**Before the**

**Federal Communications Commission**

**Washington, D.C. 20554**

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| In the Matter of                 | * | MB Docket No. 05-311         |
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| and Competition Act of 1992      | * |                              |
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REPORT AND ORDER AND

FURTHER NOTICE OF PROPOSED RULEMAKING

**Adopted: December 20, 2006** **Released: March 5, 2007**

**Comment Date: \[30 days after date of publication in the Federal
Register\]**

**Reply Comment Date: \[45 days after date of publication in the Federal
Register\]**

By the Commission: Chairman Martin, Commissioners Tate and McDowell
issuing separate statements;

> Commissioners Copps and Adelstein dissenting and issuing separate
> statements.

**TABLE OF CONTENTS**

**Paragraph**

I. INTRODUCTION 1

II\. BACKGROUND 6

# III. DISCUSSION 18 {#iii.-discussion-18 .unnumbered}

> A. The Current Operation of the Franchising Process Unreasonably
> Interferes With Competitive Entry 19

### B. The Commission Has Authority to Adopt Rules Pursuant to Section 621(a)(1) 53 {#b.-the-commission-has-authority-to-adopt-rules-pursuant-to-section-621a1-53 .unnumbered}

> C. Steps to Ensure that the Local Franchising Process Does Not
> Unreasonably Interfere with Competitive Cable Entry and Rapid
> Broadband Deployment 65

### 1. Time Limit for Franchise Negotiations 66 {#time-limit-for-franchise-negotiations-66 .unnumbered}

2\. Build-Out 82

3\. Franchise Fees 94

4\. PEG/Institutional Networks 110

5\. Regulation of Mixed-Use Networks 121

D. Preemption of Local Laws, Regulations and Requirements 125

IV\. FURTHER NOTICE OF PROPOSED RULEMAKING 139

V. PROCEDURAL MATTERS 144

VI\. ORDERING CLAUSES 153

APPENDIX A -- List of Commenters and Reply Commenters

APPENDIX B -- Rule Changes

APPENDIX C -- Initial Regulatory Flexibility Act Analysis

APPENDIX D -- Final Regulatory Flexibility Act Analysis

# INTRODUCTION

1.  In this Report and Order ("*Order*"), we adopt rules and provide
    guidance to implement Section 621(a)(1) of the Communications Act of
    1934, as amended (the "Communications Act"), which prohibits
    franchising authorities from unreasonably refusing to award
    competitive franchises for the provision of cable services.[^1] We
    find that the current operation of the local franchising process in
    many jurisdictions constitutes an unreasonable barrier to entry that
    impedes the achievement of the interrelated federal goals of
    enhanced cable competition and accelerated broadband deployment.[^2]
    We further find that Commission action to address this problem is
    both authorized and necessary. Accordingly, we adopt measures to
    address a variety of means by which local franchising authorities,
    i.e., county- or municipal-level franchising authorities ("LFAs"),
    are unreasonably refusing to award competitive franchises. We
    anticipate that the rules and guidance we adopt today will
    facilitate and expedite entry of new cable competitors into the
    market for the delivery of video programming,[^3] and accelerate
    broadband deployment consistent with our statutory responsibilities.

2.  New competitors are entering markets for the delivery of services
    historically offered by monopolists: traditional phone companies are
    primed to enter the cable market, while traditional cable companies
    are competing in the telephony market. Ultimately, both types of
    companies are projected to offer customers a "triple play" of voice,
    high-speed Internet access, and video services over their respective
    networks. We believe this competition for delivery of bundled
    services will benefit consumers by driving down prices and improving
    the quality of service offerings. We are concerned, however, that
    traditional phone companies seeking to enter the video market face
    unreasonable regulatory obstacles, to the detriment of competition
    generally and cable subscribers in particular.

3.  The Communications Act sets forth the basic rules concerning what
    franchising authorities may and may not do in evaluating
    applications for competitive franchises. Despite the parameters
    established by the Communications Act, however, operation of the
    franchising process has proven far more complex and time consuming
    than it should be, particularly with respect to facilities-based
    telecommunications and broadband providers that already have access
    to rights-of-way. New entrants have demonstrated that they are
    willing and able to upgrade their networks to provide video
    services, but the current operation of the franchising process at
    the local level unreasonably delays and, in some cases, derails
    these efforts due to LFAs' unreasonable demands on competitive
    applicants. These delays discourage investment in the fiber-based
    infrastructure necessary for the provision of advanced broadband
    services, because franchise applicants do not have the promise of
    revenues from video services to offset the costs of such deployment.
    Thus, the current operation of the franchising process often not
    only contravenes the statutory imperative to foster competition in
    the multichannel video programming distribution ("MVPD") market, but
    also defeats the congressional goal of encouraging broadband
    deployment.

4.  In light of the problems with the current operation of the
    franchising process, we believe that it is now appropriate for the
    Commission to exercise its authority and take steps to prevent LFAs
    from unreasonably refusing to award competitive franchises. We have
    broad rulemaking authority to implement the provisions of the
    Communications Act, including Title VI generally and Section
    621(a)(1) in particular. In addition, Section 706 of the
    Telecommunications Act of 1996 directs the Commission to encourage
    broadband deployment by removing barriers to infrastructure
    investment, and the U.S. Court of Appeals for the District of
    Columbia Circuit has held that the Commission may fashion its rules
    to fulfill the goals of Section 706.[^4]

5.  To eliminate the unreasonable barriers to entry into the cable
    market, and to encourage investment in broadband facilities, we: (1)
    find that an LFA's failure to issue a decision on a competitive
    application within the time frames specified herein constitutes an
    unreasonable refusal to award a competitive franchise within the
    meaning of Section 621(a)(1); (2) find that an LFA's refusal to
    grant a competitive franchise because of an applicant's
    unwillingness to agree to unreasonable build-out mandates
    constitutes an unreasonable refusal to award a competitive franchise
    within the meaning of Section 621(a)(1); (3) find that unless
    certain specified costs, fees, and other compensation required by
    LFAs are counted toward the statutory 5 percent cap on franchise
    fees, demanding them could result in an unreasonable refusal to
    award a competitive franchise; (4) find that it would be an
    unreasonable refusal to award a competitive franchise if the LFA
    denied an application based upon a new entrant's refusal to
    undertake certain obligations relating to public, educational, and
    government ("PEG") and institutional networks ("I-Nets") and (5)
    find that it is unreasonable under Section 621(a)(1) for an LFA to
    refuse to grant a franchise based on issues related to non-cable
    services or facilities. Furthermore, we preempt local laws,
    regulations, and requirements, including level-playing-field
    provisions, to the extent they permit LFAs to impose greater
    restrictions on market entry than the rules adopted herein. We also
    adopt a Further Notice of Proposed Rulemaking ("FNPRM") seeking
    comment on how our findings in this *Order* should affect existing
    franchisees. In addition, the FNPRM asks for comment on local
    consumer protection and customer service standards as applied to new
    entrants.

# BACKGROUND 

6.  ***Section 621.*** Any new entrant seeking to offer "cable
    service"[^5] as a "cable operator"[^6] becomes subject to the
    requirements of Title VI. Section 621 of Title VI sets forth general
    cable franchise requirements. Subsection (b)(1) of Section 621
    prohibits a cable operator from providing cable service in a
    particular area without first obtaining a cable franchise,[^7] and
    subsection (a)(1) grants to franchising authorities the power to
    award such franchises.[^8]

7.  The initial purpose of Section 621(a)(1), which was added to the
    Communications Act by the Cable Communications Policy Act of 1984
    (the "1984 Cable Act"),[^9] was to delineate the role of LFAs in the
    franchising process.[^10] As originally enacted, Section 621(a)(1)
    simply stated that "\[a\] franchising authority may award, in
    accordance with the provisions of this title, 1 or more franchises
    within its jurisdiction."[^11] A few years later, however, the
    Commission prepared a report to Congress on the cable industry
    pursuant to the requirements of the 1984 Cable Act.[^12] In that
    Report, the Commission concluded that in order "\[t\]o encourage
    more robust competition in the local video marketplace, the Congress
    should ... forbid local franchising authorities from unreasonably
    denying a franchise to potential competitors who are ready and able
    to provide service."[^13]

8.  In response,[^14] Congress revised Section 621(a)(1) through the
    Cable Television Consumer Protection and Competition Act of 1992
    (the "1992 Cable Act")[^15] to read as follows: "A franchising
    authority may award, in accordance with the provisions of this
    title, 1 or more franchises within its jurisdiction; except that a
    franchising authority may not grant an exclusive franchise and *may
    not unreasonably refuse to award an additional competitive
    franchise*."[^16] In the Conference Report on the legislation,
    Congress found that competition in the cable industry was sorely
    lacking:

    For a variety of reasons, including local franchising requirements
    and the extraordinary expense of constructing more than one cable
    television system to serve a particular geographic area, most cable
    television subscribers have no opportunity to select between
    competing cable systems. Without the presence of another
    multichannel video programming distributor, a cable system faces no
    local competition. The result is undue market power for the cable
    operator as compared to that of consumers and video
    programmers.[^17]

    To address this problem, Congress abridged local government
    authority over the franchising process to promote greater cable
    competition:

> Based on the evidence in the record taken as a whole, it is clear that
> there are benefits from competition between two cable systems. Thus,
> the Committee believes that local franchising authorities should be
> encouraged to award second franchises. Accordingly, \[the 1992 Cable
> Act\] as reported, prohibits local franchising authorities from
> unreasonably refusing to grant second franchises.[^18]

As revised, Section 621(a)(1) establishes a clear, federal-level
limitation on the authority of LFAs in the franchising process in order
to "promote the availability to the public of a diversity of views and
information through cable television and other video distribution
media," and to "rely on the marketplace, to the maximum extent feasible,
to achieve that availability."[^19] Congress further recognized that
increased competition in the video programming industry would curb
excessive rate increases and enhance customer service, two areas in
particular which Congress found had deteriorated because of the monopoly
power of cable operators brought about, at least in part, by the local
franchising process.[^20]

9.  In 1992, Congress also revised Section 621(a)(1) to provide that
    "\[a\]ny applicant whose application for a second franchise has been
    denied by a final decision of the franchising authority may appeal
    such final decision pursuant to the provisions of section 635."[^21]
    Section 635, in turn, states that "\[a\]ny cable operator adversely
    affected by any final determination made by a franchising authority
    under section 621(a)(1) ... may commence an action within 120 days
    after receiving notice of such determination" in federal court or a
    state court of general jurisdiction.[^22] Congress did not, however,
    provide an explicit judicial remedy for other forms of unreasonable
    refusals to award competitive franchises, such as an LFA's refusal
    to act on a pending franchise application within a reasonable time
    period.

10. ***The Local Franchising NPRM.*** Notwithstanding the limitation
    imposed on LFAs by Section 621(a)(1), prior to commencement of this
    proceeding, the Commission had seen indications that the current
    operation of the franchising process still serves as an unreasonable
    barrier to entry[^23] for potential new cable entrants into the MVPD
    market.[^24] In November 2005, the Commission issued a Notice of
    Proposed Rulemaking ("*Local Franchising NPRM*") to determine
    whether LFAs are unreasonably refusing to award competitive
    franchises and thereby impeding achievement of the statute's goals
    of increasing competition in the delivery of video programming and
    accelerating broadband deployment.

11. The Commission sought comment on the current environment in which
    new cable entrants attempt to obtain competitive cable franchises.
    For example, the Commission requested input on the number of: (a)
    LFAs in the United States; (b) competitive franchise applications
    filed to date;[^25] and (c) ongoing franchise negotiations.[^26] To
    determine whether the current operation of the franchising process
    discourages competition and broadband deployment, the Commission
    also sought information regarding, among other things:

-   how much time, on average, elapses between the date a franchise
    application is filed and the date an LFA acts on the application,
    and during that period, how much time is spent in active
    negotiations;[^27]

-   whether to establish a maximum time frame for an LFA to act on an
    application for a competitive franchise;[^28]

-   whether "level-playing-field" mandates, which impose on new entrants
    terms and conditions identical to those in the incumbent cable
    operator's franchise, constitute unreasonable barriers to
    entry;[^29]

-   whether build-out requirements (*i.e.*, requirements that a
    franchisee deploy cable service to parts or all of the franchise
    area within a specified period of time) are creating unreasonable
    barriers to competitive entry;[^30]

-   specific examples of any monetary or in-kind LFA demands unrelated
    to cable services that could be adversely affecting new entrants'
    ability to obtain franchises;[^31] and

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-   whether current procedures or requirements are appropriate for any
    cable operator, including incumbent cable operators.[^32]

12. In the *Local Franchising NPRM*, we tentatively concluded that
    Section 621(a)(1) empowers the Commission to adopt rules to ensure
    that the franchising process does not unduly interfere with the
    ability of potential competitors to provide video programming to
    consumers.[^33] Accordingly, the Commission sought comment on how it
    could best remedy any problems with the current franchising
    process.[^34]

13. The Commission also asked whether Section 706 provides a basis for
    the Commission to address barriers faced by would-be entrants to the
    video market.[^35] Section 706 directs the Commission to encourage
    broadband deployment by utilizing "measures that promote competition
    ... or other regulating methods that remove barriers to
    infrastructure investment."[^36] Competitive entrants in the video
    market are, in large part, deploying new fiber-based facilities that
    allow companies to offer the "triple play" of voice, data, and video
    services. New entrants' video offerings thus directly affect their
    roll-out of new broadband services. Revenues from cable services
    are, in fact, a driver for broadband deployment. In light of that
    relationship, the Commission sought comment on whether it could take
    remedial action pursuant to Section 706. [^37]

14. ***The Franchising Process.*** The record in this proceeding
    demonstrates that the franchising process differs significantly from
    locality to locality. In most states, franchising is conducted at
    the local level, affording counties and municipalities broad
    discretion in deciding whether to grant a franchise.[^38] Some
    counties and municipalities have cable ordinances that govern the
    structure of negotiations, while others may proceed on an
    applicant-by-applicant basis.[^39] Where franchising negotiations
    are focused at the local level, some LFAs create formal or informal
    consortia to pool their resources and expedite competitive
    entry.[^40]

15. To provide video services over a geographic area that encompasses
    more than one LFA, a prospective entrant must become familiar with
    all applicable regulations. This is a time-consuming and expensive
    process that has a chilling effect on competitors.[^41] Verizon
    estimates, for example, that it will need 2,500-3,000 franchises in
    order to provide video services throughout its service area.[^42]
    AT&T states that its Project Lightspeed deployment is projected to
    cover a geographic area that would encompass as many as 2,000 local
    franchise areas.[^43] BellSouth estimates that there are
    approximately 1,500 LFAs within its service area.[^44] Qwest's
    in-region territory covers a potential 5,389 LFAs.[^45] While other
    companies are also considering competitive entry,[^46] these
    estimates amply demonstrate the regulatory burden faced by
    competitors that seek to enter the market on a wide scale, a burden
    that is amplified when individual LFAs unreasonably refuse to grant
    competitive franchises.

