, I’ve re-posted all of their excellent discussion here:

From The Benton Foundation on December 21, 2006. Here’s their mission statement:

The mission of the Benton Foundation is to articulate a public interest vision for the digital age and to demonstrate the value of communications for solving social problems. Current priorities include: promoting a vision and policy alternatives for the digital age in which the benefit to the public is paramount; raising awareness among funders and nonprofits on their stake in critical policy issues; enabling communities and nonprofits to produce diverse and locally responsive media content.

FCC ADOPTS RULES TO ENSURE REASONABLE FRANCHISING PROCESS FOR NEW VIDEO MARKET ENTRANTS
[SOURCE: Federal Communications Commission]

The Federal Communications Commission adopted a Report and Order and Further Notice of Proposed Rulemaking that establishes rules and provides guidance to implement Section 621(a)(1) of the Communications Act of 1934, which prohibits franchising authorities from unreasonably refusing to award competitive franchises for the provision of cable services. In the Order, the Commission concludes that the current operation of the franchising process constitutes an unreasonable barrier to entry that impedes the achievement of the interrelated federal goals of enhanced cable competition and accelerated broadband deployment. The Order addresses several ways by which local franchising authorities are unreasonably refusing to award competitive franchises. These include drawn-out local negotiations with no time limits; unreasonable build-out requirements; unreasonable requests for “in-kind” payments that attempt to subvert the five percent cap on franchise fees; and unreasonable demands with respect to public, educational and government access (or “PEG”). To eliminate the unreasonable barriers to entry into the cable market, and to encourage investment in broadband facilities, the Commission: 1) Found that franchising negotiations that extend beyond certain time frames amount to an unreasonable refusal to award a competitive franchise within the meaning of Section 621(a)(1); 2) Found that requiring an applicant to agree to unreasonable build-out requirements constitutes an unreasonable refusal to award a competitive franchise; 3) Found that, unless certain specified costs, fees, and other compensation required by local franchising authorities are counted toward the statutory five percent cap on franchise fees, demanding them could result in an unreasonable refusal to award a competitive franchise; 4) Found that it would be an unreasonable refusal to award a competitive franchise if the local franchising authority denied an application based on a new entrant’s refusal to undertake certain unreasonable obligations relating to public, educational, and governmental (“PEG”) and institutional networks (“I-Nets”); and 5) Preempted local laws, regulations, and requirements, including local level-playing-field provisions, to the extent they impose greater restrictions on market entry than the rules adopted herein.
The Commission concluded that although the record allows it to determine generally what constitutes an “unreasonable refusal to award an additional competitive franchise” at the local level, the Commission does not have sufficient information to make such determinations with respect to franchising decisions made at the state level or in compliance with state statutory directives, such as statewide franchising decisions. As a result, the Order addresses only decisions made by county- or municipal-level franchising authorities. The Commission also adopted a Further Notice of Proposed Rulemaking in which it seeks comment on how its findings in the Order should affect existing franchisees, tentatively concludes that the findings should apply to existing franchisees at the time of their next franchise renewal process, and seeks comment on the Commission’s statutory authority to take this action. The Commission will conclude this rulemaking and release an order no later than six months after the release of the Order.
News Release: http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-269111A1.doc
Martin Statement: http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-269111A2.doc
Copps Statement: http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-269111A3.doc
Adelstein Statement: http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-269111A4.doc
Tate Statement: http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-269111A5.doc
McDowell Statement: http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-269111A6.doc

_Coverage_

BELL COMPANIES’ FCC VICTORY MIGHT BE SHORT-LIVED
[SOURCE: Wall Street Journal, AUTHOR: Amy Schatz Amy.Schatz@wsj.com]
Phone companies scored a win at the Federal Communications Commission when the agency agreed to change rules to let them enter the cable-television business faster, but the victory may be short-lived, as congressional Democrats complained and opponents threatened legal action. The FCC, in a 3-2 party-line vote, passed rules that give state and local authorities a 90-day deadline to grant video-franchising agreements to new competitors. The commission also struck down rules requiring that the Bells do more to provide service to all residents in an area than current providers. The FCC action raises potentially significant issues for the Bells, which have persuaded eight states — including California, New Jersey and Texas — to change laws to accelerate entry to the video business. State and local officials say the FCC is trying to usurp their authority, and cable companies say the Bells are getting preferential treatment. The matter looks to be heading for court. Yesterday’s decision may make it more difficult for the Bells to persuade other states to change some rules that are made somewhat moot by the FCC action.
http://online.wsj.com/article/SB116664369395955925.html?mod=todays_us_page_one
(requires subscription)

