FEDERAL APPEALS COURT UPHOLDS FCC
CABLE FRANCHISE ORDERS
A recent federal court ruling upholds a federal agency rulemaking that was opposed by cities across the nation. But the decision is not likely to be detrimental to Texas cities.
Background
On March 5, 2007, the Federal Communications Commission (FCC) issued an order based on the premise that local franchising authorities (typically cities) are unreasonably refusing to grant cable franchises. The order preempted various franchising requirements of cities around the country. This first FCC order did not, as some had feared, affect the Texas cable-franchising statute enacted in 2005 (commonly referred to as Senate Bill 5). The order was directed primarily at municipal barriers to entry for new providers of video service, barriers that no longer exist in Texas. However, this first order noted that some of its conclusions “also appear germane to existing franchisees.”
Under Senate Bill 5, existing franchisees (generally incumbent cable providers) are bound to their existing agreements until those agreements expire. The FCC sought additional comments on the implementation of the order, and a second order was issued on November 6, 2007. The second order extends some of the findings from the first order to incumbent cable providers, and thus may affect cities with cable franchise agreements grandfathered under Senate Bill 5.
The National League of Cities (NLC) and other national local government groups brought suit to challenge the FCC’s authority to issue the first order.
The Decision
On June 27, the federal Sixth Circuit Court of Appeals issued its opinion. The court held that the adoption of the federal Telecommunications Act (Act) and all the subsequent amendments to the Act created a system of “deliberately structured dualism” under which local governments and the FCC regulate cable service. Under the system, the FCC is authorized to regulate the technical provision of service and has explicit authority to issue the order.
The conclusion is viewed as a defeat for most areas of the country but won’t generally change the state of the law for cities operating under Senate Bill 5. In addition, the court upheld the FCC’s conclusion that it cannot void existing franchises. Rather, a cable provider has the burden to prove, under the facts and circumstances of each situation, that the new rules should apply to its franchise agreement. This last conclusion is somewhat ambiguous, and only time will tell if or how cable providers in Texas will seek to enforce the orders.
NLC has requested a rehearing of the second order at the FCC. That rehearing request is pending, and NLC is currently deciding how to proceed on both orders. The TML staff will continue to monitor the implementation of the orders and keep our members informed.