16. A few states and municipalities recently have recognized the need
    for reform and have established expedited franchising processes for
    new entrants. Although these processes also vary greatly and thus
    are of limited help to new cable providers seeking to quickly enter
    the marketplace on a regional basis, they do provide more uniformity
    in the franchising process on an intrastate basis. These state level
    reforms appear to offer promise in assisting new entrants to more
    quickly begin offering consumers a competitive choice among cable
    providers. In 2005, the Texas legislature designated the Texas
    Public Utility Commission ("PUC") as the franchising authority for
    state-issued franchises, and required the PUC to issue a franchise
    within 17 business days after receipt of a completed application
    from an eligible applicant.[^47] In 2006, Indiana, Kansas, South
    Carolina, New Jersey, North Carolina, and California also passed
    legislation to streamline the franchising process by providing for
    expedited, state level grants of franchises.[^48] Virginia, by
    contrast, did not establish statewide franchises but mandated
    uniform time frames for negotiations, public hearings, and ultimate
    franchise approval at the local level. In particular, a
    "certificated provider of telecommunications service" with existing
    authority to use public rights-of-way is authorized to provide video
    service within 75 days of filing a request to negotiate with each
    individual LFA.[^49] Similarly, Michigan recently enacted
    legislation that streamlines the franchise application process,
    establishes a 30-day timeframe within which an LFA must make a
    decision, and eliminates build-out requirements.[^50]

17. In some states, however, franchise reform efforts launched in recent
    months have failed. For example, in Florida, bills that would have
    allowed competitive providers to enter the market with a permit from
    the Office of the Secretary of State, and contained no build-out or
    service delivery schedules, died in committee.[^51] In Louisiana,
    the Governor vetoed a bill that would have created a state franchise
    structure, provided for automatic grant of an application 45 days
    after filing, and contained no build-out requirements.[^52] In
    Maine, a bill that would have replaced municipal franchises with
    state franchises was withdrawn.[^53] Finally, a Missouri bill that
    would have given the Public Service Commission the authority to
    grant franchises and would have prohibited local franchising died in
    committee. [^54] []{.mark}

# DISCUSSION

18. Based on the voluminous record in this proceeding, which includes
    comments filed by new entrants, incumbent cable operators, LFAs,
    consumer groups, and others, we conclude that the current operation
    of the franchising process can constitute an unreasonable barrier to
    entry for potential cable competitors, and thus justifies Commission
    action. We find that we have authority under Section 621(a)(1) to
    address this problem by establishing limits on LFAs' ability to
    delay, condition, or otherwise "unreasonably refuse to award"
    competitive franchises. We find that we also have the authority to
    consider the goals of Section 706 in addressing this problem under
    Section 621(a)(1). We believe that, absent Commission action,
    deployment of competitive video services by new cable entrants will
    continue to be unreasonably delayed or, at worst, derailed.
    Accordingly, we adopt incremental measures directed to
    LFA-controlled franchising processes, as described in detail below.
    We anticipate that the rules and guidance we adopt today will
    facilitate and expedite entry of new cable competitors into the
    market for the delivery of multichannel video programming and thus
    encourage broadband deployment.

## The Current Operation of the Franchising Process Unreasonably Interferes With Competitive Entry

19. Most communities in the United States lack cable competition, which
    would reduce cable rates and increase innovation and quality of
    service.[^55] Although LFAs adduced evidence that they have granted
    some competitive franchises,[^56] and competitors acknowledge that
    they have obtained some franchises,[^57] the record includes only a
    few hundred examples of competitive franchises, many of which were
    obtained after months of unnecessary delay. In the vast majority of
    communities, cable competition simply does not exist.

20. The dearth of competition is due, at least in part, to the
    franchising process.[^58] The record demonstrates that the current
    operation of the franchising process unreasonably prevents or, at a
    minimum, unduly delays potential cable competitors from entering the
    MVPD market.[^59] Numerous commenters have adduced evidence that the
    current operation of the franchising process constitutes an
    unreasonable barrier to entry. Regulatory restrictions and
    conditions on entry shield incumbents from competition and are
    associated with various economic inefficiencies, such as reduced
    innovation and distorted consumer choices.[^60] We recognize that
    some LFAs have made reasonable efforts to facilitate competitive
    entry into the video programming market. We also recognize that
    recent state level reforms have the potential to streamline the
    process to a noteworthy degree. We find, though, that the current
    operation of the local franchising process often is a roadblock to
    achievement of the statutory goals of enhancing cable competition
    and broadband deployment.

21. Commenters have identified six factors that stand in the way of
    competitive entry. They are: (1) unreasonable delays by LFAs in
    acting on franchise applications; (2) unreasonable build-out
    requirements imposed by LFAs; (3) LFA demands unrelated to the
    franchising process; (4) confusion concerning the meaning and scope
    of franchise fee obligations; (5) unreasonable LFA demands for PEG
    channel capacity and construction of I-Nets; and (6)
    level-playing-field requirements set by LFAs. We address each factor
    below.

22. ***LFA Delays in Acting on Franchise Applications*.** The record
    demonstrates that unreasonable delays in the franchising process
    have obstructed and, in some cases, completely derailed attempts to
    deploy competitive video services. Many new entrants have been
    subjected to lengthy, costly, drawn-out negotiations that, in many
    cases, are still ongoing. The FTTH Council cited a report by an
    investment firm that, on average, the franchising process, as it
    currently operates, delays entry by 8-16 months.[^61] The record
    generally supports that estimate. For example, Verizon had 113
    franchise negotiations underway as of the end of March 2005. By the
    end of March 2006, LFAs had granted only 10 of those franchises. In
    other words, more than 90% of the negotiations were not completed
    within one year.[^62] Verizon noted that delays are often caused by
    mandatory waiting periods.[^63] BellSouth explained that
    negotiations took an average of 10 months for each of its 20 cable
    franchise agreements,[^64] and that in one case, the negotiations
    took nearly three years.[^65] AT&T claims that anti-competitive
    conditions, such as level-playing-field constraints and LFA demands
    regarding build-out, not only delay entry but can prevent it
    altogether.[^66] BellSouth notes that absent such demands (in
    Georgia, for example), the company's applications were granted
    quickly.[^67] Most of Ameritech's franchise negotiations likewise
    took a number of years.[^68] New entrants other than the large
    incumbent local exchange carriers ("LECs")[^69] also have
    experienced delays in the franchising process. NTCA provided an
    example of a small, competitive IPTV provider that is in ongoing
    negotiations that began more than one year ago.[^70]

23. These delays are particularly unreasonable when, as is often the
    case, the applicant already has access to rights-of-way. One of the
    primary justifications for cable franchising is the LFA's need to
    regulate and receive compensation for the use of public
    rights-of-way.[^71] However, when considering a franchise
    application from an entity that already has rights-of-way access,
    such as an incumbent LEC, an LFA need not and should not devote
    substantial attention to issues of rights-of-way management.[^72]
    Moreover, in obtaining a certificate for public convenience and
    necessity from a state, a facilities-based provider generally has
    demonstrated its legal, technical, and financial fitness to be a
    provider of telecommunications services. Thus, an LFA need not spend
    a significant amount of time considering the fitness of such
    applicants to access public rights-of-way.

24. Delays in acting on franchise applications are especially onerous
    because franchise applications are rarely denied outright,[^73]
    which would enable applicants to seek judicial review under Section
    635.[^74] Rather, negotiations are often drawn out over an extended
    period of time.[^75] As a result, the record shows that numerous new
    entrants have accepted franchise terms they considered unreasonable
    in order to avoid further delay.[^76] Others have filed lawsuits
    seeking a court order compelling the LFA to act, which entails
    additional delay, legal uncertainty, and great expense.[^77]
    Alternatively, some prospective entrants have walked away from
    unduly prolonged negotiations.[^78] Moreover, delays provide the
    incumbent cable operator the opportunity to launch targeted
    marketing campaigns before the competitor's rollout, thus
    undermining a competitor's prospects for success.[^79]

25. Despite this evidence, incumbent cable operators and LFAs
    nevertheless assert that new entrants can obtain and are obtaining
    franchises in a timely fashion,[^80] and that delays are largely due
    to unreasonable behavior on the part of franchise applicants, not
    LFAs.[^81] For example, Minnesota LFAs claim that they can grant a
    franchise in as little as eight weeks.[^82] The record, however,
    shows that expeditious grants of competitive franchises are
    atypical. Most LFAs lack any temporal limits for consideration of
    franchise applications, and of those that have such limits, many set
    forth lengthy time frames. In localities without a time limit or
    with an unreasonable time limit, the delays caused by the current
    operation of the franchising process present a significant barrier
    to entry.[^83] For example, the cities of Chicago and Indianapolis
    acknowledged that, as currently operated, their franchising
    processes take one to three years, respectively.[^84] Miami-Dade's
    cable ordinance permits the county to make a final decision on a
    cable franchise up to eight months after receiving a completed
    application, and the process may take longer if an applicant submits
    an incomplete application or amends its application. [^85]

26. Incumbent cable operators and LFAs state that new entrants could
    gain rapid entry if the new entrants simply agreed to the same terms
    applied to incumbent cable franchisees.[^86] However, this is not a
    reasonable expectation generally, given that the circumstances
    surrounding competitive entry are considerably different than those
    in existence at the time incumbent cable operators obtained their
    franchises. Incumbent cable operators originally negotiated
    franchise agreements as a means of acquiring or maintaining a
    monopoly position.[^87] In most instances, imposing the incumbent
    cable operator's terms and conditions on a new entrant would make
    entry prohibitively costly because the entrant cannot assume that it
    will quickly -- or ever -- amass the same number or percentage of
    subscribers that the incumbent cable operator captured.[^88] The
    record demonstrates that requiring entry on the same terms as
    incumbent cable operators may thwart entry entirely or may threaten
    new entrants' chances of success once in the market.

27. Incumbent cable operators also suggest that delay is attributable to
    competitors that are not really serious about entering the market,
    as demonstrated by their failure to file the thousands of franchise
    applications required for broad competitive entry.[^89] We reject
    this explanation as inconsistent with both the record as well as
    common sense. Given the complexity and time-consuming nature of the
    current franchising process, it is patently unreasonable to expect
    any competitive entrant to file several thousand applications and
    negotiate several thousand franchising processes at once. Moreover,
    the incumbent LECs have made their plans to enter the video services
    market abundantly clear, and the evidence in the record demonstates
    their seriousness about doing so. For instance, they are investing
    billions of dollars to upgrade their networks to enable the
    provision of video services, expenditures that would make little
    sense if they were not planning to enter the video market.[^90]
    Finally, the record also demonstrates that the obstacles posed by
    the current operation of the franchising process are so great that
    some prospective entrants have shied away from the franchise process
    altogether.[^91]

28. We also reject the argument by incumbent cable operators that delays
    in the franchising process are immaterial because competitive
    applicants are not ready to enter the market and frequently delay
    initiating service once they secure a franchise.[^92] We find that
    lack of competition in the video market is not attributable to
    inertia on the part of competitors. Given the financial risk,
    uncertainty, and delay new entrants face when they apply for a
    competitive franchise, it is not surprising that they wait until
    they get franchise approval before taking all steps necessary to
    provide service.[^93] The sooner a franchise is granted, the sooner
    an applicant can begin completing those steps. Consequently,
    shortening the franchising process will accelerate market entry.
    Moreover, the record shows that streamlining the franchising process
    can expedite market entry. For example, less than 30 days after
    Texas authorized statewide franchises, Verizon filed an application
    for a franchise with respect to 21 Texas communities and was able to
    launch services in most of those communities within 45 days.[^94]

29. Incumbent cable operators offer evidence from their experience in
    the renewal and transfer processes as support for their contention
    that the vast majority of LFAs operate in a reasonable and timely
    manner.[^95] We find that incumbent cable operators' purported
    success in the franchising process is not a useful comparison in
    this case. Today's large MSOs obtained their current franchises by
    either renewing their preexisting agreements or by merging with and
    purchasing other incumbent cable franchisees with preexisting
    agreements. For two key reasons, their experiences in franchise
    transfers and renewals are not equivalent to those of new entrants
    seeking to obtain new franchises.[^96] First, in the transfer or
    renewal context, delays in LFA consideration do not result in a bar
    to market entry. Second, in the transfer or renewal context, the LFA
    has a vested interest in preserving continuity of service for
    subscribers, and will act accordingly.

30. We also reject the claims by incumbent cable operators that the
    experiences of Ameritech, RCN, and other overbuilders[^97]
    demonstrate that new entrants can and do obtain competitive
    franchises in a timely manner.[^98] Charter claims that it secured
    franchises and upgraded its systems in a highly competitive market
    and that the incumbent LECs possess sufficient resources to do the
    same.[^99] BellSouth notes, however, that Charter does not indicate
    a single instance in which it obtained a franchise through an
    initial negotiation, rather than a transfer.[^100] Comcast argues
    that it faces competition from cable overbuilders in several
    markets.[^101] The record is scant and inconsistent, however, with
    respect to overbuilder experiences in obtaining franchises, and thus
    does not provide reliable evidence. BellSouth also claims that,
    despite RCN's claims that the franchising process has worked in
    other proceedings, RCN previously has painted a less positive
    picture of the process and has called it a high barrier to
    entry.[^102] Given these facts, we do not believe that the
    experiences cited by incumbent cable operators shed any significant
    light on the current operation of the franchising process with
    respect to competitive entrants.

31. ***Impact of Build-Out Requirements*.** The record shows that
    build-out issues are one of the most contentious between LFAs and
    prospective new entrants, and that build-out requirements can
    greatly hinder the deployment of new video and broadband services.
    New and potential entrants commented extensively on the adverse
    impact of build-out requirements on their deployment plans.[^103]
    Large incumbent LECs,[^104] small and mid-sized incumbent
    LECs,[^105] competitive LECs[^106] and others view build-out
    requirements as the most significant obstacle to their plans to
    deploy competitive video and broadband services. Similarly, consumer
    groups and the U.S. Department of Justice, Antitrust Division, urge
    the Commission to address this aspect of the current franchising
    process in order to speed competitive entry.[^107]

32. The record demonstrates that build-out requirements can
    substantially reduce competitive entry.[^108] Numerous commenters
    urge the Commission to prohibit LFAs from imposing any build-out
    requirements, and particularly universal build-out
    requirements.[^109] They argue that imposition of such mandates,
    rather than resulting in the increased service throughout the
    franchise area that LFAs desire, will cause potential new entrants
    to simply refrain from entering the market at all.[^110] They argue
    that even build-out provisions that do not require deployment
    throughout an entire franchise area may prevent a prospective new
    entrant from offering service.[^111]

33. The record contains numerous examples of build-out requirements at
    the local level that resulted in delayed entry, no entry, or failed
    entry. A consortium of California communities demanded that Verizon
    build out to every household in each community before Verizon would
    be allowed to offer service to any community, even though large
    parts of the communities fell outside of Verizon's telephone service
    area.[^112] Furthermore, Qwest has withdrawn franchise applications
    in eight communities due to build-out requirements.[^113] In each
    case, Qwest determined that entering into a franchise agreement that
    mandates universal build-out would not be economically
    feasible.[^114]

34. In many instances, level-playing-field provisions in local laws or
    franchise agreements compel LFAs to impose on competitors the same
    build-out requirements that apply to the incumbent cable
    operator.[^115] Cable operators use threatened or actual litigation
    against LFAs to enforce level-playing-field requirements and have
    successfully delayed entry or driven would-be competitors out of
    town.[^116] Even in the absence of level-playing-field requirements,
    incumbent cable operators demand that LFAs impose comparable
    build-out requirements on competitors to increase the financial
    burden and risk for the new entrant.[^117]

35. Build-out requirements can deter market entry because a new entrant
    generally must take customers from the incumbent cable operator, and
    thus must focus its efforts in areas where the take-rate will be
    sufficiently high to make economic sense. Because the second
    provider realistically cannot count on acquiring a share of the
    market similar to the incumbent's share, the second entrant cannot
    justify a large initial deployment.[^118] Rather, a new entrant must
    begin offering service within a smaller area to determine whether it
    can reasonably ensure a return on its investment before
    expanding.[^119] For example, Verizon has expressed significant
    concerns about deploying service in areas heavily populated with
    MDUs already under exclusive contract with another MVPD.[^120] Due
    to the risk associated with entering the video market, forcing new
    entrants to agree up front to build out an entire franchise area too
    quickly may be tantamount to forcing them out of -- or precluding
    their entry into -- the business.[^121]

36. In many cases, build-out requirements also adversely affect consumer
    welfare. DOJ noted that imposing uneconomical build-out requirements
    results in less efficient competition and the potential for higher
    prices.[^122] Non-profit research organizations the Mercatus Center
    and the Phoenix Center argue that build-out requirements reduce
    consumer welfare.[^123] Each conclude that build‑out requirements
    imposed on competitive cable entrants only benefit an incumbent
    cable operator.[^124] The Mercatus Center, citing data from the FCC
    and GAO indicating that customers with a choice of cable providers
    enjoy lower rates, argues that, to the extent that build-out
    requirements deter entry, they result in fewer customers having a
    choice of providers and a resulting reduction in rates.[^125] The
    Phoenix Center study contends that build-out requirements deter
    entry and conflict with federal, state, and local government goals
    of rapid broadband deployment.[^126] Another research organization,
    the American Consumer Institute (ACI), concluded that build-out
    requirements are inefficient: if a cable competitor initially serves
    only one neighborhood in a community, and a few consumers in this
    neighborhood benefit from the competition, total welfare in the
    community improves because no consumer was made worse and some
    consumers (those who can subscribe to the competitive service) were
    made better.[^127] In comparison, requirements that deter
    competitive entry may make some consumers (those who would have been
    able to subscribe to the competitive service) worse off.[^128] In
    many instances, placing build-out conditions on competitive entrants
    harms consumers and competition because it increases the cost of
    cable service.[^129] Qwest commented that, in those communities it
    has not entered due to build-out requirements, consumers have been
    deprived of the likely benefit of lower prices as the result of
    competition from a second cable provider.[^130] This claim is
    supported by the Commission's 2005 annual cable price survey, in
    which the Commission observed that average monthly cable rates
    varied markedly depending on the presence -- and type -- of MVPD
    competition in the local market. The greatest difference occurred
    where there was wireline overbuild competition, where average
    monthly cable rates were 20.6 percent lower than the average for
    markets deemed noncompetitive.[^131]

37. For these reasons, we disagree with LFAs and incumbent cable
    operators who argue that unlimited local flexibility to impose
    build-out requirements, including universal build-out of a franchise
    area, is essential to promote competition in the delivery of video
    programming and ensure a choice in providers for every
    household.[^132] In many cases, build-out requirements may have
    precisely the opposite effects -- they deter competition and deny
    consumers a choice.

