Cable Television Franchise Agreements: Is Local, State or Federal Regulation Preferable?

By Rushnak, Linda A. | Rutgers Computer & Technology Law Journal, Fall 2006 | Go to article overview

Cable Television Franchise Agreements: Is Local, State or Federal Regulation Preferable?


Rushnak, Linda A., Rutgers Computer & Technology Law Journal


I. INTRODUCTION

Verizon is upgrading its existing network to provide fiber optic connectivity to homes and businesses. (1) Verizon's fiber-to-the-premises ("FTTP") service offering would allow consumers to enjoy high definition television over Verizon's high-capacity fiber optic cable network. (2) However, "current law requires companies to negotiate [cable television] franchise contracts (3) with individual cities." (4)

Verizon maintains that the construction involved in building out its fiber optic network in any one service area takes approximately 18 months, but the negotiation of a single franchise agreement to provide that service can take anywhere from 6 to 18 months. (5) Thus, while Verizon possesses the technology, it does not have the approval of local authorities to actually deliver its cable television services to consumers (6)--yet.

Verizon has obtained about a half dozen local franchises, (7) but would like to streamline the process since there are thousands of [local] franchising authorities, each of which currently requires a separately negotiated deal. (8) Therefore, in addition to pursuing local franchises, Verizon is working with state governments to create state-wide franchises, and is simultaneously encouraging federal legislation for a national video franchise. (9) Currently, seven states have passed statewide franchising laws: Texas, Virginia, Indiana, North Carolina, South Carolina, Kansas, and New Jersey. (10) Although similar legislation had been introduced in several other states, most of these bills have either died in committee (11) or run into public opposition stalling their progress. (12) Louisiana legislation made it all the way to the governor, only to be vetoed, (13) while a California bill awaits the governor's signature. (14)

While Verizon's spin is that state and federal franchising laws "remove redundant regulatory barriers that delay competition and deny consumers choice," (15) local authorities are concerned with their potential loss of control over cable carriers, which means fewer dollars and perks for their municipalities. (16) Meanwhile, cable companies oppose state and federal franchising legislation because it "unfairly favors telephone companies." (17) Cable operators and municipalities frequently cite three reasons why state-wide or nation-wide franchises are not in the best interests of the public. First, while cable companies must provide service to all residents in each municipality which grants them a franchise, "blanket coverage" does not appear to be a requirement in the proposed state or federal franchise legislation. (18) That means telephone companies, such as Verizon, could build their cable television networks only in those areas forecast as profitable. Second, local municipalities get "extras" such as "educational and local government channels, [and] connectivity for government buildings," among other things, through the franchise negotiation process. (19) Such "extras" may no longer be provided by state or federally franchised cable carriers. And, third, local municipalities would no longer be able to increase franchise fees or levy taxes against cable operators providing service to their residents. (20) Each municipality would only get a portion of the overall fee negotiated at either the state or national level. (21)

This note examines the local franchising regulations currently in force in fifty states, the possibility of other states following the lead of the seven states with new statewide franchise laws and enacting their own statewide cable television franchise legislation, and the viability of federal franchise legislation. The federal legislation consists of several competing bills: the Video Choice Act of 2005, (22) the Broadband Investment and Consumer Choice Act ("BICCA"), (23) both of which were introduced in the summer of 2005, the Broadband Internet Transmission Services Bill (24) introduced in the fall of 2005, and the Digital Age Communications Act, (25) all of which were introduced during the first session of the 109th Congress. …

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Cable Television Franchise Agreements: Is Local, State or Federal Regulation Preferable?
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