Localities See Big Fight Over LFA Rules Changes, Worry About Being Spread Thin

Local government and public, educational and government (PEG) access programming interests plan to push back on proposed rules changes governing local franchise authorities that are teed up in the Further NPRM on FCC members' Sept. 26 agenda (see 1809050056). Local government authority is seen under attack in a variety of proceedings.

"It makes it very difficult to respond adequately," said municipal cable franchise lawyer Mike Bradley of Bradley Berkland. "These proceedings are really spreading local government resources extremely thin."

Echoed NATOA General Counsel Nancy Werner, "The piecemeal approach of the FCC ... makes it more challenging to make sure local concerns are heard and to be able to respond." Issues include the petitions for reconsideration against the FCC's March wireless infrastructure order (see 1806060039), August's pole attachment order (see 1808020034) and the wireless infrastructure order also on the September agenda (see 1809050029), she said.

The mixed-use rule changes in the FNPRM might generate more traction due to issues of broadband regulation than the in-kind contributions rule changes, said Mike Wassenaar, Alliance for Community Media president. "I can see only bad things" for localities out of the in-kind proposal, given how it would let cable operators monetize almost any nonmonetary service, with that expense then being deducted from local franchise fees. He said it's likely that if the rules change, cable operators would look to insertion of program guide information and backhaul service from the studio origination point to the cable head-end as in-kind services operators likely would start attaching a price tag to and deducting from their franchise fees.

"What can't be monetized and then charged back against LFAs?" asked Wassenaar. "It's absurd." The commission, NCTA and the American Cable Association didn't comment.

'Aggressive' FCC

Bradley said local governments likely won't object to language saying they shouldn't regulate services other than cable services in cable franchise, but the FCC saying state or local governments should have no oversight of other services regulated under Communications Act Title I or Title II. He said it's surprising how "aggressive" the FCC is being in pre-empting local government on mixed-use issues and how broadly it's interpreting in-kind services. He said the agency approach on in-kind services upends decades of agreements between cable operators and local governments about issues such as complimentary cable-TV service to local government buildings.

The draft FNPRM reaches similar conclusions as the 2007 order on video franchising rules, Werner said. .The agency seems to be trying to satisfy the 6th U.S. Circuit Court of Appeals, which last year partially upheld and partially rejected a localities' challenge of that order and a 2015 order regarding LFAs (see 1707120031), Werner said. She said local governments and allies will likely be objecting to how the FCC is interpreting the Cable Act and "attempting to educate the commission on the value of PEG programming."

There also could be issues on how the mixed-use rules change teed up in the draft FNPRM create two systems of fees and regulations, with ILECs that provide cable service having to get cable franchises and pay cable franchise fees atop telecom franchise fees, but cable operators that provide similar services will be under only cable franchises. Werner said it's unclear whether the draft is saying LFAs can't use their cable franchises or Title VI to impose regulations on cable operators, or whether the Cable Act pre-empts any such authority. The former would mean they still retain state or local authority to do so, she said.

"We are deeply disappointed with the FNPRM" and how it "target[s] low-income, school children and rural communities" to the benefit of big corporations, emailed Mitsuko Herrera, program director-department of technology services for Montgomery County, Maryland. The county was a locality that challenged the FCC 2007 and 2017 LFA orders at the 6th Circuit. While MVPDs "have all the market power -- not the local franchise authorities," the FCC is suggesting the public benefits those companies agreed to in franchise agreements should be undone while nothing local governments gave up to get those in-kind benefits would change, she said, adding that agency hasn't provided any empirical analysis to show rural broadband deployment improved in states with restricted PEG payments.

Red Flags

Local governments and allies are increasingly raising red flags about what they see as the cable industry leading a charge against LFAs and local government oversight.

Industry thinks it should have a “free ride on the right of way to provide any other non-cable service” after paying the 5 percent franchise fee, said localities lawyer Tim Lay of Spiegel & McDiarmid. “In terms of the pure dollars and cents as far as right of way compensation … the Cable Act threat might be a larger one” than wireless carriers’ efforts to keep down fees for small cells, Lay said. “Cable revenues are flattening and will start dropping, whereas broadband revenues will continue to grow.” Restricting compensation to cable revenue would mean “cable operators will have more and more valuable use of the right of way and local governments will get less and less for it,” he said.

The FCC may be “very receptive” to cable’s argument that this is a broadband infrastructure issue, Lay said. It might take up the issue as part of a fall order on ROW compensation for wireless and wireline, and local governments should prepare to support the court appeal that’s likely to come, he said. The commission noted the cable franchise fee obligation in the wireline infrastructure NPRM, perhaps signaling it “only begrudgingly agrees” to the fees, the attorney said. Chairman Ajit Pai's FCC has shown on other such issues that it would rather regulate state and local governments than industry, he said.

“This is contrary to the Cable Act and it would effectively rewrite many local cable franchise agreements in which the cable operators agreed to use the ROW only for a cable system to provide cable services,” said NATOA’s Werner. Cable companies usually expect ILECs to obtain cable franchises and pay the 5 percent fee before selling competing cable services, even if the ILEC already pays a ROW fee for telecom services, Werner noted. “It made sense that cable operators would want to ensure competitors enter the market with comparable terms, yet when the tables are turned they are trying to insulate themselves from the very standard they set.” What cable wants “reinforces the old regulatory silos and seems to tilt playing field in favor of the cable industry,” she said.

It would be discriminatory, agreed Lay, because other types of broadband providers would still have to pay for ROW access. Industry argues cable franchise fees are high enough, but those are for cable service and the Cable Act allows companies to recover the costs from subscribers, which they do, he said. ROW fees are a relatively low cost that shouldn’t inhibit broadband investment and are unlikely to change the business case for a low-density area, he said. The FCC can’t give away local ROW to providers; it doesn’t belong to the federal government or companies, he said.