38. Although incumbent LECs already have telecommunications facilities
    deployed over large areas, build-out requirements may nonetheless be
    a formidable barrier to entry for them for two reasons. First,
    incumbent LECs must upgrade their existing plant to enable the
    provision of video service, which often costs billions of dollars.
    Second, as the Commission stated in the *Local Franchising NPRM*,
    the boundaries of the areas served by facilities-based providers of
    telephone and/or broadband services frequently do not coincide with
    the boundaries of the areas under the jurisdiction of the relevant
    LFAs.[^133] In some cases, a potential new entrant's service area
    comprises only a portion of the area under the LFA's
    jurisdiction.[^134] When LECs are required to build out where they
    have no existing plant, the business case for market entry is
    significantly weakened because their deployment costs are
    substantially increased. [^135] In other cases, a potential new
    entrant's facilities may already cover most or all of the franchise
    area, but certain economic realities prevent or deter the provider
    from upgrading certain "wire center service areas" within its
    overall service area.[^136] For example, some wire center service
    areas may encompass a disproportionate level of business locations
    or multi-dwelling units ("MDUs") with MVPD exclusive
    contracts.[^137] New entrants argue that the imposition of build-out
    requirements in either circumstance creates a disincentive for them
    to enter the marketplace.[^138]

39. Incumbent cable operators assert that new entrants' claims are
    exaggerated, and that, in most cases, LEC facilities are coterminous
    with municipal boundaries.[^139] The evidence submitted by new
    entrants, however, convincingly shows that inconsistencies between
    the geographic boundaries of municipalities and the network
    footprints of telephone companies are commonplace.[^140] The cable
    industry has adduced no contrary evidence. The fact that few LFAs
    argued that non-coterminous boundaries are a problem[^141] is not
    sufficient to contradict the incumbent LECs' evidence.[^142]

40. Based on the record as a whole, we find that build-out requirements
    imposed by LFAs can constitute unreasonable barriers to entry for
    competitive applicants. Indeed, the record indicates that because
    potential competitive entrants to the cable market may not be able
    to economically justify build-out of an entire local franchising
    area immediately,[^143] these requirements can have the effect of
    granting *de facto* exclusive franchises, in direct contravention of
    Section 621(a)(1)'s prohibition of exclusive cable franchises.[^144]

41. Besides thwarting potential new entrants' deployment of video
    services and depriving consumers of reduced prices and increased
    choice,[^145] build-out mandates imposed by LFAs also may directly
    contravene the goals of Section 706 of the Telecommunications Act of
    1996, which requires the Commission to "remov\[e\] barriers to
    infrastructure investment" to encourage the deployment of broadband
    services "on a reasonable and timely basis."[^146] We agree with
    AT&T that Section 706, in conjunction with Section 621(a)(1),
    requires us to prevent LFAs from adversely affecting the deployment
    of broadband services through cable regulation.[^147]

42. We do not find persuasive incumbent cable operators' claims that
    build-out should necessarily be required for new entrants into the
    video market because of certain obligations faced by cable operators
    in their deployment of voice services. To the extent cable operators
    believe they face undue regulatory obstacles to providing voice
    services, they should make that point in other proceedings, not
    here. In any event, commenters generally agree that the record
    indicates that the investment that a competitive cable provider must
    make to deploy video in a particular geographic area far outweighs
    the cost of the additional facilities that a cable operator must
    install to deploy voice service.[^148]

43. ***LFA Demands Unrelated to the Provision of Video Services.*** Many
    commenters recounted franchise negotiation experiences in which LFAs
    made unreasonable demands unrelated to the provision of video
    services. Verizon, for example, described several communities that
    made unreasonable requests, such as the purchase of street lights,
    wiring for all houses of worship, the installation of cell phone
    towers, cell phone subsidies for town employees, library parking at
    Verizon's facilities, connection of 220 traffic signals with fiber
    optics, and provision of free wireless broadband service in an area
    in which Verizon's subsidiary does not offer such service.[^149] In
    Maryland, some localities conditioned a franchise upon Verizon's
    agreement to make its data services subject to local customer
    service regulation.[^150] AT&T provided examples of impediments that
    Ameritech New Media faced when it entered the market, including a
    request for a new recreation center and pool.[^151] FTTH Council
    highlighted Grande Communications' experience in San Antonio, which
    required that Grande Communications make an up-front, \$1 million
    franchise fee payment and fund a \$50,000 scholarship with
    additional annual contributions of \$7,200.[^152] The record
    demonstrates that LFA demands unrelated to cable service typically
    are not counted toward the statutory 5 percent cap on franchise
    fees, but rather imposed on franchisees in addition to assessed
    franchise fees.[^153] Based on this record evidence, we are
    convinced that LFA requests for unreasonable concessions are not
    isolated, and that these requests impose undue burdens upon
    potential cable providers.

44. ***Assessment of Franchise Fees*.** The record establishes that
    unreasonable demands over franchise fee issues also contribute to
    delay in franchise negotiations at the local level and hinder
    competitive entry.[^154] Fee issues include not only which
    franchise-related costs imposed on providers should be included
    within the 5 percent statutory franchise fee cap established in
    Section 622(b),[^155] but also the proper calculation of franchise
    fees (*i.e.*, the revenue base from which the 5 percent is
    calculated). In Virginia, municipalities have requested large
    "acceptance fees" upon grant of a franchise, in addition to
    franchise fees.[^156] Other LFAs have requested consultant and
    attorneys' fees.[^157] Several Pennsylvania localities have
    requested franchise fees based on cable and non-cable
    revenues.[^158] Some commenters assert that an obligation to provide
    anything of value, including PEG costs, should apply toward the
    franchise fee obligation.[^159]

45. The parties indicate that the lack of clarity with respect to
    assessment of franchise fees impedes deployment of new video
    programming facilities and services for three reasons. First, some
    LFAs make unreasonable demands regarding franchise fees as a
    condition of awarding a competitive franchise. Second, new entrants
    cannot reasonably determine the costs of entry in any particular
    community. Accordingly, they may delay or refrain from entering a
    market because the cost of entry is unclear and market viability
    cannot be projected.[^160] Third, a new entrant must negotiate these
    terms prior to obtaining a franchise, which can take a considerable
    amount of time. Thus, unreasonable demands by some LFAs effectively
    creates an unreasonable barrier to entry.

46. ***PEG and I-Net Requirements.*** Negotiations over PEG and I-Nets
    also contribute to delays in the franchising process. In response to
    the *Local Franchising NPRM*, we received numerous comments asking
    for clarification of what requirements LFAs reasonably may impose on
    franchisees to support PEG and I-Nets.[^161] We also received
    comments suggesting that some LFAs are making unreasonable demands
    regarding PEG and I-Net support as a condition of awarding
    competitive franchises.[^162] LFAs have demanded funding for PEG
    programming and facilities that exceeds their needs, and will not
    provide an accounting of where the money goes.[^163] For example,
    one municipality in Florida requested \$6 million for PEG
    facilities, and a Massachusetts community requested 10 PEG channels,
    when the incumbent cable operator only provides two.[^164] Several
    commenters argued that it is unreasonable for an LFA to request a
    number of PEG channels from a new entrant that is greater than the
    number of channels that the community is using at the time the new
    entrant submits its franchise application.[^165] The record
    indicates that LFAs also have made what commenters view as
    unreasonable institutional network requests, such as free cell
    phones for employees, fiber optic service for traffic signals, and
    redundant fiber networks for public buildings.[^166]

47. ***Level-Playing-Field Provisions.*** The record demonstrates that,
    in considering franchise applications, some LFAs are constrained by
    so-called "level-playing-field" provisions in local laws or
    incumbent cable operator franchise agreements.[^167] Such provisions
    typically impose upon new entrants terms and conditions that are
    neither "more favorable" nor "less burdensome" than those to which
    existing franchisees are subject.[^168] Some LFAs impose
    level-playing-field requirements on new entrants even without a
    statutory, regulatory, or contractual obligation to do so.[^169]
    Minnesota's process allows incumbent cable operators to be active in
    a competitor's negotiation, and incumbent cable operators have
    challenged franchise grants when those incumbent cable operators
    believed that the LFA did not follow correct procedure.[^170]
    According to BellSouth, the length of time for approval of its
    franchises was tied directly to level-playing-field constraints;
    absent such demands (in Georgia, for example), the company's
    applications were granted quickly.[^171] NATOA contends, however,
    that although level-playing-field provisions sometimes can
    complicate the franchising process, they do not present unreasonable
    barriers to entry.[^172] NATOA and LFAs argue that
    level-playing-field provisions serve important policy goals, such as
    ensuring a competitive environment and providing for an equitable
    distribution of services and obligations among all operators.[^173]

48. The record demonstrates that local level-playing-field mandates can
    impose unreasonable and unnecessary requirements on competitive
    applicants.[^174] As noted above, level-playing-field provisions
    enable incumbent cable operators to delay or prevent new entry by
    threatening to challenge any franchise that an LFA grants.[^175]
    Comcast asserts that MSOs are well within their rights to insist
    that their legal and contractual rights are honored in the grant of
    a subsequent franchise.[^176] The record demonstrates, however, that
    local level-playing-field requirements may require LFAs to impose
    obligations on new entrants that directly contravene Section
    621(a)(1)'s prohibition on unreasonable refusals to award a
    competitive franchise.[^177] In most cases, incumbent cable
    operators entered into their franchise agreements in exchange for a
    monopoly over the provision of cable service.[^178] Build-out
    requirements and other terms and conditions that may have been
    sensible under those circumstances can be unreasonable when applied
    to competitive entrants. NATOA's argument that level-playing-field
    requirements always serve to ensure a competitive environment and
    provide for an equitable distribution of services and obligations
    ignores that incumbent and competitive operators are not on the same
    footing. LFAs do not afford competitive providers the monopoly power
    and privileges that incumbents received when they agreed to their
    franchises, something that investors recognize.[^179]

49. Moreover, competitive operators should not bear the consequences of
    an incumbent cable operator's choice to agree to any unreasonable
    franchise terms that an LFA may demand. And while the record is
    mixed as to whether level-playing-field mandates "assure that cable
    systems are responsive to the needs and interests of the local
    community,"[^180] the more compelling evidence indicates that they
    do not because they prevent competition. Local level-playing-field
    provisions impose costs and risks sufficient to undermine the
    business plan for profitable entry in a given community, thereby
    undercutting the possibility of competition.[^181]

50. ***Benefits of Cable Competition.*** We further agree with new
    entrants that reform of the operation of the franchise process is
    necessary and appropriate to achieve increased video competition and
    broadband deployment.[^182] The record demonstrates that new cable
    competition reduces rates far more than competition from DBS.
    Specifically, the presence of a second cable operator in a market
    results in rates approximately 15 percent lower than in areas
    without competition -- about \$5 per month.[^183] The magnitude of
    the rate decreases caused by wireline cable competition is
    corroborated by the rates charged in Keller, Texas, where the price
    for Verizon's "Everything" package is 13 percent below that of the
    incumbent cable operator, and in Pinellas County, Florida, where
    Knology is the overbuilder and the incumbent cable operator's rates
    are \$10-15 lower than in neighboring areas where it faces no
    competition.[^184]

51. We also conclude that broadband deployment and video entry are
    "inextricably linked"[^185] and that, because the current operation
    of the franchising process often presents an unreasonable barrier to
    entry for the provision of video services, it necessarily hampers
    deployment of broadband services.[^186] The record demonstrates that
    broadband deployment is not profitable without the ability to
    compete with the bundled services that cable companies
    provide.[^187] As the Phoenix Center explains, "the more potential
    revenues that the network can generate in a household, the more
    likely it is the network will be built to that household."[^188]
    DOJ's comments underscore that additional video competition will
    likely speed deployment of advanced broadband services to
    consumers.[^189] Thus, although LFAs only oversee the provision of
    wireline-based video services, their regulatory actions can directly
    affect the provision of voice and data services, not just
    cable.[^190] We find reasonable AT&T's assertion that carriers will
    not invest billions of dollars in network upgrades unless they are
    confident that LFAs will grant permission to offer video services
    quickly and without unreasonable difficulty.[^191]

52. In sum, the current operation of the franchising process deters
    entry and thereby denies consumers choices.[^192] Delays in the
    franchising process also hamper accelerated broadband deployment and
    investment in broadband facilities in direct contravention of the
    goals of Section 706,[^193] the President's competitive broadband
    objectives,[^194] and our established broadband goals.[^195] In
    addition, the economic effects of franchising delays can trickle
    down to manufacturing companies, which in some cases have lost
    business because potential new entrants would not purchase equipment
    without certainties that they could deploy their services.[^196] We
    discuss below our authority to address these problems.

## The Commission Has Authority to Adopt Rules to Implement Section 621(a)(1)

53. In the *Local Franchising NPRM*, the Commission tentatively
    concluded that it has the authority to adopt rules implementing
    Title VI of the Act,[^197] including Section 621(a)(1).[^198] The
    Commission sought comment on whether it has the authority to adopt
    rules or whether it is limited to providing guidance.[^199] Based on
    the record and governing legal principles, we affirm this tentative
    conclusion and find that the Commission has the authority to adopt
    rules to implement Title VI and, more specifically, Section
    621(a)(1).

