Incumbent cable operators were required to obtain a franchise before commencing construction. However, an overbuilder applying for a cable franchise to provide cable service may often hold a certificate from a state public service commission which authorizes operation of a telephone system. In some states, a company holding such a certificate does not require a local franchise in order to construct the telephone lines authorized by the certificate. In such a situation the overbuilder will argue that it has the right to build and is only obligated to obtain a cable franchise when and if it chooses to actually offer cable service.

Several municipalities have accepted this argument, but at some risk. Many of the benefits a locality can obtain through the franchising process can best be realized at the time of initial system construction or rebuild. After construction has been completed, it may be difficult, and much more expensive to both the operator and the community, to modify the network to serve specific community-related cable television needs. Another example of the risks of delay is that most communities have established detailed indemnity insurance and other requirements of all right-of-way utilities. These requirements usually assume that construction will occur after a franchise is issued. In the absence of a franchise, it is unclear what liability and indemnification rules will apply. Another risk is that the network will not be built to reach all areas of the community, or at least a pro-rata amount of service to poorer neighborhoods. Cable franchises usually require cable operators to arrange construction so that service is provided to poorer parts of the community at the same time and in the same proportion it is provided to richer portions of the community. This, too, requires prior agreement. There are often significant legal issues that can be created by allowing a new entrant to build before a franchise is obtained.

• 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?