This document summarizes several FCC developments that present threats and opportunities for Texas cities related to wireless infrastructure, telecommunications mergers, net neutrality, public safety networks, and cable franchising. Key points discussed include new FCC rules around wireless facility siting, pending mergers between major telecommunications providers that could impact competition and pricing, concerns about "fast lanes" on the internet, the development of a national public safety network, and FCC orders reconsidering cable franchising standards.

1. FCC Developments: Threats and
Opportunities for Texas Cities
November 7, 2014
PRESENTED TO TEXAS ASSOCIATION OF TELECOMMUNICATIONS OFFICERS AND ADVISORS
Joseph Van Eaton, Partner, Best Best & Krieger
©2014 Best Best & Krieger LLP
Telecommunications Law

2. Telecommunications Law
Topics
• Wireless rulemaking
• Mega-mergers and abandonment of the public
switched telephone network
• Net neutrality/FCC Muni petitions
• FirstNet - public safety issues
• Section 621 reconsideration and “hidden”
proceedings
• Defining “multichannel video service” and “cable
service” in an IP world

3. Wireless Rulemaking
• Commission has adopted rules interpreting Section 6409 (collocation
and modification) and 332(c)(7)
• Key takeaways
 Reconsideration petitions must be filed in 30 days of publication
 Appeal must be filed within 60 days of publication
 Likely deadlines – mid-December for the former, mid-January for the
latter
• Proprietary v. regulatory distinction – but what about RoW? Are
franchising standards different than zoning decisions
• Rules not clear – stealth (concealment elements) are protected, but
rules that allow placement so long as a facility does not exceed a
certain height or width are not – a real problem for small cell and DAS
• Applies to DAS and small cells on ground that they are small, but allows
small facilities to grow 10 feet in height and six feet in width
Telecommunications Law

4. Wireless Rulemaking
• Rules effective with respect to 6409 in 90 days – may
require major ordinance re-writes because decision on
complete 6409 application required in 60 days
• May require different approaches to DAS, and careful
drafting of leases
• Decision does raise significant 10th amendment issues,
and longer term, significant property rights issues for
localities
• For complete description of order, see presentation at
http://www.bbklaw.com/?t=40&an=34267&format=xml
Telecommunications Law

5. Wireless Rulemaking – Threats and
Telecommunications Law
Opportunities
• Most immediate risk: applications deemed granted
because locality can’t adopt procedures to respond
to new rules
• Opportunities: may provide some certainty as to
what is permitted under Section 6409, and remove
problems created by staff guidance issued in
January 2013
• There will be opportunities to appeal and to seek
reconsideration – but localities must be in a position
to take those steps within two-three months

6. Mergers – What’s Going On
• Comcast-Time Warner – Charter (merger of 1st
and 2d largest providers of cable and broadband;
spin-offs and consolidations to Charter to create
regionally concentrated dominance for Charter-
Comcast)
• AT&T Acquisition of DIRECTV
• Both pending federal approval
Telecommunications Law

7. Telecommunications Law
FCC
Communications Act
• Jurisdiction -- Communications Act poses a separate and
some feel higher standard for approval of the transfer of the
hundreds of licenses (e.g. microwave, satellite and other
licenses,) from Time Warner to Comcast.
• Standard: Comcast bears the burden of proving that the
deal is in the “public interest, convenience and necessity.”
 Public interest standard offers FCC greater latitude than the DOJ
has.
 FCC can base its actions on a determination of what the deal’s
approval might do to affect the diversity in the marketplace of
ideas, competition or localism.
 Commission decision is afforded considerable deference.

8. Telecommunications Law
FCC
• MB 14-90 is docket for AT&T – DIRECTV merger
Application materials available for public
review on FCC website
http://www.fcc.gov/transaction/att-directv
• Initial comments/petitions filed September 16,
response Oct. 16, replies ?

9. Telecommunications Law
FCC
• MB 14-57 is docket for Comcast-TWC-Charter
merger. Application materials available for public
review on FCC website
http://apps.fcc.gov/ecfs/proceeding/view?name=
14-57
• Initial comments/petitions were due August 25.
Nearly 12,000 comments/petitions filed
• Responses to comments/petitions filed Sept. 23;
Reply comments due ?