54. Congress delegated to the Commission the task of administering the
    Communications Act. As the Supreme Court has explained, the
    Commission serves "as the 'single Government agency' with 'unified
    jurisdiction' and 'regulatory power over all forms of electrical
    communication, whether by telephone, telegraph, cable, or
    radio.'"[^200] To that end, "\[t\]he Act grants the Commission broad
    responsibility to forge a rapid and efficient communications system,
    and broad authority to implement that responsibility."[^201] Section
    201(b) authorizes the Commission to "prescribe such rules and
    regulations as may be necessary in the public interest to carry out
    the provisions of this Act."[^202] "\[T\]he grant in § 201(b) means
    what it says: The FCC has rulemaking authority to carry out the
    'provisions of this Act.'"[^203] This grant of authority therefore
    necessarily includes Title VI of the Communications Act in general,
    and Section 621(a)(1) in particular. Other provisions in the Act
    reinforce the Commission's general rulemaking authority. Section
    303(r), for example, states that "the Commission from time to time,
    as public convenience, interest, or necessity requires shall ...
    make such rules and regulations and prescribe such restrictions and
    conditions, not inconsistent with law, as may be necessary to carry
    out the provisions of this Act...."[^204] Section 4(i) states that
    the Commission "may perform any and all acts, make such rules and
    regulations, and issue such orders, not inconsistent with this Act,
    as may be necessary in the execution of its functions."[^205]

55. Section 2 of the Communications Act grants the Commission explicit
    jurisdiction over "cable services."[^206] Moreover, as we explained
    in the *Local Franchising NPRM,* Congress specifically charged the
    Commission with the administration of the Cable Act, including
    Section 621.[^207] In addition, federal courts have consistently
    upheld the Commission's authority in this area.[^208]

56. Although several commenters disagreed with our tentative conclusion,
    none has persuaded us that the Commission lacks the authority to
    adopt rules to implement Section 621(a)(1). Incumbent cable
    operators and franchise authorities argue that the judicial review
    provisions in Sections 621(a)(1) and 635[^209] indicate that
    Congress gave the courts exclusive jurisdiction to interpret and
    enforce Section 621(a)(1), including authority to decide what
    constitutes an unreasonable refusal to award a competitive cable
    franchise.[^210] We find, however, that this argument reads far too
    much into the judicial review provisions. The mere existence of a
    judicial review provision in the Communications Act does not, by
    itself, strip the Commission of its otherwise undeniable rulemaking
    authority.[^211] As a general matter, the fact that Congress
    provides a mechanism for judicial review to remedy a violation of a
    statutory provision does not deprive an agency of the authority to
    issue rules interpreting that statutory provision. Here, nothing in
    the statutory language or the legislative history suggests that by
    providing a judicial remedy, Congress intended to divest the
    Commission of the authority to adopt and enforce rules implementing
    Section 621.[^212] In light of the Commission's broad rulemaking
    authority under Section 201 and other provisions in the Act, the
    absence of a specific grant of rulemaking authority in Section 621
    is "not peculiar."[^213] Other provisions in the Act demonstrate
    that when Congress intended to grant exclusive jurisdiction, it said
    so in the legislation.[^214] Here, however, neither Section
    621(a)(1) nor Section 635 includes an exclusivity provision, and we
    decline to read one into either provision.

57. In addition, we note that the judicial review provisions at issue
    here on their face apply only to a final decision by the franchising
    authority.[^215] They do not provide for review of unreasonable
    refusals to award an additional franchise by withholding a final
    decision or insisting on unreasonable terms that an applicant
    properly refuses to accept. Nor do the judicial review provisions
    say anything about the broader range of practices governed by
    Section 621.[^216]

58. We also reject the argument by some incumbent cable operators and
    franchise authorities that Section 621(a)(1) is unambiguous and
    contains no gaps in the statutory language that would give the
    Commission authority to regulate the franchising process.[^217] We
    strongly disagree. Congress did not define the term "unreasonably
    refuse," and it is far from self-explanatory. The United States
    Court of Appeals for the District of Columbia Circuit has held that
    the term "unreasonable" is among the "ambiguous statutory terms" in
    the Communications Act, and that the "court owes substantial
    deference to the interpretation the Commission accords them."[^218]
    We therefore find that Section 621(a)(1)'s requirement that an LFA
    "may not unreasonably refuse to award an additional competitive
    franchise" creates ambiguity that the Commission has the authority
    to resolve.[^219] The possibility that a court, in reviewing a
    particular matter, may determine whether an LFA "unreasonably"
    denied a second franchise does not displace the Commission's
    authority to adopt rules generally interpreting what constitutes an
    "unreasonable refusal" under Section 621(a)(1).[^220]

59. Some incumbent cable operators and franchise authorities argue that
    Section 621(a)(1) imposes no general duty of reasonableness on the
    LFA in connection with procedures for *awarding* a competitive
    franchise.[^221] According to these commenters, the "unreasonably
    refuse to award" language in the first sentence in Section 621(a)(1)
    must be read in conjunction with the second sentence, which relates
    to the *denial* of a competitive franchise application.[^222] Based
    on this, commenters claim that "unreasonably refuse to award" means
    "unreasonably *deny*" and, thus, Section 621(a)(1) is not applicable
    before a final decision is rendered.[^223] We disagree. By
    concluding that the language "unreasonably refuse to award" means
    the same thing as "unreasonably deny," commenters violate the
    long-settled principle of statutory construction that each word in a
    statutory scheme must be given meaning.[^224] We find that the
    better reading of the phrase "unreasonably refuse to award" is that
    Congress intended to cover LFA conduct beyond ultimate denials by
    final decision, such as situations where an LFA has unreasonably
    refused to award an additional franchise by withholding a final
    decision or by insisting on unreasonable terms that an applicant
    refuses to accept.[^225] While the judicial review provisions in
    Sections 621(a)(1) and 635 refer to a "final decision" or "final
    determination,"[^226] the Commission's rulemaking authority under
    Section 621 is not constrained in the same manner. Instead, the
    Commission has the authority to address what constitutes an
    unreasonable refusal to award a franchise, and as stated above, a
    local franchising authority may unreasonably refuse to award a
    franchise through other routes than issuing a final decision or
    determination denying a franchise application. For all of these
    reasons, we conclude that the Commission may exercise its statutory
    authority to establish federal standards identifying those
    LFA-imposed terms and conditions that would violate Section
    621(a)(1) of the Communications Act.[^227]

60. Incumbent cable operators and local franchise authorities also
    maintain that the legislative history of Section 621(a)(1)
    demonstrates that Congress reserved to LFAs the authority to
    determine what constitutes "reasonable" grounds for franchise
    denials, with oversight by the courts, and left no authority under
    Section 621(a)(1) for the Commission to issue rules or guidelines
    governing the franchise approval process.[^228] Commenters point to
    the Conference Committee Report on the 1992 Amendments,[^229] which
    adopted the Senate version of Section 621,[^230] rather than the
    House version, which "contained five examples of circumstances under
    which it is reasonable for a franchising authority to deny a
    franchise."[^231] We find commenters' reliance on the legislative
    history to be misplaced. While the House may have initially
    considered adopting a categorical approach for determining what
    would constitute a "reasonable *denial*," Congress ultimately
    decided to forgo that approach and prohibit franchising authorities
    from unreasonably refusing to *award* an additional competitive
    franchise.[^232] To be sure, commenters are correct to point out
    that Congress chose not to define in the Act the meaning of the
    phrase "unreasonably refuse to award." However, commenters'
    assertion that Congress therefore intended for this gap in the
    statute to be filled in by only LFAs and courts lacks any basis in
    law or logic. Rather, we believe that it is far more reasonable to
    assume, consistent with settled principles of administrative law,
    that Congress intended that the Commission, which is charged by
    Congress with the administration of Title VI,[^233] to have the
    authority to do so. There is nothing in the statute or the
    legislative history to suggest that Congress intended to displace
    the Commission's explicit authority to interpret and enforce
    provisions in Title VI, including Section 621(a)(1).

61. The pro-competitive rules and guidance we adopt in this *Order* are
    consistent with Congressional intent. Section 601 states that Title
    VI is designed to "promote competition in cable
    communications."[^234] In a report to Congress prepared pursuant to
    the 1984 Cable Act, the Commission concluded that in order "\[t\]o
    encourage more robust competition in the local video marketplace,
    the Congress should ... forbid local franchising authorities from
    unreasonably denying a franchise to potential competitors who are
    ready and able to provide service."[^235] In response, Congress
    revised Section 621(a)(1) to prohibit a franchising authority from
    unreasonably refusing to award an additional competitive
    franchise.[^236] The regulations set forth herein give force to that
    restriction and vindicate the national policy goal of promoting
    competition in the video marketplace.

62. Our authority to adopt rules implementing Section 621(a)(1) is
    further supported by Section 706 of the Telecommunications Act of
    1996, which directs the Commission to encourage broadband deployment
    by utilizing "measures that promote competition ... or other
    regulating methods that remove barriers to infrastructure
    investment."[^237] The D.C. Circuit has found that the Commission
    has the authority to consider the goals of Section 706 when
    formulating regulations under the Act.[^238] The record here
    indicates that a provider's ability to offer video service and to
    deploy broadband networks are linked intrinsically, and the federal
    goals of enhanced cable competition and rapid broadband deployment
    are interrelated.[^239] Thus, if the franchising process were
    allowed to slow competition in the video service market, that would
    decrease broadband infrastructure investment, which would not only
    affect video but other broadband services as well.[^240] As the DOJ
    points out, potential gains from competition, such as expedited
    broadband deployment, are more likely to be realized without imposed
    restrictions or conditions on entry in the franchising
    process.[^241]

63. We reject the argument by incumbent cable operators and LFAs that
    any rules adopted under Section 621(a)(1) could adversely affect the
    franchising process.[^242] In particular, LFAs contend that cable
    service requirements must vary from jurisdiction to jurisdiction
    because cable franchises need to be "tailored to the needs and
    interests of the local community."[^243] The Communications Act
    preserves a role for local jurisdictions in the franchise process.
    We do not believe that the rules we adopt today will hamper the
    franchising process. While local franchising authorities and
    potential new entrants have opposing viewpoints about the
    reasonableness of certain terms,[^244] we received comments from
    both groups that agree that Commission guidance concerning factors
    that are "reasonable" will help to expedite the franchising
    process.[^245] Therefore, we anticipate that our implementation of
    Section 621(a)(1) will aid new entrants, incumbent cable operators,
    and LFAs in understanding the bounds of local authority in
    considering competitive franchise applications.

64. In sum, we conclude that we have clear authority to interpret and
    implement the Cable Act, including the ambiguous phrase
    "unreasonably refuse to award" in Section 621(a)(1), to further the
    congressional imperatives to promote competition and broadband
    deployment. As discussed above, this authority is reinforced by
    Section 4(i) of the Communications Act, which gives us broad power
    to perform acts necessary to execute our functions, and the mandate
    in Section 706 of the Telecommunications Act of 1996 that we
    encourage broadband deployment through measures that promote
    competition.[^246] We adopt the rules and regulations in this
    *Order* pursuant to that authority. We find that Section 621(a)(1)
    prohibits not only an LFA's ultimate unreasonable denial of a
    competitive franchise application, but also LFA procedures and
    conduct that have the effect of unreasonably interfering with the
    ability of a would-be competitor to obtain a competitive franchise,
    whether by (1) creating unreasonable delays in the process, or
    (2) imposing unreasonable regulatory roadblocks, such that they
    effectively constitute an "unreasonable refusal to award an
    additional competitive franchise" within the meaning of Section
    621(a)(1).[^247]

## Steps to Ensure that the Local Franchising Process Does Not Unreasonably Interfere with Competitive Cable Entry and Rapid Broadband Deployment

65. Commenters in this proceeding identified several specific issues
    regarding problems with the current operation of the franchising
    process. These include: (1) failure by LFAs to grant or deny
    franchises within reasonable time frames; (2) LFA requirements that
    a facilities-based new entrant build out its cable facilities beyond
    a reasonable service area; (3) certain LFA-mandated costs, fees, and
    other compensation and whether they must be counted toward the
    statutory 5 percent cap on franchise fees; (4) new entrants'
    obligations to provide support mandated by LFAs for PEG and I-Nets;
    and (5) facilities-based new entrants' obligations to comply with
    local consumer protection and customer service standards when the
    same facilities are used to provide other regulated services, such
    as telephony. We discuss each measure below.

### Maximum Time Frame for Franchise Negotiations 

66. As explained above,[^248] the record demonstrates that, although the
    average time that elapses between application and grant of a
    franchise varies from locality to locality, unreasonable delays in
    the franchising process are commonplace and have hindered, and in
    some cases thwarted entirely, attempts to deploy competitive video
    services. The record is replete with examples of unreasonable delays
    in the franchising process,[^249] which can indefinitely delay
    competitive entry and leave an applicant without recourse in
    violation of Section 621(a)(1)'s prohibition on unreasonable
    refusals to award a competitive franchise.[^250]

67. We find that unreasonable delays in the franchising process deprive
    consumers of competitive video services, hamper accelerated
    broadband deployment, and can result in unreasonable refusals to
    award competitive franchises. Thus, it is necessary to establish
    reasonable time limits for LFAs to render a decision on a
    competitive applicant's franchise application.[^251] We define below
    the boundaries of a reasonable time period in which an LFA must
    render a decision, and we establish a remedy for applicants that do
    not receive a decision within the applicable time frame. We
    establish a maximum time frame of 90 days for entities with existing
    authority to access public rights-of-way, and six months for
    entities that do not have authority to access public rights-of-way.
    The deadline will be calculated from the date that the applicant
    files an application or other writing that includes the information
    described below. Failure of an LFA to act within the allotted time
    constitutes an unreasonable refusal to award the franchise under
    Section 621(a)(1), and the LFA at that time is deemed to have
    granted the entity's application on an interim basis, pursuant to
    which the applicant may begin providing service. Thereafter, the LFA
    and applicant may continue to negotiate the terms of the franchise,
    consistent with the guidance and rulings in this *Order.*

#### Time Limit

68. The record shows that the franchising process in some localities can
    drag on for years. We are concerned that without a defined time
    limit, the extended delays will continue, depriving consumers of
    cable competition and applicants of franchises. We thus consider the
    appropriate length of time that should be afforded LFAs in reaching
    a final decision on a competitive franchise application. Commenters
    suggest a wide range of time frames that may be reasonable for an
    LFA's consideration of a competitive franchise application. TIA
    proposes that we adopt the time limit used in the Texas franchising
    legislation, which would allow a new entrant to obtain a franchise
    within 17 days of submitting an application.[^252] Other commenters
    propose time limits ranging from 30 days to six months.[^253] While
    NATOA in its comments opposes any time limit,[^254] in February 2006
    a NATOA representative told the Commission that the six-month time
    limit that California law imposes is reasonable.[^255] Some
    commenters have suggested that a franchise applicant that holds an
    existing authorization to access rights-of-way (*e.g.*, a LEC)
    should be subject to a shorter time frame than other applicants.
    These commenters reason that deployment of video services requires
    an upgrade to existing facilities in the rights-of-way rather than
    construction of new facilities, and such applicants generally have
    demonstrated their fitness as a provider of communications
    services.[^256]

69. In certain states, an SFA is responsible for all franchising
    decisions (*e.g.*, Hawaii, Connecticut, Vermont, Texas, Indiana,
    Kansas, South Carolina, and beginning January 1, 2007, California
    and North Carolina), and the majority of these states have
    established time frames within which those SFAs must make
    franchising decisions.[^257] We are mindful, however, that states in
    which an LFA is the franchising authority, the LFA may be a small
    municipal entity with extremely limited resources. [^258] Thus, it
    may not always be feasible for an LFA to carry out legitimate local
    policy objectives permitted by the Act and appropriate state or
    local law within an extremely short time frame. We therefore seek to
    establish a time limit that balances the reasonable needs of the LFA
    with the needs of the public for greater video service competition
    and broadband deployment. As set out in detail below, we believe
    that it is appropriate to provide rules to guide LFAs that retain
    ultimate decision-making power over franchise decisions.