* Phone Carriers Win a Skirmish in Cable Wars

(requires registration)

* FCC Vote A Victory For Phone Companies
http://www.washingtonpost.com/wp-dyn/content/article/2006/12/20/AR2006122000779.html

* Telecoms groups gain TV boost
http://www.ft.com/cms/s/e936c23c-9082-11db-a4b9-0000779e2340.html
(requires subscription)

* Phone giants are closer to TV service
http://www.usatoday.com/printedition/money/20061221/1b_franchise21.art.htm

* FCC backs telephone companies in TV fight
http://www.latimes.com/business/printedition/la-fi-fcc21dec21,1,5635193.story?coll=la-headlines-pe-business

* FCC Gives Telcos Big Video Victory
http://www.broadcastingcable.com/article/CA6401769.html?display=Breaking+News

* FCC: 90-Day Franchise Shot Clock
http://www.multichannel.com/article/CA6401838.html?display=Breaking+News

* FCC Votes to Ease Hurdles to Cable Competition
http://www.tvweek.com/news.cms?newsId=11265

* NCTA Could Sue FCC Over Franchise Item
http://www.broadcastingcable.com/article/CA6401834.html?display=Breaking+News

* Dingell questions FCC authority on cable
http://news.yahoo.com/s/ap/20061220/ap_en_tv/cable_competition

* Markey Says He Will Review FCC Decision
http://www.broadcastingcable.com/article/CA6401858.html?display=Breaking+News

* FCC adopts relief for telecom companies planning TV offerings
http://news.com.com/FCC+adopts+relief+for+telecom+companies+planning+TV+offerings/2100-1036_3-6145184.html?tag=nefd.lede

* Divided FCC OKs ‘Shot Clock’ Plan For Awarding Video Franchises
http://www.njtelecomupdate.com/lenya/telco/live/tb-TGRO1166704700067.html

* Why the New FCC Rules May Bring Lawsuits
http://www.businessweek.com/bwdaily/dnflash/content/dec2006/db20061221_189150.htm?chan=top+news_top+news+index_businessweek+exclusives

* Phone firms gain cable TV victory
http://www.ajc.com/services/content/business/stories/2006/12/20/1221bizfcccable.html?cxtype=rss&cxsvc=7&cxcat=6

_Reaction_

* Consumer Group Says FCC Move on Video Competition Risky Without Assurances that Cable Rates Will Fall, Decision Does More Harm Than Good
Consumers Union called the Federal Communications Commission’s decision today to let phone companies begin offering video services without adhering to basic consumer protection requirements a risky move based on only flimsy evidence that consumers will actually benefit from the move. “Consumers are ill-served by the Commission’s decision to let phone companies pick and choose which neighborhoods will get more choice for cable service and which will be left with only their monopoly cable provider, facing both rate hikes and no hope of any alternative,” said Jeannine Kenney, senior policy analyst with Consumers Union. “Unless consumers receive assurances from both the FCC and the Bells that cable rates will actually decline for all customers in a market after phone companies begin offering service, FCC’s decision may do more harm than good.”
http://www.hearusnow.org/other/newsroom/tvradiocable/consumersunionsaysfccmoveonvideocompetitionrisky/

* FCC Attacks PEG Funding, Community Media, Congressional Authority
[SOURCE: Alliance for Community Media]
Executive Director Anthony Riddle: “The telephone industry could not get a law passed through the 535 legislators answerable to the public. So they anointed a “Super Legislature” where they only needed three unelected regulators to pass a law. Congress should act quickly to limit the power of activist regulators. The FCC should react to Congress. Congress should not have to react to the FCC. This order will end up losing in court. It is an unconscionable waste of the millions of tax-payers’ dollars which will be wasted on legal fees. The majority of the FCC are mistaking chaos and thuggery for a coherent national communications policy. It will not result in competition, but even more media consolidation. The FCC, in the spirit of Christmas, has given the biggest gift of all to the giant telephone companies while the children of our cities and towns get a lump of coal in their torn stockings.”
http://www.alliancecm.org/blog.php

