Bells Prevail in FCC Franchise Review; Cable Wants Balanced Inquiry

Bells, cable and municipalities are at odds over whether LFAs discourage competition. While all parties say they welcome a fair inquiry, balance may be in the eye of the beholder. “We've said before that we want to streamline the franchise process… to promote competition,” said a spokesman for Verizon: “We welcome the FCC looking into this.” NCTA’s “views are that whatever is done should address both existing [firms] and newcomers in issues related to franchise reform,” if there’s a restructuring, said Dan Brenner, senior vp law & regulatory policy. He was speaking generally. “We have visited all the offices” making such an argument, said Brenner: “I think we're being listened to… I think that the argument has resonance.”

The item may be struck from the agenda before this week’s meeting, some analysts said. “It’s not a done deal, and there’s still a reasonable chance it may not see the light of day, given the sympathies of various parties on the 8th floor toward the cable industry,” said Medley Global Advisors’ Jessica Zufalo. Commissioners have some “sympathy to state and local governments, which I think is a very important constituency that Democrats and to some extent the chairman have an affinity towards,” she said. Nonetheless, “typically even commissioners with concerns about an NPRM are willing to express their reservations and let the item go forward rather than trying to kill it permanently,” said Stanford Washington Research Group analyst Paul Gallant, a former FCC 8th-floor staffer. “Even if the FCC did nothing beyond an NPRM, this shot across the bow can only help the Bells in their franchise discussions and on Capitol Hill.”

If such a review proceeds, it’s not likely to turn up any problems, said municipal representatives. “There’s no evidence that a local government has unreasonably refused to grant a competitive franchise,” said NATOA Exec. Dir. Libby Beaty. “The assertions and allegations of delay all seem to be anecdotal, and the Commission doesn’t work on anecdotal evidence.” Research has found that only one court ruling finding a LFA unfairly blocked a franchise award, said a lawyer for municipalities who asked to not be identified. The ruling involved Qwest and Boulder, Colo., the lawyer said.

SBC shot back that court rulings aren’t at issue. “Delay in and of itself is a barrier,” said a spokesman for the firm, which plans to start video service next year. “The cable companies [were able] to obtain their franchises at their leisure since they did not face any competition as they went to market.” Verizon’s proposed franchise agreement with Fairfax County, Va. includes language which a source said is revealing of the LFA process. “While the state ‘level playing field’ requirement prohibits the Board from granting a competitive franchise that is ‘more favorable or less burdensome’ than an incumbent cable operator’s franchise, the law does not prohibit the Board from granting a competitive franchise on terms that are more onerous,” said the document. “Some of the terms and conditions of Verizon’s Proposed Franchise Agreement are more onerous than those in the franchise agreements the Board awarded to either or both of the incumbent cable operators.”