FCC Eyes Buildout, Other Rules in Video Franchise Notice

The FCC took up many arguments of Bells in seeking comments on the efficiency of how local franchise authorities (LFA) award video licenses. The notice of proposed rulemaking reflected some priorities of Chmn. Martin, who wants to speed the expansion of video services by firms including Verizon. In asking whether local mandates to build out service to an entire municipality instead of a smaller area currently served by a telecom firm hinder competition, the review reflects a major Bell concern.

The notice, adopted with significant controversy by a split commission this month, had been interpreted as a win for Bells (CD Nov 4 p1). “It is the Commission’s responsibility to remove unreasonable roadblocks to competition,” Martin said in a statement Fri.: “We seek to ensure that local authorities are not thwarting competition.” An SBC official told us the firm approves of the questions asked in the notice. Qwest made similar comments.

The item is partly a response to concerns of firms that want to expand existing telecom facilities to offer video, said a person familiar with the development of the item who asked not to be identified. Verizon and SBC are among the firms turning to offer video service as core landline phone businesses have been in decline, prompting the 2 companies to buy long distance service providers (see separate story). The FCC said it’s asking for “comment on whether build out requirements are creating unreasonable barriers to entry for providers of telephone and/or broadband services.” The Commission’s inquiry added that “there have been indications that in many areas the current operation of the local franchising process is serving as an unreasonable barrier to entry… The efficient operation of the local franchising process is especially significant with respect to potential new entrants with existing facilities.”

Another issue raised in the review is whether cities can protect rights of way only through video franchises with firms that already have permission to sell telecom service. Municipalities want to keep right of way control to keep tabs on trench digging and other technical upgrades for video and other advanced services. In a panel discussion last week, a lawyer for cities said state constitutions mandate local control over such work (CD Nov 17 p3). SBC and Verizon officials at the panel said they're good corporate citizens and will respect digging rules -- regardless of whether they have a video franchise. “We note that it is not clear how the primary justification for a cable franchise, i.e. the locality’s need to regulate and receive compensation for the use of public rights of way, applies to entities that already have franchises that authorizes their use of those rights,” said the FCC.

The notice asked several questions about franchising, including seeking the number of LFAs in the U.S., the number of competitive franchises that have been granted and how the market has changed since the 1992 Cable Act. Other questions included those on the impact of statewide franchising rules recently passed or being considered in N.J., Tex and Va. N.J. may be the latest state to pass franchise reform, under a bill introduced by a state assemblyman, telecom and cable officials said last week (CD Nov 16 p4).

Some Bells welcomed the FCC queries. “The FCC is asking many of the right questions, like why should companies like SBC, which already has franchises to use public rights of way, need to acquire another one,” said a spokesman for that company. “We also support furthering important local interests… But barriers to entry stand in the way and should be removed.” Qwest, which provides video in some parts of its service area, said in a statement to us that it’s “gratified that the FCC is examining these issues.” The company said it’s “confident that the Commission will determine that regulations which impede cable competition must be removed.”

Cities, who have greeted the FCC inquiry with some wariness, were joined by Comr. Adelstein. “The larger question that hangs over this proceeding, though, is whether the local franchising process truly is a hindrance to the deployment of alternative video networks,” he said in a statement. “Most, if not nearly all, local authorities welcome competition.” NATOA was guarded in its reaction to the notice, while NCTA said it was still studying the issue. “To the extent that the FCC has concerns, it is important that they use this opportunity to educate themselves about the facts,” said Libby Beaty, exec.-dir., NATOA. “The policies… should not be governed by anecdotes.” - Jonathan Make