Originally published on September 17, 2009
Companies that want to provide cable service are required by the Federal Cable Act to acquire a cable franchise from a unit of local government before providing service. In Minnesota, cities are the local unit of government that is authorized to grant cable franchises. Federal law also requires these franchises to be non-exclusive. In other words, no city may grant an exclusive franchise to any one particular company. For many years, most cities did not see more than one provider seeking a cable franchise. There are many reasons for this, but probably the biggest reason was that it was prohibitively expensive for a competing cable operator to construct cable wire and other facilities throughout a city. It was simply cost-prohibitive in most situations. However, with recent changes in technology and the ability of telephone companies to provide video service through IP technologies, the competitive landscape is changing. More telephone companies, particularly rural telephone companies are seeking to add video to their lineup of service offerings to their customers.
State Law Considerations
When there is an existing cable franchise in place in a city, the second competitive franchise must not be “more favorable or less burdensome than those in the existing franchise pertaining to: (1) the area served; (2) public, educational, or governmental access requirements; or (3) franchise fees.” When the new cable entrant is proposing different franchising requirements in these three areas, it is up to the franchising authority and the other interested parties to reach agreement on what “more favorable or less burdensome” means in this context. As of this posting, this issue has not yet been fleshed out by any court in Minnesota.
Another consideration is whether the competing company is a “cable communications company” as that term is defined by the Minnesota Cable Act. If it is not, the level playing field provisions of the Minnesota Cable would not apply.
When looking at granting a competitive cable franchise, it is also important to understand any “competitive equity” or “level playing field” provisions in the existing cable franchise. It is not unusual for the existing franchise to have language that contains limitations beyond the level playing field conditions set forth in state law. The language may also apply to more companies than merely cable communications companies.
In 2007, the FCC released two orders relating to competitive franchising. The first order addressed competitive applicants for cable franchise and the second order addressed whether the rules in the first order applied to the existing franchise holder. Under the first order, the FCC adopted new rules concerning the application for an additional cable franchise starting with the time in which a request for a franchise must be acted upon.
Competitive Franchise Deadlines
If a company already has authority to access the public rights-of-way, the franchising authority my act on an application within 90-days.
All other applications must be acted on within six (6) months.
A franchise applicant has the burden of proving that it filed the requisite information with the franchising authority.
Unless otherwise agreed by the applicant and the franchising authority, if deadline is not met then an applicant is automatically granted interim authority to utilize public rights-of-way to provide cable service.
The terms of an “interim franchise” are those proposed in an applicant’s application and remains in effect until a local franchising authority takes final action on a franchise application.
Network Build-Out Requirements
Like state law, the FCC in its first order addressed the area a franchising authority may require in a cable franchise. The FCC declared it is unlawful for franchising authorities to refuse to grant a competitive franchise on the basis of “unreasonable build-out mandates.” In Minnesota, it will be up to the parties to apply this language consistent with the state level playing field language relating to area served.
While the FCC did not definitively define what constitutes an “unreasonable build-out” mandate, it did list examples of both reasonable and unreasonable build-out requirements.
Examples of Unreasonable Build-Out Requirements
The FCC’s examples of unreasonable build-out mandates include:
requiring a new entrant to serve everyone in a franchise area before it has begun to serve anyone;
requiring facilities-based entrants, such as incumbent LECs, to build out beyond the footprint of their existing facilities before they have even begun to provide cable service;
requiring more of a new entrant than an incumbent cable operator by, for instance, requiring the new entrant to build out its facilities in a shorter period of time than that afforded to the incumbent;
requiring the new entrant to build out and provide service to areas of lower density than those that the incumbent cable operator is required to build out to and serve;
requiring a new entrant to build out to and service buildings or developments to which the entrant cannot obtain access on reasonable terms or which cannot be reached using standard technologies; and
requiring a new entrant to build out to and provide service to areas where it cannot obtain reasonable access to and use of public rights-of-way.
Examples of Reasonable Build-Out Requirements
The FCC notes that it would seem reasonable for a local franchising authority to consider benchmarks requiring the new entrant to increase its build-out after a reasonable time, taking into account the new entrant’s market success. The FCC also opined that it would seem reasonable to establish build-out requirements based on a new entrant’s market penetration.
With regard to redlining, the FCC continued to rely on 47 U.S.C. § 541(a)(3) to protect consumers against economic redlining, also known as cherry picking.
Franchising competitive operators in Minnesota involves the consideration of federal, state and local laws and contracts. For more information do not hesitate to contact the attorneys at Bradley & Guzzetta, LLC.