FCC to Scrutinize Local Franchising Authority

The FCC today promised to study the issue of local cable and video franchising, responding to complaints that some municipalities bar new entrants from the market.

The four-member commission adopted a Notice of Proposed Rulemaking (NPRM) to make sure local franchising authorities do not unreasonably refuse to allow new entrants into the cable and video markets. The NPRM will solicit public comment on a series of questions related to local franchising.

Noting that phone companies and other facilities-based providers can compete well against incumbent cable operators, Chairman Kevin Martin during today’s monthly FCC meeting said, “These new entrants are making significant investments in the infrastructure that enables them to offer video service along with telephone and broadband services to consumers. We are hearing from some providers that local authorities may be making the process of getting franchises unreasonably difficult. New video entrants, regardless of the technology they employ, should be encouraged – not impeded from entry.”

The commissioners – two Democrats and one Republican – all agreed with the intent of the NPRM, which further seeks to determine whether the FCC can implement the pro-competitive mandate of the 1992 Cable Television Protection and Competition Act. The notice tentatively concludes the commission can indeed take steps to ensure the local franchising process does not serve as an unreasonable barrier to entry for competitive cable operators.

The National League of Cities said the NPRM shows the FCC recognizes that municipalities are best suited to negotiate agreements that address local infrastructure and media needs. Still, said Ken Fellman, chairman of the group’s Information Technology and Communications Policy and Advocacy Committee, and mayor of Arvada, Colo., in a statement, “[T]he FCC has tentatively concluded that local governments are specifically authorized to impose build out requirements, prohibit redlining, and secure public access channels. Nonetheless, because Congress has granted the FCC only minimal authority to influence local franchises, we view with concern any future FCC action to limit local involvement beyond its statutory authority.”

SBC Communications Inc., which lobbied the Texas legislature for passage of a statewide franchising bill, praised the FCC’s NPRM, saying consumers deserve more choices, competitive pricing and new services. “[C]able rates are almost immediately cut once a facilities-based competitor is allowed to enter the market,” said James C. Smith, senior vice president-FCC for SBC, in a statement. “SBC supports furthering important local interests in connection with the deployment of its new IP video product, such as fees, public, government and education programming and maintaining rights of way management.”

The Telecommunications Industry Association (TIA) also expressed its support for the NPRM. “Although [local franchising authorities] have served an important function in overseeing the introduction of cable television service, the time is right for a comprehensive review of the local franchise process,” said President Matthew J. Flanigan in a news release.

The three FCC commissioners today noted their approval of the NPRM because it would foster competition to the benefit of consumers. Republican Commissioner Kathleen Abernathy said if the FCC can identify successfully and remedy franchising requirements that are precluding competitive entry, “we will have accomplished much. Increasing cable competition will help consumers by lowering cable rates and giving consumers more choices and better service. Fully functioning markets invariably do a better job of maximizing consumer welfare than regulators can ever hope to achieve.”

Michael Copps, a Democrat, agreed. “Cable and telephone companies are beginning to compete to offer consumers the much-heralded triple play –bundles of telephone, video and Internet services,” he said, adding, “This crossover is exciting, and it means that old industry boundaries are eroding, giving way to a new and hopefully more consumer-friendly future.”

Similarly, Jonathan Adelstein, also a Democrat, said he wants to promote video competition and broadband deployment. “In my long effort to constrain media consolidation, I have called for more diversity in the distribution and production of video content,” he said. “Nothing we have seen in recent years offers more hope for consumers to gain new choices than the serious entry of our largest telephone companies into the video marketplace.”

Other elements of the NPRM want to clarify whether the FCC has the authority to establish a minimum amount of time for potential competitors with existing facilities to build their networks beyond their current service territories; and whether the commission should address actions at the state level if it finds such actions create unreasonable barriers to entry for potential competitors.

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