70. As a preliminary matter, we find that a franchise applicant that
    holds an existing authorization to access rights-of-way should be
    subject to a shorter time frame for review than other applicants.
    First, one of the primary justifications for cable franchising is
    the locality's need to regulate and receive compensation for the use
    of public rights-of-way.[^259] In considering an application for a
    cable franchise by an entity that already has rights-of-way access,
    however, an LFA need not devote substantial attention to issues of
    rights-of-way management.[^260] Second, in obtaining a certificate
    for public convenience and necessity from a state, a
    facilities-based provider generally has demonstrated its legal,
    technical, and financial fitness to be a provider of
    telecommunications services. Thus, an LFA need not spend a
    significant amount of time considering the fitness of such
    applicants to access public rights-of-way. NATOA and its members
    concede that the authority to occupy the right-of-way has an effect
    on the review of the financial, technical, and legal merits of the
    application, and eases right-of-way management burdens.[^261] We
    thus find that a time limit is particularly appropriate for an
    applicant that already possesses authority to deploy
    telecommunications infrastructure in the public rights-of-way.[^262]
    We further agree with AT&T that entities with existing authority to
    access rights-of-way should be entitled to an expedited process, and
    that lengthy consideration of franchise applications made by such
    entities would be unreasonable.[^263] Specifically, we find that 90
    days provides LFAs ample time to review and negotiate a franchise
    agreement with applicants that have access to rights-of-way.[^264]

71. Based on our examination of the record, we believe that a time limit
    of 90 days for those applicants that have access to rights-of-way
    strikes the appropriate balance between the goals of facilitating
    competitive entry into the video marketplace and ensuring that
    franchising authorities have sufficient time to fulfill their
    responsibilities. In this vein, we note that 90 days is a
    considerably longer time frame than that suggested by some
    commenters, such as TIA.[^265] Additionally, we recognize that the
    Communications Act gives an LFA 120 days to make a final decision on
    a cable operator's request to modify a franchise.[^266] We believe
    that the record supports an even shorter time here because the costs
    associated with delay are much greater with respect to entry. When
    an incumbent cable franchisee requests a modification, consumers are
    not deprived of service while an LFA deliberates. Here, delay by an
    individual LFA deprives consumers of the benefits of cable
    competition.[^267] An LFA should be able to negotiate a franchise
    with a familiar applicant that is already authorized to occupy the
    right-of-way in less than 120 days. The list of legitimate issues to
    be negotiated is short,[^268] and we narrow those issues
    considerably in this *Order*. We therefore impose a deadline of 90
    days for an LFA to reach a final decision on a competitive franchise
    application submitted by those applicants authorized to occupy
    rights-of-way within the franchise area.

72. For other applicants, we believe that six months affords a
    reasonable amount of time to negotiate with an entity that is not
    already authorized to occupy the right-of-way, as an LFA will need
    to evaluate the entity's legal, financial, and technical
    capabilities in addition to generally considering the applicant's
    fitness to be a communications provider over the rights-of-way.
    Commenters have presented substantial evidence that six months
    provides LFAs sufficient time to review an applicant's proposal,
    negotiate acceptable terms, and award or deny a competitive
    franchise.[^269] We are persuaded by the record that a six-month
    period will allow sufficient time for review. Given that LFAs must
    act on modification applications within the 120-day limit set by the
    Communications Act, we believe affording an additional two months --
    *i.e.,* a six-month review period -- will provide LFAs ample time to
    conduct negotiations with an entity new to the franchise area.

73. Failure of an LFA to act within these time frames is unreasonable
    and constitutes a refusal to award a competitive franchise.
    Consistent with other time limits that the Communications Act and
    our rules impose,[^270] a franchising authority and a competitive
    applicant may extend these limits if both parties agree to an
    extension of time. We further note that an LFA may engage in
    franchise review activities that are not prohibited by the
    Communications Act or our rules, such as multiple levels of review
    or holding a public hearing,[^271] provided that a final decision is
    made within the time period established under this *Order*.

#### Commencement of the Time Period for Negotiations

74. The record demonstrates that there is no universally accepted event
    that "starts the clock" for purposes of calculating the length of
    franchise negotiations between LFAs and new entrants.[^272]
    Accordingly, we find it necessary to delineate the point at which
    such calculation should begin. Few commenters offer specific
    suggestions on what event should open the time period for franchise
    negotiations. Qwest contends that the period for negotiations should
    commence once an applicant files an application.[^273] On the other
    hand, Verizon argues that the clock must start before an applicant
    files a formal application because significant negotiations often
    take place before a formal filing.[^274] Specifically, the company
    advocates starting the clock when the applicant initiates
    negotiations with the LFA,[^275] which could be documented
    informally between the applicant and the LFA or with a formal
    Commission filing for evidentiary purposes.

75. We will calculate the deadline from the date that the applicant
    first files certain requisite information in writing with the LFA.
    This filing must meet any applicable state or local requirements,
    including any state or local laws that specify the contents of a
    franchise application and payment of a reasonable application fee in
    jurisdictions where such fee is required. [^276] This application,
    whether formal or informal, must at a minimum contain: (1) the
    applicant's name; (2) the names of the applicant's officers and
    directors; (3) the applicant's business address; (4) the name and
    contact information of the applicant's contact; (5) a description of
    the geographic area that the applicant proposes to serve; (6) the
    applicant's proposed PEG channel capacity and capital support; (7)
    the requested term of the agreement; (8) whether the applicant holds
    an existing authorization to access the community's public
    rights-of-way; and (9) the amount of the franchise fee the applicant
    agrees to pay (consistent with the Communications Act and the
    standards set forth herein). Any requirement the LFA imposes on the
    applicant to negotiate or engage in any regulatory or administrative
    processes before the applicant files the requisite information is
    *per se* unreasonable and preempted by this *Order*. Such a
    requirement would delay competitive entry by undermining the
    efficacy of the time limits adopted in this *Order* and would not
    serve any legitimate purpose. At their discretion, applicants may
    choose to engage in informal negotiations before filing an
    application. These informal negotiations do not apply to the
    deadline, however; we will calculate the deadline from the date that
    the applicant first files its application with an LFA. For purposes
    of any disputes that may arise, the applicant will have the burden
    of proving that it filed the requisite information or, where
    required, the application with the LFA, by producing either a
    receipt-stamped copy of the filing or a certified mail return
    receipt indicating receipt of the required documentation. We believe
    that adoption of a time limit with a specific starting point will
    ensure that the franchising process will not be unduly delayed by
    pre-filing requirements, will increase applicants' incentive to
    begin negotiating in earnest at an earlier stage of the process, and
    will encourage both LFAs and applicants to reach agreement within
    the specified time frame. We note that an LFA may toll the running
    of the 90-day or six-month time period if it has requested
    information from the franchise applicant and is waiting for such
    information. Once the information is received by the LFA, the time
    period would automatically begin to run again.

#### Remedy for Failure to Negotiate a Franchise Within the Time Limit

76. Finally, we consider what remedy or remedies may be appropriate in
    the event that an LFA and franchise applicant are unable to reach
    agreement within the 90-day or six-month time frame. Section 635 of
    the Communications Act provides a specific remedy for an applicant
    who believes that an LFA unreasonably denied its application
    containing the requisite information within the applicable time
    frame. Here, we establish a remedy in the event an LFA does not
    grant or deny a franchise application by the deadline. In selecting
    this remedy, we seek to provide a meaningful incentive for local
    franchising authorities to abide by the deadlines contained in this
    *Order* while at the same time maintaining LFAs' authority to manage
    rights-of-way, collect franchise fees, and address other legitimate
    franchise concerns.

77. In the event that an LFA fails to grant or deny an application by
    the deadline set by the Commission, Verizon urges the Commission to
    temporarily authorize the applicant to provide video service.[^277]
    In general, we agree with this proposed remedy. In order to
    encourage franchising authorities to reach a final decision on a
    competitive application within the applicable time frame set forth
    in this *Order*, a failure to abide by the Commission's deadline
    must bring with it meaningful consequences. Additionally, we do not
    believe that a sufficient remedy for an LFA's inaction on an
    application is the creation of a remedial process, such as
    arbitration, that will result in even further delay. We also decline
    to agree to NATOA's suggestion that an applicant should be awarded a
    franchise identical to that held by the incumbent cable operator.
    This suggestion is impractical for the same reasons that we find
    local level-playing-field requirements are preempted.[^278]
    Therefore, if an LFA has not made a final decision within the time
    limits we adopt in this *Order*, the LFA will be deemed to have
    granted the applicant an interim franchise based on the terms
    proposed in the application. This interim franchise will remain in
    effect only until the LFA takes final action on the application. We
    believe this approach is preferable to having the Commission itself
    provide interim franchises to applicants because a "deemed grant"
    will begin the process of developing a working relationship between
    the competitive applicant and the franchising authority, which will
    be helpful in the event that a negotiated franchise is ultimately
    approved.

78. The Commission has authority to deem a franchise application
    "granted" on an interim basis. As noted above, the Commission has
    broad authority to adopt rules to implement Title VI and,
    specifically, Section 621(a)(1) of the Communications Act.[^279]  As
    the Supreme Court has explained, the Commission serves "as the
    'single Government agency' with 'unified jurisdiction' and
    'regulatory power over all forms of electrical communication,
    whether by telephone, telegraph, cable, or radio.'"[^280]  Section
    201(b) authorizes the Commission to "prescribe such rules and
    regulations as may be necessary in the public interest to carry out
    the provisions of this Act."[^281]  "\[T\]he grant in § 201(b) means
    what it says:  The FCC has rulemaking authority to carry out the
    'provisions of this Act.'"[^282]  Section 2 of the Communications
    Act grants the Commission explicit jurisdiction over "cable
    services."[^283]  Moreover, Congress specifically charged the
    Commission with the administration of the Cable Act, including
    Section 621, and federal courts have consistently upheld the
    Commission's authority in this area.[^284]  

79. The Commission has previously granted franchise applicants temporary
    authority to operate in local areas. In the early 1970s, the
    Commission required every cable operator to obtain a federal
    certificate of compliance from the Commission before it could
    "commence operations."[^285] In effect, the Commission acted as a
    co-franchising authority -- requiring both an FCC certificate and a
    local franchise (granted pursuant to detailed Commission guidance
    and oversight) prior to the provision of services.[^286] As the
    Commission noted, "\[a\]lthough we have determined that local
    authorities ought to have the widest scope in franchising cable
    operators, *the final responsibility is ours*."[^287] And the
    Commission granted interim franchises for cable services in areas
    where there was no other franchising authority.[^288]

80. We note that the deemed grant approach is consistent with other
    federal regulations designed to address inaction on the part of a
    State decision maker.[^289] In addition, this approach does not
    raise any special legal concerns about impinging on state or local
    authority.  The Act plainly gives federal courts authority to review
    decisions made pursuant to Section 621(a)(1).[^290]  As the Supreme
    Court observed in *Iowa Utilities Board*, "This is, at bottom, a
    debate not about whether the States will be allowed to do their own
    thing, but about whether it will be the FCC or the federal courts
    that draw the lines to which they must hew.  To be sure, the FCC's
    lines can be even more restrictive than those drawn by the courts --
    but it is hard to spark a passionate 'States' rights' debate over
    that detail."[^291] 

81. We anticipate that a deemed grant will be the exception rather than
    the rule because LFAs will generally comply with the Commission's
    rules and either accept or reject applications within the applicable
    time frame. However, in the rare instance that a local franchising
    authority unreasonably delays acting on an application and a deemed
    grant therefore occurs, we encourage the parties to continue to
    negotiate and attempt to reach a franchise agreement following
    expiration of the formal time limit. Each party will have a strong
    incentive to negotiate sincerely: LFAs will want to ensure that
    their constituents continue to receive the benefits of competition
    and cable providers will want to protect the investments they have
    made in deploying their systems. If the LFA ultimately acts to deny
    the franchise after the deadline, the applicant may appeal such
    denial pursuant to Section 635(a) of the Communications Act. If, on
    the other hand, the LFA ultimately grants the franchise, the
    applicant's operations will continue pursuant to the negotiated
    franchise, rather than the interim franchise.

### Build-Out 

82. As discussed above, build-out requirements in many cases may
    constitute unreasonable barriers to entry into the MVPD market for
    facilities-based competitors.[^292] Accordingly, we limit LFAs'
    ability to impose certain build-out requirements pursuant to Section
    621(a)(1).

#### Authority 

83. Proponents of build-out requirements do not offer any persuasive
    legal argument that the Commission lacks authority to address this
    significant problem and conclude that certain build-out requirements
    for competitive entrants are unreasonable. Nothing in the
    Communications Act requires competitive franchise applicants to
    agree to build-out their networks in any particular fashion.
    Nevertheless, incumbent cable operators and LFAs contend that it is
    both lawful and appropriate, in all circumstances, to impose the
    same build-out requirements on competitive applicants that apply to
    incumbents.[^293] We reject these arguments and find that Section
    621(a)(1) prohibits LFAs from refusing to award a new franchise on
    the ground that the applicant will not agree to unreasonable
    build-out requirements.

84. The only provision in the Communications Act that even alludes to
    build-out is Section 621(a)(4)(A), which provides that "a
    franchising authority . . . shall allow the applicant's cable system
    a reasonable period of time to become capable of providing cable
    service to all households in the franchise area."[^294] Far from a
    grant of authority, however, Section 621(a)(4)(A) is actually a
    limitation on LFAs' authority. In circumstances when it is
    reasonable for LFAs to require cable operators to build out their
    networks in accordance with a specific plan, LFAs must give
    franchisees a reasonable period of time to comply with those
    requirements. However, Section 621(a)(4)(A) does not address the
    central question here: whether it may be unreasonable for LFAs to
    impose certain build-out requirements on competitive cable
    applicants. To answer that question, Section 621(a)(4)(A) must be
    read in conjunction with Section 621(a)(1)'s prohibition on
    unreasonable refusals to award competitive franchises, and in light
    of the Act's twin goals of promoting competition and broadband
    deployment.[^295]

85. Our interpretation of Section 621(a)(4)(A) is consistent with
    relevant jurisprudence and the legislative history. The D.C. Circuit
    has squarely rejected the notion that Section 621(a)(4)(A)
    authorizes LFAs to impose universal build-out requirements on all
    cable providers. The court has held that Section 621(a)(4)(A) does
    not require that cable operators extend service "throughout the
    franchise area," but instead is a limit on franchising authorities
    that seek to impose such obligations.[^296] That decision comports
    with the legislative history, which indicates that Congress
    explicitly rejected an approach that would have imposed affirmative
    build-out obligations on all cable providers. The House version of
    the bill provided that an LFA's "refusal to award a franchise shall
    not be unreasonable if, for example, such refusal is on the ground .
    . . of inadequate assurance that the cable operator will, within a
    reasonable period of time, provide universal service throughout the
    entire franchise area under the jurisdiction of the franchising
    authority."[^297] By declining to adopt this language, Congress made
    clear that it did not intend to impose uniform build-out
    requirements on all franchise applicants.[^298]

