Update on State Franchising Laws (6/05/06)

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Update on State Franchising Laws (6/05/06)

  1. 1. 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
  2. 2. WHERE CAN FRANCHISING BE CHANGED? <ul><li>Arenas for IPTV onslaught: </li></ul><ul><li>Congress </li></ul><ul><li>State Legislature </li></ul><ul><li>Federal Communications Commission </li></ul>
  3. 3. Telcos’ Strategy: “Cover the Board” <ul><li>Play All Forums Simultaneously </li></ul><ul><li>Move to the One with Earliest Relief or Best Relief </li></ul><ul><ul><li>By definition that is the Congress – one fell swoop. </li></ul></ul><ul><ul><li>By practice, that may be the state or FCC. </li></ul></ul><ul><li>Use FCC as Trump Card to win no matter the number called: </li></ul><ul><ul><li>If Congress does not act: FCC defines IPTV as “non-cable service.” </li></ul></ul><ul><ul><ul><li>Do something or FCC will undercut you. </li></ul></ul></ul><ul><ul><li>If Congress does not act – look to state action. </li></ul></ul><ul><ul><li>If State action is pro-local government – look to FCC to preempt. </li></ul></ul>
  4. 6. States Adopting State Franchising <ul><li>Texas </li></ul><ul><li>Virginia </li></ul><ul><li>Indiana </li></ul><ul><li>Kansas </li></ul><ul><li>New Jersey** </li></ul><ul><li>South Carolina </li></ul><ul><li>** Has not actually happened yet. </li></ul>
  5. 7. States in Play <ul><li>California* </li></ul><ul><li>Connecticut </li></ul><ul><li>Florida </li></ul><ul><li>Iowa </li></ul><ul><li>Louisiana </li></ul><ul><li>Maine </li></ul><ul><li>Massachusetts </li></ul><ul><li>Michigan </li></ul><ul><li>Minnesota </li></ul><ul><li>Missouri </li></ul><ul><li>New York* </li></ul><ul><li>North Carolina </li></ul><ul><li>Pennsylvania </li></ul><ul><li>Tennessee </li></ul><ul><li>Wisconsin </li></ul><ul><li>* Updates needed from materials in handout. </li></ul>
  6. 8. Jurisdictional Issues at Play <ul><li>Definition of cable service </li></ul><ul><ul><li>Must capture IPTV – but can it at state level? </li></ul></ul><ul><li>Police Powers </li></ul><ul><li>Consumer Protection </li></ul><ul><ul><li>Does your PUC (or FCC) have the staff to address consumer complaints? </li></ul></ul><ul><ul><li>Will state legislation take away your funds? </li></ul></ul><ul><li>Oversight of Rights-of-Way </li></ul><ul><ul><li>Who decides your street issues – Your Public Works Department or State PUC? </li></ul></ul>
  7. 9. Dollar Issues at Play <ul><li>Definition of Gross Revenue </li></ul><ul><ul><li>Must capture all revenue generated on the system not specifically preempted by Federal law. For example: </li></ul></ul><ul><ul><li>Advertising Rentals Launch fees </li></ul></ul><ul><ul><li>Late Fee Home Shopping On Demand/Pay-per view </li></ul></ul><ul><ul><li>Beware of reference to GAAP. </li></ul></ul><ul><li>Audits & Enforcement. </li></ul><ul><ul><li>Beware of limits and ability to recover your audit fees. </li></ul></ul>
  8. 10. Taxes and Fees <ul><li>Don’t Allow State law to jeopardize traditional taxes and fees. </li></ul><ul><ul><li>Some states have banned permit fees over and above cable franchise. </li></ul></ul>
  9. 11. Buildout <ul><li>Discrimination/buildout/redlining. </li></ul><ul><ul><li>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) </li></ul></ul><ul><ul><li>Don’t allow state law to ban buildout or substitute in “intent” standards. </li></ul></ul>
