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HomeMy WebLinkAbout12 LEGISLATIVE UPDATES: AB2987 & HR5252 05-15-06AGENDA REPORT MEETING DATE: SEPTEMBER 6, 2005 TO: WILLIAM A. HUSTON, CITY MANAGER FROM: JOE MEYERS, ADMINISTRATIVE SERVICES MANAGER SUBJECT: AB 2987 and H.R. 5252 RECOMMENDATION: Pleasure of the City Council. SUMMARY: Pending Federal and State legislation could significantly alter the franchise and service obligations of cable and video service providers and have impacts on local government and consumers. DISCUSSION: Cable television companies have historically been required to obtain franchises from local governments prior to using public streets to construct cable systems. The federal Cable Act prohibits any entity, including telephone companies, from providing cable service without obtaining a state or local franchise. California law requires cable companies to obtain a franchise from the applicable city or county prior to constructing a cable system. local franchise agreements have typically included: . Requirements that the cable operator provide service to all residents regardless of income (or "universal service" requirements); . Customer service/consumer protection standards that are locally enforced; . Payment of a franchise fee of 5% of gross revenues; . Public, educational and government ("PEG") access requirements, including dedication of channels, provision of equipment and facilities and capital funding; . "Institutional Networks", I.e., requirements that the cable operator dedicate telecommunications lines to connect schools, libraries and other public buildings; . Free cable service for schools, libraries and other public buildings; . Right-of-way management regulations, I.e., regulations concerning the manner in which cable companies construct and maintain lines along public rights-of-way; . Regulations relating to the transfer, renewal and termination of franchises; and . Enforcement mechanisms, such as security funds and liquidated damages for violations. Pending State and Federal legislation will significantly alter the relationships between municipalities, cable and & video companies and the federal government. AS 2987 AB 2987 (Nunez and Levine) would provide for statewide franchising of video and cable services subject to meeting certain limited requirements to pay fees and provide community benefits while preempting local government franchises. AB 2987 would authorize the Department of Corporations to grant a "state-issued authorization" to provide cable service or video service. The applicant is not required to notify the local agencies that it has applied for the state-issued authorization, but is required to notify all applicable local agencies that it has obtained the state-issued authorization not later than 10 days before it begins to provide service. The bill would establish a new category of service, "video service", defined as video programming services provided through wireline facilities located within public rights of way without regard to technology. Local agencies would be prohibited from requiring any holder of a state-issued authorization to obtain a local franchise or impose "any fee or requirement. . . except as expressly provided" in the bill. Under current law, a cable operator is required to pay the franchising agency not more than 5% of the operator's gross revenues. Most agencies have set the franchise fee at the full 5%. Under AB 2987, the holder of a state-issued authorization ("Holder") providing service within a local jurisdiction is required to remit a "state-issued authorization fee" to the local agency. AB 2987 does not ensure that cities will be "kept whole" in regard to franchise revenues. The bill upholds a local agency's ability to impose a utility user tax, but appears to prohibit them from imposing other local fees and taxes, such as business license taxes, encroachment permit fees and building permit fees. Incumbent cable operators with existing franchises, seeking to provide cable service after the effective date of the bill are required to obtain a state-issued authorization and would be required to continue to provide the following services (if they are currently being provided) until January 1, 2008, or until the term of their franchise expires, whichever is later: (1) PEG production or studio facilities; (2) institutional network capacity; and (3) cable services to public buildings. The bill allows video service providers three years to build out video service, and to self- define the area they will service. Local governments will not have the authority to challenge the adequacy of the service area "footprint." Some areas may only be provided satellite or "another alternative technology" when the video service provider is not able to physically build out service to all areas of their service area footprint. The bill preempts local government from adopting and enforcing customer service standards for those operators who have received a statewide franchise. This would create a two-tiered customer service standard, with local cable operators subject to local customer service standards and new statewide franchisees exempt from these standards. Currently, most local franchises require cable companies to provide services to schools and libraries. This bill would eliminate this obligation. As a result, community members who can't afford the services at home will lose access to these advanced broadband services. Local agencies would also lose control over the determination of the number of public, education and government (PEG) channels needed to properly meet a community's needs. H.R.5252 Congressman Joe Barton has introduced legislation in Congress (commonly referred to as C.O.P.E.) H.R. 5252 would allow providers of cable service to apply to the Federal Communications Commission (FCC) for a national franchise. National franchises for the provision of cable services to a local area would eventually be substitutes for separate, negotiated agreements with states and localities. Specifically, the bill would: . Eliminate the authority, in certain circumstances, of local entities to issue franchises . for cable providers; . Prohibit municipal governments from imposing certain fees on providers of cable services; . Preempt state and local consumer protection laws; . Preempt local government authority over municipal rights of way; and . Preempt state laws prohibiting local governments from offering certain services to provide Internet access. . Require there to be competition for video services other than satellite in any franchise area before existing providers of such services could apply for a national franchise. H.R. 5252 removes local government authority to franchise the use of their rights-of-way for video/cable services and gives that authority to the Federal Communications Commission (FCC). Historically, the FCC has never had the authority to oversee all local rights-of-way management practices and has no expertise concerning local streets, sidewalks, public safety or traffic patterns. The FCC would also be granted the authority to handle all customer service issues. The FCC may not be able to respond in a timely manner to these rights-of-way concerns and does not currently have the resources to handle all customer complaints nationwide. Additionally the bill will allow providers of broadband-video service, through the national franchise, to use the public rights-of-way in a community but decide which neighborhoods they wish to serve. In conclusion, while consumers will likely benefit from the competition among video service providers, the proposed legislation would have various impacts to local government revenues and to the taxpayer's investment in the public right of way. The bills would also have the effect of granting new service providers an advantage over incumbent operators due to more lenient franchising standards. If both the federal and state legislation is adopted, complex questions would arise as to whether all or part of AS 2987 would be preempted and how any remaining provisions of AS 2987 would continue to apply.