86. LFAs and incumbent cable operators also rely on Section 621(a)(3) to
    support compulsory build-out. That Section provides: "In awarding a
    franchise or franchises, a franchising authority shall assure that
    access to cable service is not denied to any group of potential
    residential cable subscribers because of the income of the residents
    of the local area in which such group resides."[^299] We therefore
    address below some commenters' concerns that limitations on
    build-out requirements will contravene or render ineffective the
    statutory prohibition against discrimination on the basis of income
    ("redlining.")[^300] But for present purposes, it has already been
    established that Section 621(a)(3) does not mandate universal
    build-out. As the Commission previously has stated, "the intent of
    \[Section 621(a)(3)\] was to prevent the exclusion of cable service
    based on income" and "this section does not mandate that the
    franchising authority require the complete wiring of the franchise
    area in those circumstances where such an exclusion is not based on
    the income status of the residents of the unwired area."[^301] The
    U.S. Court of Appeals for the District of Columbia Circuit (the
    "D.C. Circuit") has upheld this interpretation in the face of an
    argument that universal build-out was required by Section 621(a)(3):

> The statute on its face prohibits discrimination on the basis of
> income; it manifestly does not require universal \[build-out\]. . . .
> \[The provision requires\] "wiring of all areas of the franchise" *to
> prevent redlining.* However, if no redlining is in evidence, it is
> likewise clear that wiring within the franchise area can be
> limited.[^302]

#### Discussion

87. Given the current state of the MVPD marketplace, we find that an
    LFA's refusal to award a competitive franchise because the applicant
    will not agree to specified build-out requirements can be
    unreasonable. Market conditions today are far different from when
    incumbent cable operators obtained their franchises. Incumbent cable
    providers were frequently awarded community-wide monopolies.[^303]
    In that context, a requirement that the provider build out
    facilities to the entire community was eminently sensible. The
    essential bargain was that the cable operator would provide service
    to an entire community in exchange for its status as the only
    franchisee from whom customers in the community could purchase
    service. Thus, a financial burden was placed upon the monopoly
    provider in exchange for the undeniable benefit of being able to
    operate without competition.[^304]

88. By contrast, new cable entrants must compete with entrenched cable
    operators and other video service providers. A competing cable
    provider that seeks to offer service in a particular community
    cannot reasonably expect to capture more than a fraction of the
    total market.[^305] Build-out requirements thus impose significant
    financial risks on competitive applicants, who must incur
    substantial construction costs to deploy facilities within the
    franchise area in exchange for the opportunity to capture a
    relatively small percentage of the market.[^306] In many instances,
    build-out requirements make entry so expensive that the prospective
    competitive provider withdraws its application and simply declines
    to serve any portion of the community.[^307] Given the
    entry-deterring effect of build-out conditions, our construction of
    Section 621(a)(1) best serves the Act's purposes of promoting
    competition and broadband deployment.[^308]

89. Accordingly, we find that it is unlawful for LFAs to refuse to grant
    a competitive franchise on the basis of unreasonable build-out
    mandates. For example, absent other factors, it would seem
    unreasonable to require a new competitive entrant to serve everyone
    in a franchise area before it has begun providing service to anyone.
    It also would seem unreasonable to require facilities-based
    entrants, such as incumbent LECs, to build out beyond the footprint
    of their existing facilities before they have even begun providing
    cable service.[^309] It also would seem unreasonable, absent other
    factors, to require more of a new entrant than an incumbent cable
    operator by, for instance, requiring the new entrant to build out
    its facilities in a shorter period of time than that originally
    afforded to the incumbent cable operator; or requiring the new
    entrant to build out and provide service to areas of lower density
    than those that the incumbent cable operator is required to build
    out to and serve.[^310] We note, however, it would seem reasonable
    for an LFA in establishing build-out requirements to consider the
    new entrant's market penetration. It would also seem reasonable for
    an LFA to consider benchmarks requiring the new entrant to increase
    its build-out after a reasonable period of time had passed after
    initiating service and taking into account its market success.

90. Some other practices that seem unreasonable include: requiring the
    new entrant to build out and provide service to buildings or
    developments to which the new entrant cannot obtain access on
    reasonable terms; requiring the new entrant to build out to certain
    areas or customers that the entrant cannot reach using standard
    technical solutions; and requiring the new entrant to build out and
    provide service to areas where it cannot obtain reasonable access to
    and use of the public rights of way. Subjecting a competitive
    applicant to more stringent build-out requirements than the LFA
    placed on the incumbent cable operator is unreasonable in light of
    the greater economic challenges facing competitive applicants
    explained above. Moreover, build-out requirements may significantly
    deter entry and thus forestall competition by placing substantial
    demands on competitive entrants.

91. In sum, we find, based on the record as a whole, that build-out
    requirements imposed by LFAs can operate as unreasonable barriers to
    competitive entry. The Commission has broad authority under Section
    621(a)(1) to determine whether particular LFA conditions on entry
    are unreasonable. Exercising that authority, we find that Section
    621(a)(1) prohibits LFAs from refusing to award a competitive
    franchise because the applicant will not agree to unreasonable
    build-out requirements.

#### Redlining

92. The Communications Act forbids access to cable service from being
    denied to any group of potential residential cable subscribers
    because of neighborhood income. The statute is thus clear that no
    provider of cable services may deploy services with the intent to
    redline and "that access to cable service \[may not be\] denied to
    any group of potential residential cable subscribers because of the
    income of the residents of the local area in which such group
    resides."[^311] Nothing in our action today is intended to limit
    LFAs' authority to appropriately enforce Section 621(a)(3) and to
    ensure that their constituents are protected against discrimination.
    This includes an LFA's authority to deny a franchise that would run
    afoul of Section 621(a)(3).

93. MMTC suggests that the Commission develop anti-redlining "best
    practices," specifically defining who is responsible for overseeing
    redlining issues, what constitutes redlining, and developing
    substantial relief for those affected by redlining.[^312] MMTC
    suggests that an LFA could afford a new entrant means of obtaining
    pre-clearance of its build-out plans, establishing a rebuttable
    presumption that the new entrant will not redline (for example,
    proposing to replicate a successful anti-redlining program employed
    in another franchise area).[^313] Alternatively, an LFA could allow
    a new entrant to choose among regulatory options, any of which would
    be sufficient to allow for build-out to commence while the granular
    details of anti-redlining reporting are finalized.[^314] We note
    these suggestions but do not require them.

### Franchise Fees

94. In response to questions in the *Local Franchising NPRM* concerning
    existing practices that may impede cable entry,[^315] various
    parties discussed unreasonable demands relating to franchise fees.
    Commenters have also indicated that unreasonable demands concerning
    fees or other consideration by some LFAs have created an
    unreasonable barrier to entry.[^316] Such matters include not only
    the universe of franchise-related costs imposed on providers that
    should or should not be included within the 5 percent statutory
    franchise fee cap established in Section 622(b),[^317] but also the
    calculation of franchise fees (*i.e.*, the revenue base from which
    the 5 percent is calculated). Accordingly, we will exercise our
    authority under Section 621(a)(1) to address the unreasonable
    demands made by some LFAs. In particular, any refusal to award an
    additional competitive franchise because of an applicant's refusal
    to accede to demands that are deemed impermissible below shall be
    considered to be unreasonable. The Commission's jurisdiction over
    franchise fee policy is well established.[^318] The general law with
    respect to franchise fees should be relatively well known, but we
    believe it may be helpful to restate the basic propositions here in
    effort to avoid misunderstandings that can lead to delay in the
    franchising process as well as unreasonable refusals to award
    competitive franchises. To the extent that our determinations are
    relevant to incumbent cable operators as well, we would expect that
    discrepancies would be addressed at the next franchise renewal
    negotiation period, as noted in the FNPRM *infra,* which tentatively
    concludes that the findings in this *Order* should apply to cable
    operators that have existing franchise agreements as they negotiate
    renewal of those agreements with LFAs.[^319]

95. We address below four significant issues relating to franchise fee
    payments. First, we consider the franchise fee revenue base. Second,
    we examine the limitations on charges incidental to the awarding or
    enforcing of a franchise. Third, we discuss the proper
    classification of in-kind payments unrelated to the provision of
    cable service. Finally, we consider whether contributions in support
    of PEG services and equipment should be considered within the
    franchise fee calculation.

96. The fundamental franchise fee limitation is set forth in Section
    622(b), which states that "franchise fees paid by a cable operator
    with respect to any cable system shall not exceed 5 percent of such
    cable operator's gross revenues derived in such period from the
    operation of the cable system to provide cable services."[^320]
    Section 622(g)(1) broadly defines the term "franchise fee" to
    include "any tax, fee, or assessment of any kind imposed by a
    franchising authority or other governmental entity on a cable
    operator or cable subscriber, or both, solely because of their
    status as such."[^321] Section 622(g)(2)(c), however, excludes from
    the term "franchise fee" any "capital costs which are required by
    the franchise to be incurred by the cable operator for public,
    educational, or governmental access facilities."[^322] And Section
    622(g)(2)(D) excludes from the term (and therefore from the 5
    percent cap) "requirements or charges incidental to the awarding or
    enforcing of the franchise, including payments for bonds, security
    funds, letters of credit, insurance, indemnification, penalties, or
    liquidated damages."[^323] It has been established that certain
    types of "in-kind" obligations, in addition to monetary payments,
    may be subject to the cap. The legislative history of the 1984 Cable
    Act, which adopted the franchise fee limit, specifically provides
    that "lump sum grants not related to PEG access for municipal
    programs such as libraries, recreation departments, detention
    centers or other payments not related to PEG access would be subject
    to the 5 percent limitation."[^324]

97. **Definition of the 5 percent fee cap revenue base.** As a
    preliminary matter, we address the request of several parties to
    clarify which revenue-generating services should be included in the
    gross fee figure from which the 5 percent calculation is
    drawn.[^325] The record indicates that in the franchise application
    process, disputes that arise as to the propriety of particular fees
    can be a significant cause of delay in the process and that some
    franchising authorities are making unreasonable demands in this
    area.[^326] This issue is of particular concern where a prospective
    new entrant for the provision of cable services is a
    facilities-based incumbent or competitive provider of
    telecommunications and/or broadband services. A number of
    controversies regarding which revenues are properly subject to
    application of the franchise fee were resolved before the Supreme
    Court's decision in *NCTA v. Brand X*,[^327] which settled issues
    concerning the proper regulatory classification of cable modem-based
    Internet access service. Nevertheless, in some quarters, there has
    been considerable uncertainty over the application of franchise fees
    to Internet access service revenues and other non-cable revenues.
    Thus, we believe it may assist the franchise process and prevent
    unreasonable refusals to award competitive franchises to reiterate
    certain conclusions that have been reached with respect to the
    franchise fee base.

98. We clarify that a cable operator is not required to pay franchise
    fees on revenues from non-cable services.[^328] Section 622(b)
    provides that the "franchise fees paid by a cable operator with
    respect to any cable system shall not exceed 5 percent of such cable
    operator's gross revenues derived in such period from the operation
    of the cable system to provide *cable services*."[^329] The term
    "cable service" is explicitly defined in Section 602(6) to mean (i)
    "the one-way transmission to subscribers of video programming or
    other programming service," and (ii) "subscriber interaction, if
    any, which is required for the selection or use of such video
    programming or other programming service."[^330] The Commission
    determined in the *Cable Modem Declaratory Ruling* that a franchise
    authority may not assess franchise fees on non-cable services, such
    as cable modem service, stating that "revenue from cable modem
    service would not be included in the calculation of gross revenues
    from which the franchise fee ceiling is determined."[^331] Although
    this decision related specifically to Internet access service
    revenues, the same would be true for other "non-cable" service
    revenues.[^332] Thus, Internet access services, including broadband
    data services, and any other non-cable services are not subject to
    "cable services" fees.

99. **Charges incidental to the awarding or enforcing of a franchise.**
    Section 622(g)(2)(D) excludes from the term "franchise fee"
    "requirements or charges incidental to the awarding or enforcing of
    the franchise, including payments for bonds, security funds, letters
    of credit, insurance, indemnification, penalties, or liquidated
    damages."[^333] Such "incidental" requirements or charges may be
    assessed by a franchising authority without counting toward the 5
    percent cap. A number of parties assert, and seek Commission
    clarification, that certain types of payments being requested in the
    franchise process are not incidental fees under Section 622(g)(2)(D)
    but instead must either be prohibited or counted toward the
    cap.[^334] Furthermore, a number of parties report that disputes
    over such issues as well as unreasonable demands being made by some
    franchising authorities in this regard may be leading to delays in
    the franchising process as well as unreasonable refusals to award
    competitive franchises. We therefore determine that non-incidental
    franchise-related costs required by LFAs must count toward the 5
    percent franchise fee cap and provide guidance as to what
    constitutes such non-incidental franchise-related costs. Under the
    Act, these costs combined with other franchise fees cannot exceed 5
    percent of gross revenues for cable service.

100. BellSouth urges us to prohibit franchising authorities from
     assessing fees that the authorities claim are "incidental" if those
     fees are not specifically allowed under Section 622 of the Cable
     Act.[^335] BellSouth asserts that LFAs often seek fees beyond the 5
     percent franchise fee allowed by the statutory provision. The
     company therefore asks us to clarify that any costs that an LFA
     requires a cable provider to pay beyond the exceptions listed in
     Section 622 -- including generally applicable taxes, PEG capital
     costs, and "incidental charges" -- count toward the 5 percent
     cap.[^336] OPASTCO asserts that higher fees discourage investment
     and often will need to be passed on to consumers.[^337] Verizon
     also requests that we clarify that fees that exceed the cap are
     unreasonable.[^338]

101. AT&T argues that we should find unreasonable any fees or
     contribution requirements that are not credited toward the
     franchise fee obligation.[^339] AT&T also asserts that any
     financial obligation to the franchising authority that a provider
     undertakes, such as application or acceptance fees that exceed the
     reasonable cost of processing an application, free or discounted
     service to an LFA, and LFA attorney or consultant fees, should
     apply toward the franchise fee obligation.[^340]

102. Conversely, NATOA asserts that costs such as those enumerated above
     by AT&T fall within Section 622(g)(2)(D)'s definition of charges
     "incidental" to granting the franchise.[^341] NATOA contends that
     the word "incidental" does not refer to the *amount* of the charge,
     but rather the fact that a charge is "naturally appertaining" to
     the grant of a franchise. Thus, NATOA argues, these costs are not
     part of the franchise fee and therefore do not count toward the
     cap.[^342]

103. There is nothing in the text of the statute or the legislative
     history to suggest that Congress intended the list of exceptions in
     Section 622(g)(2)(D) to include the myriad additional expenses that
     some LFAs argue are "incidental."[^343] Given that the lack of
     clarity on this issue may hinder competitive deployment and lead to
     unreasonable refusals to award competitive franchises under Section
     621, we seek to provide guidance as to what is "incidental" for a
     new competitive application.[^344] We find that the term
     "incidental" in Section 622(g)(2)(D) should be limited to the list
     of incidentals in the statutory provision, as well as other minor
     expenses, as described below. We find instructive a series of
     federal court decisions relating to this subsection of Section 622.
     These courts have indicated that (i) there are significant limits
     on what payments qualify as "incidental" and may be requested
     outside of the 5 percent fee limitation; and (ii) processing fees,
     consultant fees, and attorney fees are not necessarily to be
     regarded as "incidental" to the awarding of a franchise.[^345] In
     *Robin Cable Systems v. City of Sierra Vista,* for example, the
     United States District Court for the District of Arizona held that
     "processing costs" of up to \$30,000 required as part of the award
     of a franchise were not excluded under subsection (g)(2)(D) because
     they were not "incidental," but rather "substantial" and therefore
     "inconsistent with the Cable Act."[^346] Additionally, in *Time
     Warner Entertainment v. Briggs,* the United States District Court
     for the District of Massachusetts decided that attorney fees and
     consultant fees fall within the definition of franchise fees, as
     defined in Section 622. Because the municipality in that case was
     already collecting 5 percent of the operator's gross revenues, the
     Court determined that a franchise provision requiring the cable
     operator to pay such fees above and beyond its 5 percent gross
     revenues was preempted and therefore unenforceable.[^347] Finally,
     in *Birmingham Cable Comm. v. City of Birmingham,* the United
     States District for the Northern District of Alabama stated that
     "it would be an aberrant construction of the phrase 'incidental to
     the awarding ... of the franchise,' in this context, to conclude
     that the phrase embraces consultant fees incurred solely by the
     City."[^348]

104. We find these decisions instructive and emphasize that LFAs must
     count such non-incidental franchise-related costs toward the cap.
     We agree with these judicial decisions that non-incidental costs
     include the items discussed above, such as attorney fees and
     consultant fees, but may include other items, as well. Examples of
     other items include application or processing fees that exceed the
     reasonable cost of processing the application, acceptance fees,
     free or discounted services provided to an LFA, any requirement to
     lease or purchase equipment from an LFA at prices higher than
     market value, and in-kind payments as discussed below. Accordingly,
     if LFAs continue to request the provision of such in-kind services
     and the reimbursement of franchise-related costs, the value of such
     costs and services should count towards the provider's franchise
     fee payments.[^349] For future guidance, LFAs and video service
     providers may look to judicial cases to determine other costs that
     should be considered "incidental."

