state franchising and renewal: what happens next?

Telecommunications Law


State Franchising and Renewal:What Happens Next?

PRESENTED BY:Joseph Van Eaton

Partner, Best Best & Krieger

NATOA 2013ANNUAL CONVENTION

ORLANDO, FLORIDA

September 15, 2013


Overview

• State v. local franchising

• How federal Cable Act fits in

• Some key questions (which may affect youeven if you franchise locally)


State Franchising Status Today

LEGENDState with Franchising Law

Local Franchising – Legislation Under Consideration

Local Franchising – No Active Legislation


…But “State Franchising” Is NotOne Size Fits All

• In some states, state is franchising authority,issues franchises, sets terms (CA.)

• In some states, locality is franchising authoritybut state created “uniform franchise” (MI.)

• In some states, state and locality can franchise(VA.)

• Significant variations in enforcement authority,right to modify state model


Rate of State Franchise LawAdoption

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“State Franchise” States NowHeading Into Renewal

• 47 U.S.C. § 546 – establishes formal andinformal process for renewal

• Formal process must be activated 30-36 monthsprior to franchise expiration, or formal processdoes not apply (the renewal window)

• State franchises issued in 2006 are in renewalwindow; 2007-issued franchises hit windownext year


…Consequences

• If operator activates formal renewal processfranchising authority has six months to“commence proceeding” which provides publicopportunity to participate to review pastperformance and identify future, cable-relatedneeds and interests


…Consequences (cont’d)

• Renewal issues may be resolved informally.(47 U.S.C. § 546(h)…but a franchise may onlybe renewed informally “after affording thepublic adequate notice and opportunity forcomment…”

• How can these formal/informal requirements besquared with state laws that contemplaterenewal by simple application?


California CPUC- Rulemaking 13-05-007

• CPUC (LFA for CA.) is determining whetherit can or should adopt renewal rules

• Cities and consumer protection groups arguepublic (and cities) must have a meaningfulopportunity to comment on renewal even ininformal proceeding

• Providers generally arguing renewal isautomatic unless there are state statutorygrounds for denial


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 2013WL 1340108 (E.D. Mich., Apr. 3, 2013)

• District court finds that ‘home rule” provisionsof state constitution means localities must beable to reject uniform state franchise

• Court finds no conflict between state law andfederal law


Detroit v. Michigan

• Dist. court concludes under MI. law, that oldfranchises not extended automatically, soComcast is now a trespasser

• Case will be briefed to 6th Circuit this Fall

• Case follows City of Dearborn v. Comcast ofMichigan III, Inc., 2008 U.S. Dist. LEXIS77755 (E.D. Mich. Oct. 3, 2008, as amendedNov. 25, 2008) (finding state law preempted inpart by Cable Act)


Why Renewal Issues Matter InState Law States…and Implications

for Other States


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Basic Tier

Digital Tier

Failure of Benefits:Prices Continue to Rise


Failure of Benefits: No Change InPrice Slope Post 2006

Source: FCC


Failure of Benefits: ConsumerSatisfaction

• Ninety eight percent(98%) of local regulatorsin state franchise stateswhen surveyed disagreedwith the statement“Customer service isworking better now thanit was before theimplementation of statefranchising.”

Source: NATOA98% Disagree 2% Agree


Failure of Benefits: 2013 AmericanCustomer Satisfaction Index

• Subscription TV industry satisfaction rose from 66 in 2012 to68% approval in 2013, as an industry only newspapers andInternet 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 Americabracket will be full of cable and Internet providers.

• Source: http://consumerist.com/2013/05/21/comcast-time-warner-cable-bring-up-rear-in-cable-customer-satisfaction/


Failure of Benefits: Jobs

• According to CWA report, even if there were gainsfrom state franchising, the approved deal betweenVerizon Wireless and the big cable companies willcost 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 over500,000 since 2006.

According to Bureau of Labor Statistics there were about309,000 “Line Installer” jobs in 1996, but only 269,100 in2010. That’s a decrease.


Failure of Benefits to Arrive: Choice

• New state entrants have not appeared at all, or only toa limited degree in some states (North Carolina), andfor largest entrants, competition is limited to telephonefootprint

• Rural areas are losing wireline even with statewidefranchising

• Does state franchising make a difference? Verizonhas entered without state franchises and is expected topass 18 million premises by 2018 - 70 percent of theVerizon wireline footprint

• No state has made any significant effort to enforcebuild-out requirements


Why A Rigorous Renewal Process?

• May allow localities to question new and questionablecharges being levied on bills – or to raise issuesregarding credits due for customer-providedequipment

• Does allow localities to review customer servicerequirements

• Does provide opportunities to review adequacy ofbuild-out of system (is redlining occurring?)


Significant Questions Remain As ToMeaning of State Laws

• Almost all states provide for some PEG channels. Butnone 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 iscommonly 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?



• What does it mean to provide a channel? Where doesthe channel begin and end, and who pays to get thechannel to the operator?

• Must the channel be part of basic service? In whatformat?

• Is a channel a program delivered in one format? Or isit capacity, which can be used for multicasting?

• What are obligations with respect to guides, closedcaptioning, multi-lingual audio tracks?



• What is effect of state laws on local rights toenforce I-Net obligations?

• What deductions are permitted from franchisefees?

• What is obligation to comply with FCC regs –and how are the regs enforced?

• What is the scope of the franchise, and whomust obtain a franchise?

• Do franchise fee provisions adequately addresschanges in manner services are provided?


Contact InformationBest Best & Krieger

1155 Connecticut Ave. NWSuite 1000

Washington DC 20036Phone: (202) 785-0600

Fax: (202) 785-1234Cell: (202) 664-4621

Website: www.bbklaw.com

Joseph Van Eaton

[email protected]

state franchising and renewal: what happens next?

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