On Monday, the Federal Communications Commission released its final written order to streamline the local franchising process through which companies gain local approvals to offer subscription video services. The order was adopted on December 20, 2006.
The FCC concluded that the current operation of the franchising process constitutes an unreasonable barrier to entry that impedes the federal goals of enhanced cable competition and accelerated broadband deployment.
The new rules address 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:
- Found that franchising negotiations that extend beyond certain time frames (90 days) amount to an unreasonable refusal to award a competitive franchise
- Found that requiring an applicant to agree to unreasonable build-out requirements constitutes an unreasonable refusal to award a competitive franchise
- 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
- 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")
- 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 FCC also concluded that while the new rules will affect the local level, the Commission does not have sufficient information to make such determinations with respect to franchising decisions made at the state level. As a result, the Order addresses only decisions made by county- or municipal-level franchising authorities.
Naturally, AT&T and Verizon were quite pleased with the new rules. Marilyn O'Connell, chief marketing officer of Verizon Telecom, responded, "This decision removes obstacles to the continued aggressive rollout of our all-fiber-optic network and our FiOS TV service. It means that we will be able to reach our goal of rapidly expanding the number of consumers who have a choice of video service providers. Verizon spends more on capital investment than any other American company. It would be difficult to invest so much into broadband and video deployment without common-sense decisions like this one. Chairman Martin has led the commission to a breakthrough for consumers."