* FCC Decision on Video Franchising is Detrimental for Local Government
[SOURCE: National League of Cities]
Don Borut, Executive Director, National League of Cities: “We are confounded by today’s decision by the Federal Communications Commission (FCC) that would systematically block the ability of local governments to protect their citizens, local assets and revenues. It is not in the best interest of America’s taxpaying public; it is not in the best interest of our citizens who own the public rights of way; it is not in the best interest of the widest number of consumers, who, depending on where they live or how much they are willing to spend, may be shut out from the most up-to-date technology by companies seeking to service only the most well-to-do neighborhoods. The cities and towns represented by NLC have urged fairness in the effort to reform telecommunications policy. That did not happen today.”
http://www.nlc.org/Newsroom/Press_Room/13105.cfm

* NATOA Responds to FCC Vote on Jurisdiction and Franchising Authority
[SOURCE: National Association of Telecommunications Officers and Advisors]
NATOA’s Executive Director, Libby Beaty, responded to the news of the vote: “Today the FCC played Scrooge to local governments when they changed the agency from a regulatory to a legislative body. 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.” We will respond to the entirety of the Commission’s order when it is released and available for thorough review.
http://www.natoa.org/

* NCTA Statement
Kyle McSlarrow, President & CEO, National Cable & Telecommunications Association: “The FCC’s pricing survey fails to account for the benefits of bundled pricing, its favorable impact on cable prices, and the greatly increased value of cable services in a digital world. Ignoring these factors makes the pricing survey obsolete on arrival and an unsound basis for policy decisions. On today’s decision on video franchising, it appears that the FCC pared back some of the more troubling proposals that had been floated in recent days. The Commission made crystal clear that its order isn’t a license for AT&T to ignore the franchising process and operate under different rules from its competitors. In addition, the Commission stepped back from pre-empting all state franchising laws, many of which have acknowledged the value to consumers of a level playing field for all competitors. We appreciate the FCC’s commitment to complete action within six months on a further notice to address regulatory parity. But the simple fact is that today’s order doesn’t provide a level playing field, a concept that has been universally supported up until now at federal, state, and local levels. We don’t believe the Commission has the legal authority to establish separate regimes for incumbents and new entrants in today’s highly competitive marketplace.”
http://www.ncta.com/ContentView.aspx?hidenavlink=true&type=reltyp2&contentId=3746

* ACA’s Polka: Martin Misguided
[SOURCE: Multichannel News]
American Cable Association CEO Matthew M. Polka had plenty to say about the Federal Communications Commission’s decision on cable rates and local franchising. On cable rates, Polka said, “The answer is very simple. Who controls the rates of the content on cable, satellite and telco video today? Not the operators, but the media-conglomerate programmers, whose rates and increases far exceed the data reported by the FCC on cable rates. Why are satellite’s rates the same or higher than cable’s? Why did [Verizon Communications’ FiOS TV] just announce a 7.6% increase for January?” On video franchising, Polka said, “These new rules upset the balance of competition, take authority away from local governments and give the Bell companies a free pass on serving all subscribers in a market. Through these rules, the FCC is ratifying the red-lining practice of building out service in only the wealthiest areas.”
http://www.multichannel.com/article/CA6402183.html?display=Breaking+News

* TIA Commends FCC’s Decision to Facilitate Entry into the Video Services Market
The Telecommunications Industry Association has long urged the FCC to impose uniform requirements on local franchise authorities (LFAs) to minimize the adverse effects of the existing local franchise process. TIA believes the commission’s decision today is consistent with its momentum toward a deregulatory framework necessary to increase broadband deployment to all Americans.
http://www.tiaonline.org/business/media/press_releases/2006/PR-122.cfm

* NAB Statement
National Association of Broadcasters Executive Vice President of Media Relations Dennis Wharton: “NAB salutes the FCC for taking decisive action to increase much needed competition to cable monopolies. With today’s action, the Commission has delivered a holiday treat for cable customers who will now have a choice and the ability to avoid rate hikes that run two to four times the annual rate of inflation.”
http://www.nab.org/AM/Template.cfm?Section=News_Room&CONTENTID=7542&TEMPLATE=/CM/ContentDisplay.cfm

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One thought on “With Ruling, FCC Levels the Cable TV Franchising Field?

  1. I think the danger of action like this is that it may actually contribute to local media being squeezed out. Many local channels are now struggling to survive, competing with a multitude of new and popular media options (internet, satellite, cable, to name a few), and many of these local stations exist only because of the financial backing of companies that have bought them. These local channels provide us still with key services that we may take for granted–things like weather alerts, school and public transportation closings, coverage of local events and politics–but on their own they may not survive.

    Certainly worth thinking about–the FCC needs to reassess their outdated regulations, most of which were developed decades ago when the face of the national media was radically different.

    For the record, I consult for the NAB in Washington, DC, but that doesn’t change what I’ve said.

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