Four new and significant problems arise in overbuild environments.

BANKRUPTCY. In a competitive environment, multiple companies may survive, or only one company may survive. It is impossible to predict the result, or the winner. That means public benefits must be crafted in a way that does not depend on all operators succeeding, and it also means that local ordinances must be crafted to minimize risks to the taxpayer and to the broader community associated with bankruptcy of one or more of the overbuilders.

MANAGING THE RIGHTS-OF-WAY. It is very likely that at the same time the overbuilder begins to build, the incumbent will be racing to upgrade its system in the city -- at least in the neighborhoods where the overbuilder is constructing. That means the public works department could be faced with massive numbers of construction permits, requests for street cuts, and doubly difficult "make-ready" problems. Inspection is critical as both operators have an incentive to build quickly rather than carefully. Restoration, accurate placement of facilities, and tedious construction standards may all be left in the wake of the land-rush to get to the subscriber first. The taxpayer and abutting property owners will expect the local government to police and enforce appropriate behavior by the companies. At a minimum, therefore, it is important to ensure that the legal structure for managing the rights-of-way provides the responsible city officials with the tools needed to manage the construction process well.

EFFECTS ON NEIGHBORHOODS AND AESTHETICS. The new builds can be quite intrusive. A homeowner may not object to one pedestal. Two (or more) may be a different issue. The new entrant will be very alert to disparate treatment of its permit requests and those of the incumbent. The new entrant can be expected to object to placements that in some instances represent legitimate grandfathering, but in other cases represent code violations. The community therefore may find itself in a position where it must develop appropriate mechanisms to ensure local requirements are equitably enforced.

THE RIPPLE EFFECT. The promise of competition can be hard to resist and elected officials are under enormous popular pressure to assist competition in every way possible. It is tempting to allow entry at any cost, without fully providing for the risks to the community if competition does not survive or if the new operator is planning a quick "green mail" project. If a new entrant is allowed into the market subject to very few public interest obligations, the incumbent may claim a right to a franchise modification, throwing the enforceability of existing requirements into doubt. Cable TV Fund 14-A, Ltd. v. City of Naperville, No. 96 C 5962, May 21, 1997, 1997 WL 280692 (N.D. Ill. 1997).

The incumbent operator can be expected to argue that a franchise issued to the new entrant identifies the cable-related needs and interests of the community, at least for the overbuilder's term of that franchise. The incumbent will argue it is entitled to the same franchise terms. To be sure, that argument can and should be resisted. Naperville demonstrates the risk is real, even with "level-playing field" language in either agreement.

• Overview
  
• Who Are The Overbuilders? Can Localities Franchise Them?
  
• Should the Franchise be Obtained Before Construction Begins? Or Before the Operator Begins to Provide Service?
  
• How Does a Company Apply for a Franchise? How Does A Community Decide Whether the Franchise Should be Granted?
  
• What Key Franchise Issues Arise and How are Public Obligations Balanced?
  
• In a Competitive Environment, How Do I Protect the City and Its Citizens from Harm?