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FCC Releases Text of Franchising Rules for New Entrants and Text of Notice of Proposed Rulemaking Regarding Incumbent Operator Franchise Obligations
March 6, 2007
The FCC has finally released the text of the "Report and Order and Further Notice of Proposed Rulemaking" ("Order" and "Further Notice") that it adopted last December in its so called "franchising reform" proceeding. The Order finds that the FCC has the authority to adopt rules implementing Section 62I(a)(I) of the Cable Act, which bars local franchising authorities ("LF As") from unreasonably refusing to grant competitive franchises and identifies certain actions and practices deemed to violate this prohibition. The Further Notice seeks comment on whether the FCC can and should apply certain of these new rules to the relationship between LFAs and incumbent cable operators.
As discussed below, the Order identifies the following practices and actions by LFAs that unreasonably interfere with competitive cable entry: (1) failure to grant or deny competing franchises within a reasonable time frame; (2) the imposition of overly burdensome build-out requirements; (3) the imposition of certain fees and payment obligations in excess of the 5% franchise fee "cap"; (4) the imposition of certain PEG and l-Net obligations on new entrants; and (5) the imposition of regulations relating to non-cable services, such as telephony, as a condition of providing cable service.
To address these practices, the Order adopts specific rules establishing time limits on franchise negotiations and giving an applicant the right to begin providing service if an LFA fails to act on a franchise application within these time limits. The FCC also expressly preempted certain LFA-mandated build-out, PEG, and l-Net requirements as well as requirements for payments in excess of the 5% franchise fee limit, the imposition of regulation on non-cable services as a condition of the grant of a competing franchise, and local level playing field requirements.
Notably, the FCC's rules and guidance regarding actions deemed to be unreasonable and preempted only apply to new entrants seeking competing cable franchises, not to incumbent cable operators. Moreover, the FCC expressly stated that its interpretation of Section 62I(a)(1) applies only to franchise requirements imposed by LFAs pursuant to local law and does not invalidate or otherwise apply to franchise procedures or terms established through statewide legislation.