10. Telecommunications Law
FCC
• Seeking conditions if approved: Cities of New York, Boston,
Dallas, Chicago, Los Angeles, Montgomery County,
Maryland, Portland, NATOA, SEATOA, Public Telecomm
Institute (PTI), and others, including groups supporting
public, educational and government access (Alliance for
Community Media and Alliance for Community Democracy
(ACD). Several technology groups and “edge providers”
including Netflix are in this category
• Seeking approval: Coalition of 50 mayors in support of the
merger, Philadelphia, amongst others.
• Full Denials: Consumers Union, Public Knowledge, Open
Technology Institute, Free Press

11. Telecommunications Law
FCC
• Major conditions proposed by local gov/PEG
 Conditions to close digital divide
• Enhance Internet Essentials program
• System expansions to underserved areas
 Conditions to preserve “open Internet”
 Conditions to protect consumers/availability of
alternative end user equipment
 Conditions to protect local programming
• Allow use of PEG support for PEG operations
• Ensure PEG providers (and local governments) are able to take
advantage of capabilities of cable system
 Conditions to maximize competitive entry potential
 Extension of conditions to Charter/GreatLand

12. Post-Merger – National Picture
1.53% 0.85%
8.66%
Telecommunications Law
48.96%
13.45%
9.22%
4.56%
1.93%
10.84%
Comcast
Charter
U-Verse
Verizon
Cablevision
Suddenlink
Mediacom
Cable ONE
All others

13. Description of the Merger
• Effectively consolidates systems and clusters:
 Comcast gains in California, New England,
Tennessee, Georgia, North Carolina, Texas, Oregon,
Washington and Virginia.
 Charter gains in Ohio, Kentucky, Wisconsin,
Indiana, and Alabama
 GreatLand in Michigan, Minnesota, Indiana,
Alabama, Eastern Tennessee, Kentucky and
Wisconsin
Telecommunications Law

14. Mergers – In the Context Of:
• Court decision striking down net neutrality rules;
FCC considering rule to allow providers to create
Internet “fast lanes”
• FCC allows VZ Wireless to sell Comcast services
outside FiOS footprint, and Comcast to sell VZ
Wireless across its territories
• Announcement of possible order classifying
linear OTT as MVPDs (???)
Telecommunications Law

15. What Does Comcast Say In Response?
• No one submitted an economic study that rebutted
our submittal that the merger is good
• There is no impact on video competition, because
there is none, and there is no impact on broadband
competition
• We deal on a case by case basis with franchise
issues, so no need to establish any federal standards
to address franchising issues
• No conditions should be extended to
Charter/GreatLand (Internet Essentials dead in
Midwest)
Telecommunications Law

16. What Does Comcast Say In Response?
• No improvements to Internet Essentials required or
appropriate – unrelated to merger
• No additional PEG requirements – public interest is
satisfied by extension of PEG conditions in
NBC/Universal to TWC systems; PEG conditions
unrelated to transaction
• No broadband/net neutrality conditions
• No customer service conditions because no showing
customer service will get worse because of merger
• No local enforcement of federal conditions
Telecommunications Law

17. Mergers – Threats and Opportunities
• Threat: wireline video service competition that
justified elimination of local franchising will
substantially diminish; Comcast will have
substantially increased market power
• Opportunity: if conditions are imposed,
conditions may address some shortcomings of
state video franchising law – but don’t be
surprised if the merger is approved without
locally important conditions if localities are silent
Telecommunications Law

18. Open Internet – Threats and
Telecommunications Law
Opportunities
• Reclassification may have significant tax implications,
implications for RoW use by provider, and implications for
municipal entry into market (see, e.g. Texas Utilities Code Sec.
54.202)(but see petitions by Wilson, N.C. and Chattanooga re:
preemption of certain state laws regarding muni entry)
• Internet fast lane may create challenges for local govs, schools,
health care facilities seeking to communicate cost-effectively
with public; may affect ability of new content providers to
attract users; may affect deployment and investment and may
be particularly problematical if control of pathways to homes
and businesses is concentrated in a few providers

19. Telecommunications Law
Public Safety
• FirstNet is issuing a series of public notices and requests for information that will
result in defining capabilities, uses, and limitations on uses of proposed national,
interoperable public safety network – and relationship of that network to state
networks
• Most immediately – comments are due on 10/27 on “certain proposed
interpretations of its enabling legislation that will inform, among other things,
forthcoming requests for proposals, interpretive rules, and network policies. With
the benefit of the comments received from this Notice, FirstNet may proceed to
implement these or other interpretations with or without further administrative
procedure Issue for localities”
• FirstNet is seeking (for example) definition of term “rural” and also seeks to define
permissible public safety uses of network (beyond traditional first responders)
• Localities may have an interest in participating rather than relying on states to
address key policy issues, NTIA Docket Number 140821696-4696-01, 79 Fed. Reg.
57058
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20. Section 621 Orders
• FCC – in response to complaints localities delaying new entrants – decides to
interpret Section 621 of Cable Act, authorizing issuance of one or more franchises,
but prohibiting exclusivity
• First Order – already upheld on appeal – applies to new entrants but not in states
with uniform franchising. Holds, among other things:
 Can’t require build-out faster than build-out first required for cable system
 Must act on application within a certain period, or application deemed granted
 Can’t use cable regulatory authority to regulate telephone side of business (multi-use
facilities)
 Franchise fees
• Can’t recover attorney/consultant costs
• In-kind requirements unrelated to cable count against franchise fee
• PEG = capital for facilities only with important exceptions
 Can’t enforce most favored nations clauses against a new entrant
Telecommunications Law
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21. Section 621 – Order 2
• Second Order applies most of first order to incumbents.
Problems:
 Order allows incumbents to apply MFN against localities
 Requires localities to finance renewal process which may
require expert studies
 Operators (TW) decide to interpret “in-kind” to allow an
offset against franchise fees based on “value” of free
services
 Operators decide order writes I-Nets out of Act except to
the extent used for PEG, and argues that it limits ability to
regulate portions of system used for other services (wi-fi)
Telecommunications Law
21

