Statewide Video Franchising - ABA YLD 101 Practice Series

By Michael E. Adler

Technological change has basically eliminated the historic barriers between cable and telephone service providers. Today's cable and telephone companies vigorously compete for customers to take their "triple play" of voice, video and high-speed Internet services. Statewide video franchising creates a more efficient method for companies that want to build new broadband networks in the United States. It simplifies a currently fragmented and inefficient system by moving video licensing authority from thousands of cities, towns, and counties to the state.

In the past, companies who wanted to serve a city or town with "community antenna" television (CATV) would negotiate a franchise with the town, effectively establishing a local monopoly for cable TV. The theory was that one company could provide communitywide cable service more efficiently by negotiating the terms, contract, and rates with local governments. These franchise agreements imposed requirements and fees on video providers. As a result, cable companies had to negotiate separate agreements with each local government, creating a situation where a single cable company could have thousands of separate contracts across the nation. In a new era of competition, this process designed for monopolies no longer makes sense, and this has been recognized by many jurisdictions.

Cable franchising has been done at the state level in Arkansas, Connecticut, Hawaii, Rhode Island, and Vermont. In addition, as of the date of this article, new "statewide franchising" bills have been enacted in nine states recently, including California, Indiana, Kansas, Michigan, New Jersey, North Carolina, South Carolina, Texas, Virginia:

Legislation is pending in two other states: New York and Pennsylvania. In five other states, legislation was introduced in 2006, but was not enacted: Florida, Iowa, Louisiana, Missouri, and Tennessee. Congress has also been considering federal legislation to streamline the franchise process. The House passed a "COPE" bill (H.R. 5252) on June 8, 2006, but the Senate efforts stalled just before the 2006 mid-term elections. Some related issues still on the table include internet and wireless access taxation, preemption of state and local oversight of wireless practices, and the complex issue of net neutrality. State and local governments should continue to provide vital functions to the competitive video market, such as managing rights-of way, public, education and government ("PEG") channels, build-out requirements, anti-redlining requirements, franchise fees and other public obligations.

The law in this area is in quite a state of flux and varies quite a bit from jurisdiction to jurisdiction, but those who are considering filing an application for statewide video franchising should consider, among other issues, the following:

  • What types of services will be provided?
  • What type of system will be used to provide the reception and delivery of video services?
  • What type of public, educational and government ("PEG") access programming 1 will be offered and will the franchisee be required to pay a flat fee or a pro rata contribution based on the number of subscribers?
  • Will Institutional Networks ("I-Nets") 2 be included for cable and Internet connection for schools, libraries, and/or municipal service properties?
  • What cable channels will be offered throughout the state?
  • What are the proposed rates for the services to be provided?
  • What types of rights-of-way will be necessary?
  • What types of customer service standards will be required? Who will have enforcement power?
  • What types of technical standards will be required, and who will have enforcement power?
  • What types of taxes and franchise fees will be required?

Television providers of all kinds are now able to offer services throughout and entire state without having to negotiate individual franchise agreements with each and every municipality where they desire to provide service. Numerous companies now plan to use the fiber networks to offer a triple play of voice, video, and broadband, putting them on equal footing with the incumbent cable companies. The new laws are also victory for consumers, in that it finally sets the standard for accelerating cable-TV competition. Customers can expect new choices, greater value and improved service in terms of video providers.

1 Public access consists of video programming and other electronic information produced, directed, and engineered by community volunteers. In the case of public access, the programming is developed or acquired by nonprofit community groups, neighborhood organizations, social service agencies, and individual citizens. It focuses on many aspects of community life, ranging from the services and activities of community organizations to the opinions and beliefs of individuals in the community. Educational access is developed or acquired by school or college employees, students, and school volunteers. It typically focuses on distance learning, school activities, and information that the school/college wants to get out to the community or share among schools. Government access is created or acquired by local government employees, elected officials, and volunteers. It typically focuses on information about services provided by local, State, and regional governments, issues faced by local governments, and public meeting coverage. Government access is also used for other purposes, such as providing training to City employees or exchanging information between City agencies and other institutions.

2 "I-NET" stands for Institutional Network, which is a local government "intranet" linking local schools, libraries, public safety and government offices into a seamless telecommunications network. Federal law permits local governments to negotiate with cable TV companies to provide I-NET services as part of the rent the company pays for use of our public right-of-ways. I-NETs have become even more critical communications tools post/9-11 and post-Katrina, as local communications strive to create redundant and secure emergency-response telecommunications networks.


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About the Author

Michael E. Adler is the General Counsel of Hotwire Communications, LLC. Hotwire a telecommunications service providers specializing in multi-family communities.

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