CABLE PRIMER: LOCAL AUTHORITY OVER CABLE SYSTEMS
SCOPE OF LOCAL AUTHORITY
In 1984, Congress adopted what has become known as the "Cable Act," 47
U.S.C. ??521 et seq. While municipalities had been regulating cable systems for years, there was
significant debate as to the scope of Federal Communications Commission authority over cable
systems, as to the appropriate scope of cable regulation, and as to what level of government
(federal, state or local) should have what regulatory responsibilities. The Cable Act attempted to
resolve those issues. It placed significant and primary responsibility for key elements of cable
regulation at the local level. The Act was intended to "establish franchise procedures and
standards which encourage the growth and development of cable systems and which assure that cable
systems are responsive to the needs and interests of the local community." 47 U.S.C. ??521.
As a general matter, local governments have significant authority to ensure cable systems serve
community interests well, and to replace system operators that are unwilling to provide adequate
service. That is not to say that local authority is unlimited. It is limited in some areas that
are key concerns of subscribers:
The Cable Act was intended to limit government authority to require cable operators to carry
specific, commercial programming. Thus, 47 U.S.C. ? 544 states that "a franchising authority may
not establish in its request for proposals for a [cable] franchise" requirements for "video
programming or other information services." By agreement, an operator and a community can establish
enforceable requirements "for broad categories of video programming or other services."
The Cable Act limits, but does not eliminate, local authority to regulate rates. 47 U.S.C. ??543.
In communities where the cable operator does not face effective competition, a local government can
regulate rates for "basic" service (the lowest level of service ? this is the level that includes
all local broadcast channels) and for equipment. Through equipment rate regulation, a local
government can set rates for converters and remotes, as well as rates for installations and service
calls. Rates for services like HBO cannot be regulated.
The Cable Act states that no locality may "prohibit, condition, or restrict a cable system's use of
any type of subscriber equipment or any transmission technology." 47 U.S.C. ? 544(e). FCC orders
suggest that a city could not require an operator to use fiber optics as opposed to coaxial copper,
microwave or other technologies to deliver service. On the other hand, some operators have argued
that if an operator promises to build a particular type of system, that promise can be enforced.
And, there is a strong argument that localities can require that the cable system have certain
characteristics regardless of the transmission technology used (for example, a locality could
require that the system be highly reliable and capable of delivering advanced cable services).
The Cable Act states that a locality may not, as a condition of granting or renewing a cable
franchise, "require a cable operator to provide any telecommunications service or facilities, other
than institutional networks" except as provided in the Cable Act sections regarding PEG access and
commercial leased access. 47 U.S.C. ??541(b). This limitation is one of a series of provisions that
are designed (with important exceptions for PEG and institutional networks) to prevent localities
from leveraging authority protected by the Cable Act to regulate the provision of telecommunications
services and facilities. The Cable Act does not prohibit localities from regulating cable companies
that provide telecommunications services in the same manner as other telecommunications providers
are regulated.
On the other hand, localities specifically have the authority:
To adopt and enforce customer service standards. The FCC has adopted minimum customer service
standards, and a locality can choose to enforce these, but a locality can also adopt more stringent
standards. 47 U.S.C. ??552.
To include a franchise requirement requiring the operator to pay a franchise fee equal to 5% of the
gross revenues derived from the operation of the cable system to provide cable services. 47 U.S.C.
??542.
To require an operator, through the franchising process, to submit a proposal for facilities,
equipment and services adequate to meet the cable-related needs and interests of the community. 47
U.S.C. ???546, 541(a)(4), 544(b).
To require the cable operator, through the franchising process, to build an institutional network,
and to dedicate capacity on that network for educational and government use. An institutional
network is a portion of the cable system designed primarily to serve customers other than
residential customers. In many communities, operators have agreed to construct institutional
networks that link schools, libraries and other government buildings. These links are then used for
voice, video and data transmissions, and to provide connections to the Internet. An institutional
network can replace expensive phone lines that might otherwise be required, and can significantly
enhance a local government's communications capabilities. Id., 47 U.S.C. ??531.
To require an operator, through the franchising process, to provide channels, facilities, equipment
and capital support for public, educational and government use of the cable system. Thus, for
example, many franchises require the operator to provide channels, equipment and studios that
non-profit groups and others can use to produce programming. PEG requirements can significantly
enhance the ability of government, schools, non-profits and others to deliver information to the
community cost-effectively. In St. Paul, Minnesota, for example, the operator pays a 5% franchise
fee and in addition provides more than $1.50 per subscriber per month for PEG and institutional
network uses. In Larchmont, New York, the operator provides more than $1.00 per subscriber per
month in PEG support. Id.
Through the franchising process a locality also can define where an operator must serve, and set the
time for build-out of the system. 47 U.S.C. ??552(a). Some franchises require the operator to
construct its system so that it can provide service to all residences in a community; some require
that the system be constructed so that it can serve all businesses and residences; and some require
operators to serve all areas with a certain population density. The point is that the community is
in a position to ensure that service is available universally.
The result of the franchising process is a franchise ? which is treated at law as a grant of special
privilege to use the public rights-of-way in return for specific performance promises. In some
communities this takes the form of a franchise ordinance that the operator accepts, and in some
communities it takes the form of an issuing ordinance, authorizing city entry into a "franchise
agreement" that the operator signs. Throughout this paper, the authors will refer to the collection
of documents that set out the operator's contractual privileges and obligations as the ?franchise.?
There may be other separate regulatory rules and ordinances that also apply, such as rights-of-way
management regulations and consumer protection regulations.
The Cable Act suggests that some requirements (such as PEG requirements) may only be established
through the franchising process. However, it may also be wise for a community to adopt a general
cable ordinance pursuant to its police and regulatory powers. A cable ordinance may set out the
procedures for applying for a franchise, and may establish rules that the locality is entitled to
establish unilaterally. For example, an ordinance might establish street permitting, joint
trenching and other such requirements (or even customer service standards, which can be adopted
unilaterally). The advantage of such an ordinance is that, generally, it can be unilaterally
changed over time, while a franchise, because it is a contract, generally cannot (except as the
parties may agree otherwise). However the City proceeds, it must be careful to avoid drafting any
franchise in a manner that prevents it from responding to new challenges to rights-of-way and land
use management. The problem and risks are illustrated by Southern California Gas Co. v. City of
Santa Ana, 336 F.3d 885 (9th Cir. 2003) (Municipal ordinance requiring advance payment by anyone
wishing to perform excavations or trench cuts "substantially impaired" gas utility's rights under
prior franchise agreement). Keys to effective regulation There are several keys to effective cable
regulation for a local government. Among other things, it can be important for a locality to:
Draft the cable franchise carefully, recognizing that it is a long-term contract that will affect
local infrastructure for a decade or more.
Enforce the franchise publicly, and regularly. A community that demands and reviews reports by its
operator, that conducts regular reviews to determine whether the operator is actually meeting its
obligations, and which takes public enforcement action when the operator fails to comply will tend
to receive better service than a community that only acts when subscribers begin to complain.
Recognize that there are points during the franchise term where a community may have important
opportunities to require an operator to bring itself into compliance with its franchise
obligations...and may lose rights if it fails to do so.
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