Telecommunications Law
State Franchising and Renewal:
What Happens Next?
NATOA 2013
ANNUAL CONVENTION
ORLANDO, FLORIDA
September 15, 2013
PRESENT...
Overview
• State v. local franchising
• How federal Cable Act fits in
• Some key questions (which may affect you
even if y...
State Franchising Status Today

LEGEND

State with Franchising Law

Local Franchising – Legislation Under Consideration
Lo...
…But “State Franchising” Is Not
One Size Fits All
• In some states, state is franchising authority,
issues franchises, set...
Number of states passing state
franchise legislation

Rate of State Franchise Law
Adoption
9
8
7
6
5
4
3
2
1
0
2005 2006 2...
“State Franchise” States Now
Heading Into Renewal
• 47 U.S.C. § 546 – establishes formal and
informal process for renewal
...
…Consequences
• If operator activates formal renewal process
franchising authority has six months to
“commence proceeding”...
…Consequences (cont’d)
• Renewal issues may be resolved informally.
(47 U.S.C. § 546(h)…but a franchise may only
be renewe...
California CPUC
- Rulemaking 13-05-007
• CPUC (LFA for CA.) is determining whether
it can or should adopt renewal rules
• ...
Detroit v. Michigan
• Detroit v. Michigan, 879 F. Supp. 2d 680 (E.D.
Mich. 2012), recon. denied 2012 WL 3234967
(E.D. Mich...
Detroit v. Michigan
• Dist. court concludes under MI. law, that old
franchises not extended automatically, so
Comcast is n...
Why Renewal Issues Matter In
State Law States…and Implications
for Other States

Telecommunications Law
Failure of Benefits:
Prices Continue to Rise
$60.00
$50.00
$40.00
$30.00
$20.00
$10.00
$0.00
Source:
NATOA

Basic Tier
Dig...
Failure of Benefits: No Change In
Price Slope Post 2006

Source: FCC

Telecommunications Law
Failure of Benefits: Consumer
Satisfaction
• Ninety eight percent
(98%) of local regulators
in state franchise states
when...
Failure of Benefits: 2013 American
Customer Satisfaction Index
• Subscription TV industry satisfaction rose from 66 in 201...
Failure of Benefits: Jobs
• According to CWA report, even if there were gains
from state franchising, the approved deal be...
Failure of Benefits to Arrive: Choice
• New state entrants have not appeared at all, or only to
a limited degree in some s...
Why A Rigorous Renewal Process?
• May allow localities to question new and questionable
charges being levied on bills – or...
Significant Questions Remain As To
Meaning of State Laws
• Almost all states provide for some PEG channels. But
none reall...
Significant Questions Remain As To
Meaning of State Laws
• What does it mean to provide a channel? Where does
the channel ...
Significant Questions Remain As To
Meaning of State Laws
• What is effect of state laws on local rights to
enforce I-Net o...
Joseph Van Eaton
Joseph.VanEaton@bbklaw.com

Contact Information
Best Best & Krieger
1155 Connecticut Ave. NW
Suite 1000
W...
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State Franchising and Renewal: What Happens Next?