105. **In-kind payments unrelated to provision of cable service.** The
     record indicates that in the context of some franchise
     negotiations, LFAs have demanded from new entrants payments or
     in-kind contributions that are unrelated to the provision of cable
     services. While many parties argue that franchising authority
     requirements unrelated to the provision of cable services are
     unreasonable,[^350] few parties provided specific details
     surrounding the in-kind payment demands of LFAs.[^351] As discussed
     further below, most parties generally discussed examples of
     concessions, but were unwilling to provide details of specific
     instances, including the identity of the LFA requesting the
     unrelated services.[^352] Even without specific details concerning
     the LFAs involved, however, the record adequately supports a
     finding that LFA requests unrelated to the provision of cable
     services have a negative impact on the entry of new cable
     competitors in terms of timing and costs and may lead to
     unreasonable refusals to award competitive franchises. Accordingly,
     we clarify that any requests made by LFAs that are unrelated to the
     provision of cable services by a new competitive entrant are
     subject to the statutory 5 percent franchise fee cap.

106. The Broadband Service Providers Association states that an example
     of a municipal capital requirement can include traffic light
     control systems.[^353] FTTH Council states that non-video
     requirements raise the cost of entry for new entrants and should be
     prohibited.[^354] As an example, FTTH Council asserts that in San
     Antonio, Grande Communications was required to prepay \$1 million
     in franchise fees (which took the company five years to draw down)
     and to fund a \$50,000 scholarship, with an additional \$7,200 to
     be contributed each year. They assert that new entrants agree to
     these requirements because they have no alternative.[^355] The
     National Telecommunications Cooperative Association ("NTCA") also
     asserts that its members have complained that LFAs require them to
     accept franchise terms unrelated to the provision of video
     service.[^356] NTCA states that any incumbent cable operator that
     already abides by such a requirement has made the concession in
     exchange for an exclusive franchise, but that new entrants, in
     contrast, must fight for every subscriber and will not survive if
     forced into expensive non-video related projects.[^357]

107. AT&T refers to a press article stating that Verizon has faced
     myriad requests unrelated to the provision of cable service. These
     include: a \$13 million "wish list" in Tampa, Florida; a request
     for video hookup for a Christmas celebration and money for
     wildflower seeds in New York; and a request for fiber on traffic
     lights to monitor traffic in Virginia.[^358] Verizon provides
     little additional information about these examples, but argues that
     any requests must be considered franchise-related costs subject to
     the 5 percent franchise fee cap, as discussed above.[^359]

108. We clarify that any requests made by LFAs unrelated to the
     provision of cable services by a new competitive entrant are
     subject to the statutory 5 percent franchise fee cap, as discussed
     above. Municipal projects unrelated to the provision of cable
     service do not fall within any of the exempted categories in
     Section 622(g)(2) of the Act and thus should be considered a
     "franchise fee" under Section 622(g)(1). The legislative history of
     the 1984 Cable Act supports this finding, providing that "lump sum
     grants not related to PEG access for municipal programs such as
     libraries, recreation departments, detention centers or other
     payments not related to PEG access would be subject to the 5
     percent limitation."[^360] Accordingly, any such requests for
     municipal projects will count towards the 5 percent cap.

109. **Contributions in support of PEG services and equipment.** As
     further discussed in the Section below, we also consider the
     question of the proper treatment of LFA-mandated contributions in
     support of PEG services and equipment. The record reflects that
     disputes regarding such contributions are impeding video deployment
     and may be leading to unreasonable refusals to award competitive
     franchises.[^361] Section 622(g)(2)(C) excludes from the term
     "franchise fee" any "capital costs which are required by the
     franchise to be incurred by the cable operator for public,
     educational, or governmental access facilities."[^362] Accordingly,
     payments of this type, if collected only for the cost of building
     PEG facilities, are not subject to the 5 percent limit. Capital
     costs refer to those costs incurred in or associated with the
     construction of PEG access facilities.[^363] These costs are
     distinct from payments in support of the use of PEG access
     facilities. PEG support payments may include, but are not limited
     to, salaries and training. Payments made in support of PEG access
     facilities are considered franchise fees and are subject to the 5
     percent cap.[^364] While Section 622(g)(2)(B) excluded from the
     term franchise fee any such payments made in support of PEG
     facilities, it only applies to any franchise in effect on the date
     of enactment.[^365] Thus, for any franchise granted after 1984,
     this exemption from franchise fees no longer applies.

### PEG/Institutional Networks 

110. In the *Local Franchising NPRM*, we tentatively concluded that it
     is not unreasonable for an LFA, in awarding a franchise, to
     "require adequate assurance that the cable operator will provide
     adequate public, educational and governmental access channel
     capacity, facilities, or financial support"[^366] because this
     promotes important statutory and public policy goals.[^367]
     However, pursuant to Section 621(a)(1), we conclude that LFAs may
     not make unreasonable demands of competitive applicants for PEG and
     I-Net[^368] and that conditioning the award of a competitive
     franchise on applicants agreeing to such unreasonable demands
     constitutes an unreasonable refusal to award a franchise. This
     finding is limited to competitive applicants under Section
     621(a)(1). Yet, as this issue is also germane to existing
     franchisees, we ask for further comment on the applicability of
     this and other findings in the *Further Notice of Proposed
     Rulemaking* attached hereto. The FNPRM tentatively concludes that
     the findings in this *Order* should apply to cable operators that
     have existing franchise agreements as they negotiate renewal of
     those agreements with LFAs.

111. As an initial matter, we conclude that we have the authority to
     address issues relating to PEG and I-Net support.[^369] Some
     commenters argue that Congress explicitly granted the
     responsibility for PEG and I-Net regulation to state and local
     governments.[^370] For example, NATOA contends that we cannot limit
     the in-kind or monetary support that LFAs may request for PEG
     access, because Sections 624(a) and (b) allow an LFA to establish
     requirements "related to the establishment and operation of a cable
     system," including facilities and equipment.[^371] In response,
     Verizon claims that PEG requirements should extend only to channel
     capacity, and that LFAs can obtain other contributions only to the
     extent that they are agreed to voluntarily by the cable
     operator.[^372] Verizon also asserts that the record confirms that
     LFAs often demand PEG support that exceeds statutory limits.[^373]

112. Section 611(a) of the Communications Act operates as a restriction
     on the authority of the franchising authority to establish channel
     capacity requirements for PEG. This Section provides that "\[a\]
     franchising authority may establish requirements in a franchise
     with respect to the designation or use of channel capacity for
     public, educational, or governmental use only to the extent
     provided in this section."[^374] Section 611(b) allows a
     franchising authority to require that "channel capacity be
     designated for public, educational or governmental use," but the
     extent of such channel capacity is not defined.[^375] Section
     621(a)(4)(b) provides that a franchising authority may require
     "adequate assurance" that the cable operator will provide
     "adequate" PEG access channel capacity, facilities, or financial
     support."[^376] Because the statute does not define the term
     "adequate," we have the authority to interpret what Congress meant
     by "adequate PEG access channel capacity, facilities, and financial
     support," and to prohibit excessive LFA demands in this area, if
     necessary. We note that the legislative history does not define
     "adequate," nor does it provide any guidance as to what Congress
     meant by the term.[^377] We therefore conclude that "adequate"
     should be given its plain meaning: the term does not mean
     significant but rather "satisfactory or sufficient."[^378] As
     discussed above, we have also accepted the tentative conclusion of
     the *Local Franchising* *NPRM* that Section 621(a)(1) prohibits not
     only the ultimate refusal to award a competitive franchise, but
     also the establishment of procedures and other requirements that
     have the effect of unreasonably interfering with the ability of a
     would-be competitor to obtain a competitive franchise. Given this
     conclusion and our authority to interpret the term "adequate" in
     Section 621(a)(4), we will provide guidance as to what constitutes
     "adequate" PEG support under that provision as subject to the
     constraints of the "reasonableness" requirement in Section
     621(a)(1).

113. AT&T asserts that we should shorten the period for franchise
     negotiations by adopting standard terms for PEG channels.[^379] We
     reject this suggestion and clarify that LFAs are free to establish
     their own requirements for PEG to the extent discussed herein,
     provided that the non-capital costs of such requirements are offset
     from the cable operator's franchise fee payments. This is
     consistent with the Act and the historic management of PEG
     requirements by LFAs.[^380]

114. Consumers for Cable Choice and Verizon argue that it is
     unreasonable for an LFA to request a number of PEG channels from a
     new entrant that is greater than the number of channels that the
     community is using at the time the new entrant submits its
     franchise application.[^381] We find that it is unreasonable for an
     LFA to impose on a new entrant more burdensome PEG carriage
     obligations than it has imposed upon the incumbent cable operator.

115. Some commenters also asked whether certain requirements regarding
     construction or financial support of PEG facilities and I-Nets are
     unreasonable under Section 621(a)(1). Several parties indicate
     that, as a general matter, PEG contributions should be limited to
     what is "reasonable" to support "adequate" facilities.[^382] We
     agree that PEG support required by an LFA in exchange for granting
     a new entrant a franchise should be both adequate and reasonable,
     as discussed above. In addressing each of these concerns below, we
     seek to strike the necessary balance between the two statutory
     terms.

116. Ad Hoc Telecom Manufacturers argue that it is unreasonable to
     require the payment of ongoing costs to operate PEG channels,
     because a requirement is unrelated to right-of-way management, the
     fundamental policy rationale for an LFA's franchising
     authority.[^383] In response, Cablevision asserts that exempting
     incumbent LECs from PEG support requirements would undermine the
     key localism features of franchise requirements, and could
     undermine the ability of incumbent cable operators to provide
     robust community access.[^384] We disagree with Ad Hoc Telecom
     Manufacturers that it is *per se* unreasonable for LFAs to require
     the payment of ongoing costs to support PEG. Such a ruling would be
     contrary to Section 621(a)(4)(B) and public policy. We note,
     however, that any ongoing LFA-required PEG support costs are
     subject to the franchise fee cap, as discussed above.

117. FTTH Council, Verizon, and AT&T ask us to affirm that PEG or I-Net
     requirements imposed on a new entrant that are wholly duplicative
     of existing requirements imposed on the incumbent cable operator
     are *per se* unreasonable.[^385] AT&T and Verizon argue that
     Section 621(a)(4)(B) requires adequate facilities, not duplicative
     facilities.[^386] FTTH Council contends that if LFAs can require
     duplicative facilities, they can burden new entrants with
     inefficient obligations without increasing the benefit to the
     public.[^387] FTTH Council thus suggests that LFAs be precluded
     from imposing completely duplicative requirements, and that we
     require new entrants to contribute a *pro rata* share of the
     incumbent cable operator's PEG obligations. For example, if an
     incumbent cable operator funds a PEG studio, the new entrant should
     be required to contribute a *pro rata* share of the ongoing
     financial obligation for such studio, based on the new entrant's
     number of subscribers.[^388]

118. In addition to advocating a *pro rata* contribution rule, FTTH
     Council requests that we require incumbents to permit new entrants
     to connect with the incumbent's pre-existing PEG channel
     feeds.[^389] FTTH Council proposes that the incumbent cable
     operator and new entrant decide how to accomplish this connection,
     with LFA involvement if necessary, and that the costs of the
     connection should be deducted from the new entrant's PEG-related
     financial obligations to the LFA.[^390] Others agree that PEG
     interconnection is necessary to maximize the value of local access
     channels when more than one video provider operates in a
     community.[^391] New entrants seek a *pro rata* contribution rule
     based on practical constraints as well. AT&T asserts that, although
     incumbent cable operators can provide space for PEG in local
     headend buildings, LEC new entrants' facilities are not designed to
     accommodate those needs. Thus, if duplicative facilities are
     demanded, new entrants would have to build or rent facilities
     solely for this purpose, which AT&T contends would be unreasonable
     under the statute.[^392] NATOA counters that AT&T's complaint
     regarding space mischaracterizes PEG studio requirements that exist
     in some franchises.[^393] Specifically, NATOA claims that LFAs
     generally are not concerned with a PEG studio's location, and that
     PEG studios are usually located near cable headends simply because
     those locations reduce the cable operators' costs.[^394]

119. We agree with AT&T, FTTH Council, Verizon, and others that
     completely duplicative PEG and I-Net requirements imposed by LFAs
     would be unreasonable.[^395] Such duplication generally would be
     inefficient and would provide minimal additional benefits to the
     public, unless it was required to address an LFA's particular
     concern regarding redundancy needed for, for example, public
     safety. We clarify that an I-Net requirement is not duplicative if
     it would provide additional capability or functionality, beyond
     that provided by existing I-Net facilities. We note, however, that
     we would expect an LFA to consider whether a competitive franchisee
     can provide such additional functionality by providing financial
     support or actual equipment to supplement existing I-Net
     facilities, rather than by constructing new I-Net facilities.
     Finally, we find that it is unreasonable for an LFA to refuse to
     award a competitive franchise unless the applicant agrees to pay
     the face value of an I-Net that will not be constructed. Payment
     for I-Nets that ultimately are not constructed are unreasonable as
     they do not serve their intended purpose.

120. While we prefer that LFAs and new entrants negotiate reasonable PEG
     obligations, we find that under Section 621 it is unreasonable for
     an LFA to require a new entrant to provide PEG support that is in
     excess of the incumbent cable operator's obligations. We also agree
     that a *pro rata* cost sharing approach is one reasonable means of
     meeting the statutory requirement of the provision of adequate PEG
     facilities. To the extent that a new entrant agrees to share *pro
     rata* costs with the incumbent cable operator, such an arrangement
     is *per se* reasonable.[^396]

### Regulation of Mixed-Use Networks 

121. We clarify that LFAs' jurisdiction applies only to the provision of
     cable services over cable systems. To the extent a cable operator
     provides non-cable services and/or operates facilities that do not
     qualify as a cable system, it is unreasonable for an LFA to refuse
     to award a franchise based on issues related to such services or
     facilities. For example, we find it unreasonable for an LFA to
     refuse to grant a cable franchise to an applicant for resisting an
     LFA's demands for regulatory control over non-cable services or
     facilities.[^397] Similarly, an LFA has no authority to insist on
     an entity obtaining a separate cable franchise in order to upgrade
     non-cable facilities. For example, assuming an entity (*e.g.*, a
     LEC) already possesses authority to access the public
     rights-of-way, an LFA may not require the LEC to obtain a franchise
     solely for the purpose of upgrading its network.[^398] So long as
     there is a non-cable purpose associated with the network upgrade,
     the LEC is not required to obtain a franchise until and unless it
     proposes to offer cable services. For example, if a LEC deploys
     fiber optic cable that can be used for cable and non-cable
     services, this deployment alone does not trigger the obligation to
     obtain a cable franchise. The same is true for boxes housing
     infrastructure to be used for cable and non-cable services.