22. Section 621 – Order 2
• Second Order was appealed, and localities asked
FCC to reconsider almost every one of the points
discussed above
• Recon has been pending since 2007, and appeal
has been on hold for that period
• FCC now about to rule – press reports say recon
will be denied generally - but extend orders to
states with uniform franchises
• May be opportunity if localities act now
Telecommunications Law
22

23. Other proceedings
• PEG-ATT proceeding/accessibility proceeding
(access to guides)
• IP-Enabled services
• RoW management/fees (to speed deployment
of broadband)
Telecommunications Law
23

24. Rethinking regulatory Rules in an IP
Telecommunications Law
World
• FCC asked to classify OTT providers as “multichannel video service providers” to
enable them to obtain access to video content on same basis as cable operators
Interpretation of the Terms “Multichannel Video Programming Distributor” and
“Channel,” MB Docket No. 12-83; Aereo ex parte
http://apps.fcc.gov/ecfs/document/view?id=60000972464
• Providers likely to roll out their own OTT products as part of Internet package,
separate from video services
• What happens to franchise fees and to bundling allocations as OTT services roll out?
Are they subject to fees? Or not? What triggers obligation to obtain a video service
franchise?
• How do we deal with competitive equity (and should we?)
• Threat: localities will see revenues drop without developing response to changing
regulatory landscape. Opportunity: localities can begin to shape a response to a
world where services are provided via the public Internet and private Intranets

25. Can Congress Harmonize Electronic
Telecommunications Law
Taxation?
Possible On-Line Tax
Reform
Marketplace
Fairness
Internet Tax
Freedom
Digital
Goods
Cell Tax
Morat’m

26. The Permanent Internet Tax Freedom Act
Internet Tax Freedom Forever Act (“ITFFA”)
• ITFA has been in effect since 1998, currently
scheduled to expire in November, 2014
• ITFA “walls off” from state and local taxation
broadband communications
• PITFA passed House on voice vote – Senate will
only extend for a short term.
Telecommunications Law
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27. Telecommunications Law
ITFA
• As what was formerly telecom is supplanted by
broadband, states and locals are left with a shrinking
communications service tax base
• Left in place, the ITFA will eventually “tax exempt” all,
or almost all, of the entire telecommunications
industry’s services [except where tied to RoW
authorization]
• Unless telecom tax “reform” is coupled with ITFA
repeal, industry will have no incentive to ever let ITFA
expire.

28. Telecommunications Law
Wireless Tax
Fairness Act
• Last Congress passed the House, went
nowhere in the Senate
• Would impose a 5-year moratorium on any new
“discriminatory”, or any increase in existing,
state or local taxes on wireless services; would
grandfather existing taxes and exclude taxes
imposed by vote of community
• Returned in 2013, but no action
28

29. The Digital Goods and Services Tax
Fairness Act of 2013 -- S.1364
• Legislation creates a nationwide “tax preference” for
online goods and services over competing brick-and-mortar
sales by limiting state and local taxes on
“digital goods and services.”
• Downloaded music and videos;
• Pay-per-View (PPV) and video-on-demand (VoD)
revenue removed from the cable franchise fee
revenue base
Telecommunications Law
29

30. Main Street Fairness Act
(S. 743 and H.R. 684)
• Passed Senate on a strong bi-partisan basis
• Pending in House Judiciary
• Allows states and local governments to collect sales
and use taxes on remote (typically online) sales to
their residents
• Aims to eliminate the current disadvantage
suffered by brick-and-mortar retailers vis-à-vis
online retailers
• Generate funds ($23B)
Telecommunications Law
30

31. Threats and Opportunities
• There has been significant recognition that existing tax
structure is unsustainable
• Issue for localities – is there a solution that protects, as
opposed to diminishing local revenues?
• Can any solution pass both Houses of Congress in any
reasonable time frame?
• Will result be driven by moderates – or by a “Tea Party”
approach?
• ITFA expires December 11 – along with other key tax
provisions – so something will happen. Only question is
what – municipal engagement is critical now
Telecommunications Law
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32. Telecommunications Law
Questions?
Joseph Van Eaton
Best Best & Krieger LLP
2000 Pennsylvania Avenue N.W.
Suite 4300
Washington, DC 20006
(202) 370-5306
Joseph.VanEaton@bbklaw.com