On May 31, the federal Fifth Circuit Court of Appeals brought an end to seven years of litigation over the “grandfathering” provisions in the Texas state cable franchise law. The court entered a final order in Texas Cable and Telecommunications Association v. P.U.C. Commissioners declaring the provisions to be unconstitutional because they violate cable providers’ right to freedom of speech under the First Amendment.

The case involved the longstanding dispute regarding the “grandfathering” provision in Senate Bill 5. That provision required incumbent cable providers to fulfill obligations under existing franchise agreements until those agreements expired. (S.B. 5, which authorized a state-issued certificate of franchise authority for cable and video providers, became law in 2005. The bill is now codified in Chapter 66 of the Texas Utilities Code.)

The Texas Cable and Telecommunications Association (TCTA) filed the lawsuit one day after the bill became effective, and the Texas Coalition of Cities for Utility Issues (TCCFUI) intervened shortly thereafter on behalf of Texas cities. In 2006, the court dismissed the case on procedural grounds. In 2007, the TCTA appealed the dismissal to the Fifth Circuit Court of Appeals. In 2008, the Fifth Circuit issued its opinion and concluded that the TCTA’s claims deserved consideration by the trial court.

After several procedural delays, the federal district court granted a motion for summary judgment in favor of the Texas Public Utility Commission, TCCFUI, and others (i.e., upholding the grandfathering provision). TCTA appealed once again to the Fifth Circuit, which issued an opinion that the state law binding cable providers to an existing franchise violates the providers’ First Amendment rights by discriminating based on the content of a cable provider’s programming.

In the meantime, Senate Bill 1087 was passed during the 2011 regular legislative session.  The bill provides that a cable service provider in a city with a population of less than 215,000 may elect to terminate not less than all unexpired local cable franchises in the state and seek a state cable franchise.  (Only 4 large cities were operating under a grandfathered cable franchise when the bill passed and the Fifth Circuit issued its opinion.)

Time Warner Cable and Comcast Cable (the major providers in Texas) have done just that.  Senate Bill 1087 appeared to be the cable industry’s “plan B” for getting out of grandfathered local franchises.  The good news is that the bill will likely benefit many Texas cities because the terms of the state franchise will often be more favorable in terms of revenue to the city. 

The May 31 court order, taken in conjunction with S.B. 1087, essentially means that grandfathered cable franchises are a thing of the past. 

Why did TCTA fight so hard for a court order to end grandfathering after it received legislation doing essentially the same thing?  The Fifth Circuit’s opinion concludes that a state law that differentiates cable from other providers (e.g., satellite) can be unconstitutional.  It remains to be seen how TCTA may attempt to use that jurisprudence in relation to other state laws.  The League will make every effort to ensure that any such use is not detrimental to cities.

TML member cities may use the material herein for any purpose. No other person or entity may reproduce, duplicate, or distribute any part of this document without the written authorization of the Texas Municipal League.

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