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Cable Franchise Renewal in An IP World


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Brian T. Grogan presentation to National Association of Telecommunications Officers and Advisors, June 3, 2013

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Cable Franchise Renewal in An IP World

  1. 1. eNATOA – Educational WebinarJune 3, 2013Brian T. Grogan, Esq., Moss & BarnettCABLE FRANCHISERENEWAL IN AN IP WORLD
  2. 2. Top Five Renewal Issues1. Consideration2. Customer Service3. Competitive Equity4. PEG5. Institutional Network1
  3. 3. Consideration• Franchise Fee– Define “Gross Revenues”– Clearly define verification and enforcement• PEG Fee– Upfront, pay as you go, periodic payments– Tied to subscriber numbers?– Can PEG fees be offset from franchise fees?• In-Kind Services– Schools and public buildings– I-Net, return capacity2
  4. 4. 3Consideration• Cable Act – provides :• during any 12 month period the franchise fees paidby the cable operator with respect to any cablesystem shall not exceed 5% of the operator’s grossrevenues derived in such period from the operationof the cable system to provide cable services– 47 U.S.C. § 542• Key in franchise negotiations is how the parties define“gross revenues”• What if franchise fee payment is late?– Notice and chance to cure?– Simply pay applicable interest?
  5. 5. 4Defining “Gross Revenues”• Simplest definition =– Any and all revenue in any way derived, directly orindirectly, by the Grantee or any affiliated entity from theoperation of the cable system to provide cable servicesin the City.• Listing revenue categories is fine, however– Watch for operator requested exclusions:• Fee on fee• Late fees• Bundling• Advertising revenue• GAAP exclusions• Other non-subscriber revenues
  6. 6. 5PEG Fee• The term "franchise fee" does not include:– Capital costs which are required by the franchise to be incurred by thecable operator for public, educational, or governmental access facilities.- 47 U.S.C. § 542• Operator may oppose PEG fees – Operator may argue:– Makes them less competitive than Direct TV / Dish– Use your franchise fees, that’s what they’re for– Why do you want to raise taxes; Mayor won’t like that?– Nobody watches PEG anyway– No other cities ask for PEG fees– We never pay PEG fees – corporate policy• Be prepared for political debate – get out in front• Should cities be careful not to kill the goose?
  7. 7. 6Customer Service1. FCC standards:a. Office hours and telephone availableb. Installations, outages, and service callsc. Comm. b/t operators and subscribersd. Billing, refunds, and creditse. Local office- Look to both 47 C.F.R. § 76.309 and § 76.1601 - 1604 (notices)1. Reporting/enforcement - not in FCC regs- Specify in franchise or City Code- Regional call centers – how to enforce?2. Operator may argue - competitive disadvantage- May want relief if FCC amends regulations3. City can adopt separate Customer Service Ordinance- Part of City Code
  8. 8. Competitive Equity• Operator will demand Level Playing Field language– Nothing in federal law requires such a provision– Check state law for state obligation• Why should the City agree to any language more burdensomethan state or federal law?• Fairness?• Issues to watch for in proposed language– “Opt-out” provisions that allow operator to avoid franchiseobligations without City approval– “Line item veto” - allows the operator to unilaterally modifyfranchise if different than competing franchise– Consider “all or nothing” approach• Operator can have the same terms as the competitor• But it must take all requirements – no pick and choose7
  9. 9. 8PEGStart with the four “C’s”1. Content –who will program the channels- City, Schools, Colleges, Non-profit, public users2. Channels - Identify needed PEG channels – are they used?a. Analog/digital migration (HDTV - VOD)b. Location, location, locationc. Transmission compatibility – picture quality3. Connectivity with origination facilitiesa. Two-way connections – how configured?b. I-Net obligations4. Cash - capital and operational supporta. Capital - equipment and facilities = “depreciable life”b. Operator will argue against “operational support”
  10. 10. 9Institutional NetworkInstitutional Network “I-Net” means:§611(f) [531(f)]• A communication network which is constructed oroperated by the cable operator• Generally available only to subscribers who are notresidential subscribers– In practice an I-Net is typically:• a dedicated network built by an operator• used by a city free of charge or at a low cost• for voice, video and data transmissions– Operators may want to convert I-Nets to:• Commercial services contracts - increase profits• Can the operator “mandate” a commercial contract?
  11. 11. 10Can an Operator Say NOto a Requested I-Net?• Cable operator usually cites to:Cable Act §621(b) [541(b)]A franchising authority may not impose any requirement thathas the purpose or effect of prohibiting, limiting, restricting,or conditioning the provision of a telecommunications serviceby a cable operator or an affiliate thereof.• Cities should look to:Cable Act §621(b) [541(b)]Except as otherwise permitted by sections 611 and 612, afranchising authority may not require a cable operator toprovide any telecommunications service or facilities, otherthan institutional networks, as a condition of the initialgrant of a franchise, a franchise renewal, or a transfer of afranchise.
  12. 12. 11Thank YouBrian T. Grogan, Esq.Moss & Barnett, A Professional Association4800 Wells Fargo Center, 90 South Seventh StreetMinneapolis, MN 55402-4129(612) 877-5340 phone / (612) 877-5999 facsimilee-mail: GroganB@moss-barnett.comWebsite: