Cable Franchise Rules Seen as Losing Relevance, but Regulatory Fix Not Coming Soon
Cable franchise rules and cable system definitions seem increasingly irrelevant with growing numbers of broadband-centric MVPDs, but it likely would take petitioning from MVPDs before the FCC tried to address the disconnect, experts and industry officials tell us. An overbuilder to Service Electric Cable not having to follow franchise rules points to a flaw in those rules, said Director-Public Affairs Tim Himmelwright. A programming industry expert said Layer3's offering of cable service, while apparently not paying franchise fees in those markets, could lead to complaints. Layer3 didn't comment.
MVPDs have argued that IP transmission means a video service isn't cable and so isn't subject to cable franchises and cable regulation, a communications lawyer with cable and broadcast experience told us, pointing to fight in federal court a decade ago over AT&T's U-verse product (see 0707270116). The technology shift from coaxial cable to IPTV and the growth in the number of over-the-top systems opens the door to cable systems that operate outside the definitions set in the Cable Act, the lawyer said. The expert said it's conceivable a major MVPD would petition the FCC for a proceeding wanting either the same level of regulation for those operations or similar deregulation for legacy operations.
Chairman Ajit Pai isn't likely to go after the issue since there's no big external push now, though if the long-rumored rewrite of the Telecom Act ever gains momentum in Congress, there could be a legislative push to address such issues, a broadcast compliance lawyer said. Echoed communications lawyer Paul Feldman of Fletcher Heald, Pai's "instincts are deregulatory," seeing deregulation as facilitating innovation, and he would likely be largely disinclined to revisit cable definitions. The FCC didn't comment.
RCN is overbuilding in part of Service Electric's footprint in Pennsylvania's Lehigh Valley but only offering data and voice service, Himmelwright said. Not offering cable service, plus the company's argument it's not crossing a local right of way in that overbuild, has it not getting a cable franchise, which puts Service Electric at a competitive disadvantage, he said. A cable operator offering all its services, including cable television in some of its franchise areas, should have to get franchise agreements in all areas it serves, he said.
The RCN overbuild so far hasn't been in the right of way in Upper Milford Township, Pennsylvania, going only to homeowner association-owned private developments and getting a state highway permit when it needed to cross a state highway, Township Manager Dan DeLong said. He said the township offered RCN a cable franchise agreement, only to be told that since it's not providing cable TV, it doesn't need a cable franchise. RCN didn't comment.
Municipalities undoubtedly would love to see a Cable Act update that would let them charge franchise fees on broadband provision, a cable lawyer told us. And the more people who opt for streaming video, the more cable operators will have the incentive to get rid of video service, which could trigger a hue and cry from municipalities as they look to replace dwindling franchise fee revenues, the lawyer said.
Upper Milford takes in about $120,000 annually in cable franchise fees now, though DeLong foresees that going away as cable TV moves to IP distribution: "One company says, 'I'm providing you with cable TV,' the other says, 'I'm providing you with internet TV,' they're both going down the same wires. I myself don't understand the difference."