  1. 1. Telecommunications Law
  2. 2. State Franchising and Renewal: What Happens Next? NATOA 2013 ANNUAL CONVENTION ORLANDO, FLORIDA September 15, 2013 PRESENTED BY: Joseph Van Eaton Partner, Best Best & Krieger Telecommunications Law
  3. 3. Overview • State v. local franchising • How federal Cable Act fits in • Some key questions (which may affect you even if you franchise locally) Telecommunications Law
  4. 4. State Franchising Status Today LEGEND State with Franchising Law Local Franchising – Legislation Under Consideration Local Franchising – No Active Legislation Telecommunications Law
  5. 5. …But “State Franchising” Is Not One Size Fits All • In some states, state is franchising authority, issues franchises, sets terms (CA.) • In some states, locality is franchising authority but state created “uniform franchise” (MI.) • In some states, state and locality can franchise (VA.) • Significant variations in enforcement authority, right to modify state model Telecommunications Law
  6. 6. Number of states passing state franchise legislation Rate of State Franchise Law Adoption 9 8 7 6 5 4 3 2 1 0 2005 2006 2007 2008 2009 2010 2011 2012 Year Telecommunications Law
  7. 7. “State Franchise” States Now Heading Into Renewal • 47 U.S.C. § 546 – establishes formal and informal process for renewal • Formal process must be activated 30-36 months prior to franchise expiration, or formal process does not apply (the renewal window) • State franchises issued in 2006 are in renewal window; 2007-issued franchises hit window next year Telecommunications Law
  8. 8. …Consequences • If operator activates formal renewal process franchising authority has six months to “commence proceeding” which provides public opportunity to participate to review past performance and identify future, cable-related needs and interests Telecommunications Law
  9. 9. …Consequences (cont’d) • Renewal issues may be resolved informally. (47 U.S.C. § 546(h)…but a franchise may only be renewed informally “after affording the public adequate notice and opportunity for comment…” • How can these formal/informal requirements be squared with state laws that contemplate renewal by simple application? Telecommunications Law
  10. 10. California CPUC - Rulemaking 13-05-007 • CPUC (LFA for CA.) is determining whether it can or should adopt renewal rules • Cities and consumer protection groups argue public (and cities) must have a meaningful opportunity to comment on renewal even in informal proceeding • Providers generally arguing renewal is automatic unless there are state statutory grounds for denial Telecommunications Law
  11. 11. Detroit v. Michigan • Detroit v. Michigan, 879 F. Supp. 2d 680 (E.D. Mich. 2012), recon. denied 2012 WL 3234967 (E.D. Mich., Aug. 7, 2012), app. certified 2013 WL 1340108 (E.D. Mich., Apr. 3, 2013) • District court finds that ‘home rule” provisions of state constitution means localities must be able to reject uniform state franchise • Court finds no conflict between state law and federal law Telecommunications Law
  12. 12. Detroit v. Michigan • Dist. court concludes under MI. law, that old franchises not extended automatically, so Comcast is now a trespasser • Case will be briefed to 6th Circuit this Fall • Case follows City of Dearborn v. Comcast of Michigan III, Inc., 2008 U.S. Dist. LEXIS 77755 (E.D. Mich. Oct. 3, 2008, as amended Nov. 25, 2008) (finding state law preempted in part by Cable Act) Telecommunications Law
  13. 13. Why Renewal Issues Matter In State Law States…and Implications for Other States Telecommunications Law
  14. 14. Failure of Benefits: Prices Continue to Rise $60.00 $50.00 $40.00 $30.00 $20.00 $10.00 $0.00 Source: NATOA Basic Tier Digital Tier Before State Franchise Telecommunications Law After State Franchise
  15. 15. Failure of Benefits: No Change In Price Slope Post 2006 Source: FCC Telecommunications Law
  16. 16. Failure of Benefits: Consumer Satisfaction • Ninety eight percent (98%) of local regulators in state franchise states when surveyed disagreed with the statement “Customer service is working better now than it was before the implementation of state franchising.” 98% Disagree Telecommunications Law 2% Agree Source: NATOA
  17. 17. Failure of Benefits: 2013 American Customer Satisfaction Index • Subscription TV industry satisfaction rose from 66 in 2012 to 68% approval in 2013, as an industry only newspapers and Internet service providers have a worse industry index score. • Verizon FiOS came out on top of rankings for a second year; Charter jumped from bottom over Comcast and Time Warner. • Call center satisfaction was dismal, with a low, low score of 65 — a full nine points below the ACSI average of 74. • Study anticipates that next year’s Worst Company In America bracket will be full of cable and Internet providers. • Source: http://consumerist.com/2013/05/21/comcast-timewarner-cable-bring-up-rear-in-cable-customer-satisfaction/ Telecommunications Law
  18. 18. Failure of Benefits: Jobs • According to CWA report, even if there were gains from state franchising, the approved deal between Verizon Wireless and the big cable companies will cost workers and communities 72,000 jobs. • It’s clear there were no such gains  According to the Bureau of Labor Statistics, the domestic call center industry continues to shed jobs, losing over 500,000 since 2006.  According to Bureau of Labor Statistics there were about 309,000 “Line Installer” jobs in 1996, but only 269,100 in 2010. That’s a decrease. Telecommunications Law
  19. 19. Failure of Benefits to Arrive: Choice • New state entrants have not appeared at all, or only to a limited degree in some states (North Carolina), and for largest entrants, competition is limited to telephone footprint • Rural areas are losing wireline even with statewide franchising • Does state franchising make a difference? Verizon has entered without state franchises and is expected to pass 18 million premises by 2018 - 70 percent of the Verizon wireline footprint • No state has made any significant effort to enforce build-out requirements Telecommunications Law
  20. 20. Why A Rigorous Renewal Process? • May allow localities to question new and questionable charges being levied on bills – or to raise issues regarding credits due for customer-provided equipment • Does allow localities to review customer service requirements • Does provide opportunities to review adequacy of build-out of system (is redlining occurring?) Telecommunications Law
  21. 21. Significant Questions Remain As To Meaning of State Laws • Almost all states provide for some PEG channels. But none really define what a channel is:  Is a channel just a pathway from point A to point B? Or is a “channel” what is provided to broadcasters (what is commonly understood as a “television channel”)  If HD is provided by PEG programmer to operator, does the operator need to deliver the signal in HD?  What quality standards apply?  What functionalities are provided?  Is accessibility part of functionality?  Can special charges be assessed for PEG channels? Telecommunications Law
  22. 22. Significant Questions Remain As To Meaning of State Laws • What does it mean to provide a channel? Where does the channel begin and end, and who pays to get the channel to the operator? • Must the channel be part of basic service? In what format? • Is a channel a program delivered in one format? Or is it capacity, which can be used for multicasting? • What are obligations with respect to guides, closed captioning, multi-lingual audio tracks? Telecommunications Law
  23. 23. Significant Questions Remain As To Meaning of State Laws • What is effect of state laws on local rights to enforce I-Net obligations? • What deductions are permitted from franchise fees? • What is obligation to comply with FCC regs – and how are the regs enforced? • What is the scope of the franchise, and who must obtain a franchise? • Do franchise fee provisions adequately address changes in manner services are provided? Telecommunications Law
  24. 24. Joseph Van Eaton Joseph.VanEaton@bbklaw.com Contact Information Best Best & Krieger 1155 Connecticut Ave. NW Suite 1000 Washington DC 20036 Phone: (202) 785-0600 Fax: (202) 785-1234 Cell: (202) 664-4621 Website: www.bbklaw.com Telecommunications Law

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