The Challenge To Local Franchising: What's Happening in

the State Legislatures?

Gerard Lavery Lederer

Presentation to the United States Conference of Mayors

Las Vegas

WHERE CAN FRANCHISING BE CHANGED?

Arenas for IPTV onslaught:

• Congress

• State Legislature

• Federal Communications Commission

Telcos’ Strategy:“Cover the Board”

Play All Forums Simultaneously• Move to the One with Earliest Relief or Best Relief

– By definition that is the Congress – one fell swoop.– By practice, that may be the state or FCC.

• Use FCC as Trump Card to win no matter the number called:– If Congress does not act: FCC defines IPTV as “non-cable service.”

• Do something or FCC will undercut you.– If Congress does not act – look to state action.– If State action is pro-local government – look to FCC to preempt.

States Adopting State Franchising

• Texas

• Virginia

• Indiana

• Kansas

• New Jersey**

• South Carolina

** Has not actually happened yet.

States in Play• California* • Connecticut • Florida • Iowa • Louisiana • Maine• Massachusetts • Michigan

• Minnesota • Missouri• New York*• North Carolina • Pennsylvania• Tennessee• Wisconsin* Updates needed from materials in

handout.

Jurisdictional Issues at Play

• Definition of cable service – Must capture IPTV – but can it at state level?

Police Powers• Consumer Protection

– Does your PUC (or FCC) have the staff to address consumer complaints?

– Will state legislation take away your funds?• Oversight of Rights-of-Way

– Who decides your street issues – Your Public Works Department or State PUC?

Dollar Issues at Play

• Definition of Gross Revenue– Must capture all revenue generated on the system not

specifically preempted by Federal law. For example:– Advertising Rentals Launch fees

– Late Fee Home Shopping On Demand/Pay-per view

– Beware of reference to GAAP.

• Audits & Enforcement. – Beware of limits and ability to recover your audit fees.

Taxes and Fees

• Don’t Allow State law to jeopardize traditional taxes and fees.– Some states have banned permit fees over and

above cable franchise.

Buildout

• Discrimination/buildout/redlining.– Federal law bans redlining and authorizes an

LFA to require buildout to every consumer, so long as the LFA provides the operator a reasonable time to do so. (47 U.S.C. § 541)

– Don’t allow state law to ban buildout or substitute in “intent” standards.

I-NET/PEG/PEG $$

• Channels– Typically match incumbent

• Financial Support (Can this be enforced?)– 1% states– Match incumbent or 1% states– Zero

Lessons Learned for LFAs

1. The Law of Unintended Consequences. – Can incumbent abandon

• the franchise?• current service obligations?

– Cash is Not an adequate substitute for in-kind.2. Need forward-looking PEG 3. No Current state bill truly keeps “LFA

whole”4. The “process issues”

Right-of-Way Problems and Catastrophes

Indemnification

Insurance

Effective remedies for bad behavior

Telcos and small operators are not the same

The Process Issues

• Consumer point of contact?• Remedies against bad actors?

– Franchise in perpetuity– No contract enforcement

• Control over PROW? -- Lip-service.a. Limited enforcement powersb. Cumbersome enforcement process

Example: Does “stop work” order violate right of access until court decision?

WHAT’S MISSING?

1. Termination or abandonment?

2. Sell out to the other?

3. No consumer rebates, refunds and credits

4. No construction and repair notices.

5. No stand-by power.

6. No CPE and cable-ready TV compatibility.

7. No mention of disabled community.

8. No record of customer service complaints.

WHAT’S MISSING?1. No emergency alert system.2. No upstream connections for PEG signals.3. No signal testing or performance evaluations.4. No restrictions on operator editorial control of

PEG.5. No reference to “non-standard installations.”6. No privacy rights and disclosures.6. No EEO and Small Business Procurement

practices.7. No prohibition of anti-competitive pricing

within the franchise area.

FCC—Hey Don’t Forget Us!

Cable Franchise NPRM

• MB Dkt No. 05-311; FCC 05-189

• Issue: Is LFA RBOC Negotiation for Franchise “per se unreasonable” under 621(a)(1)?

FCC— Preemption of IP (IPTV?) Service Regulation

– E911?– CALEA?– Consumer Recourse?– Net Neutrality?– Interconnection?– Non-Discrimination?

Conclusion

• RBOCs are Coming to Video this time

• Core Debate over Video Franchising:LFA v. Telco v. Cable Operators

• RBOCs can win without Congress but can LFAs?

Contact Information

Gerard L. Ledererglederer@millervaneaton.comMiller & Van Eaton, P.L.L.C.1155 Connecticut Avenue, N.W.Suite 1000Washington, D.C. 20036-4301Phone: 202.785.0600Fax: 202.785-1234www.millervaneaton.com