  10. 12. I-NET/PEG/PEG $$ <ul><li>Channels </li></ul><ul><ul><li>Typically match incumbent </li></ul></ul><ul><li>Financial Support (Can this be enforced?) </li></ul><ul><ul><li>1% states </li></ul></ul><ul><ul><li>Match incumbent or 1% states </li></ul></ul><ul><ul><li>Zero </li></ul></ul>
  11. 13. Lessons Learned for LFAs <ul><li>The Law of Unintended Consequences. </li></ul><ul><ul><li>Can incumbent abandon </li></ul></ul><ul><ul><ul><li>the franchise? </li></ul></ul></ul><ul><ul><ul><li>current service obligations? </li></ul></ul></ul><ul><ul><li>Cash is Not an adequate substitute for in-kind. </li></ul></ul><ul><li>2. Need forward-looking PEG </li></ul><ul><li>3. No Current state bill truly keeps “LFA whole” </li></ul><ul><li>4. The “process issues” </li></ul>
  12. 14. Right-of-Way Problems and Catastrophes <ul><li>Indemnification </li></ul><ul><li>Insurance </li></ul><ul><li>Effective remedies for bad behavior </li></ul><ul><li>Telcos and small operators are not the same </li></ul>
  13. 15. The Process Issues <ul><li>Consumer point of contact? </li></ul><ul><li>Remedies against bad actors? </li></ul><ul><ul><li>Franchise in perpetuity </li></ul></ul><ul><ul><li>No contract enforcement </li></ul></ul><ul><li>Control over PROW? -- Lip-service. </li></ul><ul><li>a. Limited enforcement powers </li></ul><ul><li>b. Cumbersome enforcement process </li></ul><ul><li>Example: Does “stop work” order violate right of access until court decision? </li></ul>
  14. 16. WHAT’S MISSING? <ul><li>Termination or abandonment? </li></ul><ul><li>Sell out to the other? </li></ul><ul><li>No consumer rebates, refunds and credits </li></ul><ul><li>No construction and repair notices. </li></ul><ul><li>No stand-by power. </li></ul><ul><li>No CPE and cable-ready TV compatibility. </li></ul><ul><li>No mention of disabled community. </li></ul><ul><li>No record of customer service complaints. </li></ul>
  15. 17. WHAT’S MISSING? <ul><li>No emergency alert system. </li></ul><ul><li>No upstream connections for PEG signals. </li></ul><ul><li>No signal testing or performance evaluations. </li></ul><ul><li>No restrictions on operator editorial control of PEG. </li></ul><ul><li>No reference to “non-standard installations.” </li></ul><ul><li>No privacy rights and disclosures. </li></ul><ul><li>No EEO and Small Business Procurement practices. </li></ul><ul><li>No prohibition of anti-competitive pricing within the franchise area. </li></ul>
  16. 18. FCC—Hey Don’t Forget Us! <ul><li>Cable Franchise NPRM </li></ul><ul><li>MB Dkt No. 05-311; FCC 05-189 </li></ul><ul><li>Issue: Is LFA RBOC Negotiation for Franchise “per se unreasonable” under 621(a)(1)? </li></ul>
  17. 19. FCC— Preemption of IP (IPTV?) Service Regulation <ul><ul><li>E911? </li></ul></ul><ul><ul><li>CALEA? </li></ul></ul><ul><ul><li>Consumer Recourse? </li></ul></ul><ul><ul><li>Net Neutrality? </li></ul></ul><ul><ul><li>Interconnection? </li></ul></ul><ul><ul><li>Non-Discrimination? </li></ul></ul>
  18. 20. Conclusion <ul><li>RBOCs are Coming to Video this time </li></ul><ul><li>Core Debate over Video Franchising: </li></ul><ul><ul><li>LFA v. Telco v. Cable Operators </li></ul></ul><ul><li>RBOCs can win without Congress but can LFAs? </li></ul>
  19. 21. Contact Information <ul><li>Gerard L. Lederer </li></ul><ul><li>[email_address] </li></ul><ul><li>Miller & Van Eaton, P.L.L.C. </li></ul><ul><li>1155 Connecticut Avenue, N.W. </li></ul><ul><li>Suite 1000 </li></ul><ul><li>Washington, D.C. 20036-4301 </li></ul><ul><li>Phone: 202.785.0600 </li></ul><ul><li>Fax: 202.785-1234 </li></ul><ul><li>www.millervaneaton.com </li></ul>

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