There are three broad categories of overbuilders.

The first category of companies plan to build and operate an independent, stand-alone "cable system" within the meaning of the federal Cable Communications Policy Act of 1984, as amended in 1992 and 1996, 47 U.S.C. §521 et seq. ("Cable Act").ⁱ Some of these companies also hold state utility commission certification to operate as a telephone company (often called a "Certificate of Public Convenience and Necessity"). The decision to function as a cable operator forces a company to also get a cable franchise.ⁱⁱ Many of the most prominent overbuilders entering the market now fall into this category.

The second category are open video system ("OVS") operators. An open video system functions as a hybrid common carrier/cable system. The OVS operator must lease large portions of its system channel capacity to third parties to provide cable services. The OVS operator can retain control of a portion of the cable system itself. There is no federal franchising requirement that applies to OVS operators even though the service provided is identical to the service provided by franchised cable operators.ⁱⁱⁱ Assuming state law allows it, however, a locality may establish an independent franchising requirement for OVS. City of Dallas v. F.C.C., 165 F.3d 341 (5th Cir. 1999).

The third category is a concoction of the Federal Communications Commission and the courts. This category functions more or less like cable operators. The courts and the FCC have read the terms "cable operator" and "cable system" to exempt these companies from the federal franchising requirement that applies to traditional cable companies. The U.S. Court of Appeals for the 5th Circuit concluded that a subsidiary of Southwestern Bell Telephone that provided cable service by leasing channel capacity from its parent telephone company was not subject to the federal cable franchising requirement. The U.S. Court of Appeals for the Seventh Circuit upheld an FCC decision which found certain "cable systems" as not being operated by "cable operators". The FCC concluded that an entity operated a cable system but owned only those parts of the cable system located outside the right-of-way was not subject to the federal franchising requirement. To the extent the cable system included elements located within the right-of-way and the system operator leased those elements from the local telephone carrier, then the operator was not a "cable operator" as defined in federal law. City of Austin v. Southwestern Bell Video Services, Inc. , 193 F.3d 309 (5th Cir. 1999); City of Chicago v. FCC, 199 F.3d 424 (7th Cir. 1999)

It is important to note that an exemption from the federal requirement to get a cable franchise is not a free pass to enter the rights-of-way. Federal law does not prevent states and localities from imposing an independent franchise requirement on the operators benefiting from these federal cases. Under the logic of the federal cases, a local franchising requirement could be enforced against these companies, depending on local authority under state law (and assuming the locality wished to enforce such a requirement).^iv

In short, two out of the three most common types of overbuilders will not be subject to a federal franchising requirement. For communities that conclude it is appropriate to establish a franchise requirement for such entities, it is important to craft a local franchising ordinance designed to reach them. A requirement based on the current federal definition of "cable system" and "cable operator" may not suffice.

• 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?