The FCC, cable franchising and Commissioner Adelstein

Wed, 01/31/2007 - 7:00pm
Jeffrey Krauss, President of Telecommunications and Technology Policy

It was no surprise that the FCC in December adopted rules beneficial to telephone companies that pre-empt much of the jurisdiction of Local cable TV Franchising Authorities (LFAs). And it was no surprise that the FCC did nothing to help existing cable MSOs except promise to look at whether the same pre-emption might apply when existing franchises expire. Now that FCC Chairman Kevin Martin has a third Republican Commissioner at the agency to support him, he can drive his steamroller anywhere he wants.

Jeffrey Krauss
Jeffrey Krauss
President of
&Technology Policy
What was a surprise was the vehemence of the dissenting statement of Democratic Commissioner Jonathan Adelstein. In his eight-page statement, Commissioner Adelstein makes clear why he believes the FCC's decision is arbitrary, capricious, goes far beyond the authority that Congress gave to the FCC, and is certain to be overturned in court.

The public statement of NCTA President Kyle McSlarrow was mild by comparison, saying in effect that while the FCC's action is illegal, it isn't as bad as they expected it to be. (He'd sing a different tune if the new rules also applied to existing cable franchises, but they don't.)

First, the FCC found that franchising negotiations that extend beyond 90 days amount to an unreasonable refusal to award a competitive franchise. The FCC decided that after 90 days, a cable franchise is automatically granted! What a great idea! (That 90-day default period only applies to telephone companies, electric power companies and water and sewer companies, because they already have rights-of-way access. It does not apply to existing cable companies, nor to new startup overbuilders.)

Commissioner Adelstein's first point is that the local franchising process isn't broken, and there is no evidence that telephone companies have encountered more than a handful of delays in gaining cable franchises. But even in those few cases, the franchises were eventually granted.

But then he points to the language of the law, which says that LFAs "may not unreasonably refuse to award an additional competitive franchise" (his italics). But the law does not impose any time limitation on an LFA's authority to consider, award or deny a competitive franchise. Nor does it give the FCC or a court the authority to set a time limit. There are plenty of other portions of the law that have time limits written in. For example, the law says that LFAs have 120 days to act on transfers and renewals of existing franchises. If Congress wanted to impose a time limit for awarding new franchises, or give the FCC authority to set time limits, it would have. But it didn't.

He also notes that the selection of 90 days as the drop-dead period is arbitrary and capricious. There is no justification for choosing 90 days rather than (for example) 91 days. And when Congress wrote deadlines into the law, they were typically 120 or 180 days, not 90 days.

Moreover, by requiring that a franchise be automatically granted after 90 days, the FCC tilted the negotiating field, eliminated any incentive to negotiate in good faith, and guaranteed that a telephone company will stall in an attempt to gain negotiating leverage.

According to Commissioner Adelstein, one option that was considered, but rejected by the 3-2 majority, was to deem a franchise application to be automatically denied after some period of time, rather than automatically granted, to give the applicant the ability to go to court. Under the law, an applicant can seek judicial relief only when the competitive franchise has been denied by a final decisionof the LFA. He thinks that approach would have more chance of being upheld on appeal.

Another element of the FCC's decision is that LFAs will not be permitted to deny franchises if the LFAs make unreasonable demands and the applicant refuses to comply. This is aimed squarely at LFA demands for institutional networks for municipalities and financial support for PEG channel operations. The FCC's intent is to undermine demands of this sort, and to limit franchise obligations to the 5 percent cap for the franchise fee. Under the new rules, financial support for PEG operations would have to be included in the 5 percent limit. (My monthly cable bill lists $3.43 for the franchise fee and an additional $1.50 for a PEG/I-Net fee.)

Commissioner Adelstein's view on this issue is that PEG facilities are an important resource in local communities, and municipal institutional networks support invaluable homeland security and public health, safety and welfare functions. (That's a predictable Democratic position, isn't it?) Moreover, he says, while the law may limit franchise fees to 5 percent, Congress has decided that financial support for institutional networks and PEG operations are not "fees."

Meanwhile, the FCC has given itself a 90-day time limit to make a decision on how these new rules will apply to existing cable franchises. Ninety days? Pardon me for being skeptical.

Existing cable operators could eventually benefit from some of these rules. But the FCC can only adopt regulations if Congress has written a law that explicitly gives the FCC authority to do so. Recently, the FCC decision to adopt "broadcast flag" rules was overturned in court because the FCC did not have that authority. Here we go again.


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