122. We further clarify that an LFA may not use its video franchising
     authority to attempt to regulate a LEC's entire network beyond the
     provision of cable services. We agree with Verizon that the
     "entirety of a telecommunications/data network is not automatically
     converted to a 'cable system' once subscribers start receiving
     video programming."[^399] For instance, we find that the provision
     of video services pursuant to a cable franchise does not provide a
     basis for customer service regulation by local law or franchise
     agreement of a cable operator's entire network, or any services
     beyond cable services.[^400] Local regulations that attempt to
     regulate any non-cable services offered by video providers are
     preempted because such regulation is beyond the scope of local
     franchising authority and is inconsistent with the definition of
     "cable system" in Section 602(7)(C).[^401] This provision
     explicitly states that a common carrier facility subject to Title
     II is considered a cable system "to the extent such facility is
     used in the transmission of video programming . . . ."[^402] As
     discussed above, revenues from non-cable services are not included
     in the base for calculation of franchise fees.

123. In response to requests that we address LFA authority to regulate
     "interactive on-demand services,"[^403] we note that Section
     602(7)(C) excludes from the definition of "cable system" a facility
     of a common carrier that is used solely to provide interactive
     on-demand services.[^404] "Interactive on-demand services" are
     defined as "service\[s\] providing video programming to subscribers
     over switched networks on an on-demand, point-to-point basis, but
     does not include services providing video programming prescheduled
     by the programming provider."[^405] We do not address at this time
     what particular services may fall within the definition.

124. We note that this discussion does not address the regulatory
     classification of any particular video services being offered. We
     do not address in this *Order* whether video services provided over
     Internet Protocol are or are not "cable services."[^406]

## Preemption of Local Laws, Regulations and Requirements

125. Having established rules and guidance to implement Section
     621(a)(1), we turn now to the question of local laws that may be
     inconsistent with our decision today. Because the rules we adopt
     represent a reasonable interpretation of relevant provisions in
     Title VI as well as a reasonable accommodation of the various
     policy interests that Congress entrusted to the Commission, they
     have preemptive effect pursuant to Section 636(c). Alternatively,
     local laws are impliedly preempted to the extent that they conflict
     with this *Order* or stand as an obstacle to the accomplishment and
     execution of the full purposes and objectives of Congress.[^407]

126. At that outset of this discussion, it is important to reiterate
     that we do not preempt state law or state level franchising
     decisions in this *Order*.[^408] Instead, we preempt only local
     laws, regulations, practices, and requirements to the extent
     that: (1) provisions in those laws, regulations, practices, and
     agreements conflict with the rules or guidance adopted in this
     *Order*; and (2) such provisions are not specifically authorized by
     state law. As noted above,[^409] we conclude that the record before
     us does not provide sufficient information to make determinations
     with respect to franchising decisions where a state is involved,
     issuing franchises at the state level or enacting laws governing
     specific aspects of the franchising process. We expressly limit our
     findings and regulations in this *Order* to actions or inactions at
     the local level where a state has not circumscribed the LFA's
     authority. For example, in light of differences between the scope
     of franchises issued at the state level and those issued at the
     local level, it may be necessary to use different criteria for
     determining what may be unreasonable with respect to the key
     franchising issues addressed herein. We also recognize that many
     states only recently have enacted comprehensive franchise reform
     laws designed to facilitate competitive entry. In light of these
     facts, we lack a sufficient record to evaluate whether and how such
     state laws may lead to unreasonable refusals to award additional
     competitive franchises.

127. Section 636(c) of the Communications Act provides that "any
     provision of law of any State, political subdivision, or agency
     thereof, or franchising authority, or any provision of any
     franchise granted by such authority, which is inconsistent with
     this Act shall be deemed to be preempted and superseded."[^410] In
     the *Local Franchising NPRM*, the Commission tentatively concluded
     that, pursuant to the authority granted under Sections 621 and
     636(c), and under the Supremacy Clause,[^411] the Commission may
     deem to be preempted any state or local law that stands as an
     obstacle to the accomplishment and execution of the full purposes
     and objectives of Title VI.[^412] For example, we may deem
     preempted any local law that causes an unreasonable refusal to
     award a competitive franchise in violation of Section
     621(a)(1).[^413] Accordingly, the Commission sought comment on
     whether it would be appropriate to preempt state and local
     legislation to the extent we find that it serves as an unreasonable
     barrier to the grant of competitive franchises.

128. The doctrine of federal preemption arises from the Supremacy
     Clause, which provides that federal law is the "supreme Law of the
     Land."[^414] Preemption analysis requires a statute-specific
     inquiry. There are various avenues by which state law may be
     superseded by federal law. We focus on the two which are most
     relevant here. First, preemption can occur where Congress expressly
     preempts state law.[^415] When a federal statute contains an
     express preemption provision, the preemption analysis consists of
     identifying the scope of the subject matter expressly preempted and
     determining if a state's law falls within its scope.[^416] Second,
     preemption can be implied and can occur where federal law conflicts
     with state law. [^417] Courts have found implied "conflict
     preemption" where compliance with both state and federal law is
     impossible or where state law "stands as an obstacle to the
     accomplishment and execution of the full purposes and objectives of
     Congress." [^418]

129. Applying these principles to this proceeding, we find that local
     franchising laws, regulations, and agreements are preempted to the
     extent they conflict with the rules we adopt in this *Order*.
     Section 636(c) expressly preempts state and local laws that are
     inconsistent with the Communications Act.[^419] This provision
     precludes states and localities from acting in a manner
     inconsistent with the Commission's interpretations of Title VI so
     long as those interpretations are valid.[^420] It is the
     Commission's job, in the first instance, to determine the scope of
     the subject matter expressly preempted by Section 636.[^421] As
     noted elsewhere, we adopt the rules in this *Order* pursuant to our
     interpretation of Section 621(a)(1) and other relevant Title VI
     provisions in light of the twin congressional goals of promoting
     competition in the multichannel video marketplace and promoting
     broadband deployment.[^422] These rules represent a reasonable
     interpretation of relevant provisions in Title VI as well as a
     reasonable accommodation of the various policy interests that
     Congress entrusted to the Commission. They therefore have
     preemptive effect pursuant to Section 636(c).

130. Alternatively, we find that such local laws, regulations, and
     agreements are impliedly preempted to the extent that they conflict
     with this *Order* or stand as an obstacle to the accomplishment and
     execution of the full purposes and objectives of Congress.[^423]
     Among the stated purposes of Title VI is to (1) "establish a
     national policy concerning cable communications," (2) "establish
     franchise procedures and standards which encourage the growth and
     development of cable systems and which assure that cable systems
     are responsive to the needs and interests of the local community,"
     and (3) "promote competition in cable communications and minimize
     unnecessary regulation that would impose an undue economic burden
     on cable systems."[^424] The legislative history to both the 1984
     and 1992 Cable Acts identifies a national policy of encouraging
     competition in the multichannel video marketplace and recognizes
     the national implications that the local franchising process can
     have on that policy.[^425] The national policy of promoting a
     competitive multichannel video marketplace has been repeatedly
     reemphasized by Congress, the Commission, and the courts.[^426] The
     record here shows that the current operation of the franchising
     process at the local level conflicts with this national
     multichannel video policy by imposing substantial delays on
     competitive entry and requiring unduly burdensome conditions that
     deter entry.[^427] And to the extent that local requirements result
     in LFAs unreasonably refusing to award competitive franchises, such
     mandates frustrate the policy goals underlying Title VI. The rules
     we adopt today, *e.g.*, limits on the time period for LFA action on
     competitive franchise applications,[^428] limits on LFA's ability
     to impose build-out requirements,[^429] and limits on LFA
     collection of franchise fees,[^430] are designed to ensure
     efficiency and fairness in the local franchising process and to
     provide certainty to prospective marketplace participants. This, in
     turn, will allow us to effectuate Congress' twin goals of promoting
     cable competition and minimizing unnecessary and unduly burdensome
     regulation on cable systems. Thus, not only are Section 636(c)'s
     requirements for preemption satisfied, but preemption in these
     circumstances is proper pursuant to the Commission's judicially
     recognized ability, when acting pursuant to its delegated
     authority, to preempt local regulations that conflict with or stand
     as an obstacle to the accomplishment of federal objectives.[^431]

131. We reject the claim by incumbent cable operators and franchising
     authorities that the Commission lacks authority to preempt local
     requirements because Congress has not explicitly granted the
     Commission the authority to preempt.[^432] These commenters suggest
     that because the Commission seeks to preempt a power traditionally
     exercised by a state or local government (*i.e.*, local
     franchising), under the Fifth Circuit's decision in *City of
     Dallas*,[^433] the Commission can only preempt where it is given
     express statutory authority to do so.[^434] However, this argument
     ignores the plain language of Section 636(c), which states that
     "any provision of law of any State, political subdivision, or
     agency therefore, or franchising authority ... which is
     inconsistent with this chapter shall be deemed to be preempted and
     superseded."[^435] Moreover, Section 621 expressly limits the
     authority of franchising authorities by prohibiting exclusive
     franchises and unreasonable refusals to award additional
     competitive franchises.[^436] Congress could not have stated its
     intent to limit local franchising authority more clearly. These
     provisions therefore satisfy any express preemption
     requirement.[^437]

132. Furthermore, as long as the Commission acts within the scope of its
     delegated authority in adopting rules that implement Title VI,
     including the prohibition of Section 621(a)(1), its rules have
     preemptive effect.[^438] Courts assess whether an agency acted
     within the scope of its authority "without any presumption one way
     or the other"; there is no presumption against preemption in this
     context.[^439] As noted above, Congress charged the Commission with
     the task of administering the Communications Act, including Title
     VI, and the Commission has clear authority to adopt rules
     implementing provisions such as Section 621.[^440] Consequently,
     our rules preempt any contrary local regulations.[^441]

133. We also find no merit in incumbent cable operators' and local
     franchising authorities' argument that the scope of the
     Commission's preemption authority under Section 636(c) is limited
     by the terms of Section 636(a) of the Act.[^442] Section 636(a)
     provides that nothing in Title VI "shall be construed to affect any
     authority of any State, political subdivision, or agency thereof,
     or franchising authority, regarding matters of public health,
     safety, and welfare, to the extent consistent with the express
     provisions of this title."[^443] The very reason for preemption in
     these circumstances is that many local franchising laws and
     practices are at odds with the express provisions of Title VI, as
     interpreted in this *Order*. Consequently, Section 636(a) presents
     no obstacle to preemption here. We therefore need not decide
     whether the state and local laws at issue relate to "matters of
     public health, safety, and welfare" within the meaning of Section
     636(a).

134. We also reject the franchising authorities' argument that any
     attempt to preempt lawful local government control of public
     rights-of-way by interfering with local franchising requirements,
     procedures and processes could constitute an unconstitutional
     taking under the Fifth Amendment of the United States
     Constitution.[^444] The "takings" clause of the Fifth Amendment
     provides: "\[N\]or shall private property be taken for public use,
     without just compensation."[^445] We conclude that our actions here
     do not run afoul of the Fifth Amendment for several reasons. To
     begin with, our actions do not result in a Fifth Amendment taking.
     Courts have held that municipalities generally do not have a
     compensable "ownership" interest in public rights-of-way,[^446] but
     rather hold the public streets and sidewalks in trust for the
     public.[^447] As one court explained, "municipalities generally
     possess no rights to profit from their streets unless specifically
     authorized by the state."[^448] Also, we note that
     telecommunications carriers that seek to offer video service
     already have an independent right under state law to occupy
     rights-of-way.[^449] States have granted franchises to
     telecommunications carriers, pursuant to which the carriers
     lawfully occupy public rights-of-way for the purpose of providing
     telecommunications service.[^450] Because all municipal power is
     derived from the state,[^451] courts have held that "a state can
     take public rights-of-way without compensating the municipality
     within which they are located."[^452] Given the municipality is not
     entitled to compensation when its interest in the streets are taken
     pursuant to state law, it is difficult to see how the transmission
     of additional video signals along those same lines results in any
     physical occupation of public rights-of-way beyond that already
     permitted by the states.[^453]

135. Moreover, even if there was a taking, Congress provided for "just
     compensation" to the local franchising authorities.[^454] Section
     622(h)(2) of the Act provides that a local franchising authority
     may recover a franchise fee of up to 5 percent of a cable
     operator's annual gross revenue.[^455] Congress enacted the cable
     franchise fee as the consideration given in exchange for the right
     to use the public ways.[^456] The implementing regulations we adopt
     today do not eviscerate the ability of local authorities to impose
     a franchise fee. Rather, our actions here simply ensure that the
     local franchising authority does not impose an excessive fee or
     other unreasonable costs in violation of the express statutory
     provisions and policy goals encompassed in Title VI.[^457]

136. Finally, LFAs maintain that the Commission's preemption of local
     governmental powers offends the Tenth Amendment of the U.S.
     Constitution.[^458] The Tenth Amendment provides that "\[t\]he
     powers not delegated to the United States by the Constitution, nor
     prohibited by it to the States, are reserved to the States
     respectively, or to the people."[^459] In support of their
     position, commenters argue that the Commission is improperly
     attempting to override local government's duty to "maximize the
     value of local property for the greater good" by imposing a federal
     regulatory scheme onto the states and/or local governments.[^460]
     Contrary to the local franchising authorities' claim, however, they
     have failed to demonstrate any violation of the Tenth
     Amendment.[^461] "If a power is delegated to Congress in the
     Constitution, the Tenth Amendment expressly disclaims any
     reservation of that power to the States."[^462] Thus, when Congress
     acts within the scope of its authority under the Commerce Clause,
     no Tenth Amendment issue arises.[^463] Regulation of cable services
     is well within Congress' authority under the Commerce Clause.[^464]
     Thus, because our authority in this area derives from a proper
     exercise of congressional power, the Tenth Amendment poses no
     obstacle to our preemption of state and local franchise law or
     practices.[^465] Likewise, there is no merit to LFA commenters'
     suggestion that Commission regulation of the franchising process
     would constitute an improper "commandeering" of state governmental
     power.[^466] The Supreme Court has recognized that "where Congress
     has the authority to regulate private activity under the Commerce
     Clause," Congress has the "power to offer States the choice of
     regulating that activity according to federal standards or having
     state law preempted by federal regulation."[^467] And here, we are
     simply requiring local franchising authorities to exercise their
     regulatory authority according to federal standards, or else local
     requirements will be preempted. For all of these reasons, our
     actions today do not offend the Tenth Amendment.

137. We do not purport to identify every local requirement that this
     *Order* preempts. Rather, in accordance with Section 636(c), we
     merely find that local laws, regulations and, agreements are
     preempted to the extent they conflict with this *Order* and the
     rules adopted herein. For example, local laws would be preempted if
     they: (1) authorize a local franchising authority to take longer
     than 90 days to act on a competitive franchise application
     concerning entities with existing authority to access public
     rights-of-way, and six months concerning entities that do not have
     authority to access public rights-of-way;[^468] (2) allow an LFA to
     impose unreasonable build-out requirements on competitive franchise
     applicants;[^469] or (3) authorize or require a local franchising
     authority to collect franchise fees in excess of the fees
     authorized by law.[^470]

138. One specific example of the type of local laws that this *Order*
     preempts are so-called "level-playing-field" requirements that have
     been adopted by a number of local authorities.[^471] We find that
     these mandates unreasonably impede competitive entry into the
     multichannel video marketplace by requiring LFAs to grant
     franchises to competitors on substantially the same terms imposed
     on the incumbent cable operators.[^472] As an initial matter, just
     because an incumbent cable operator may agree to franchise terms
     that are inconsistent with provisions in Title VI, LFAs may not
     require new entrants to agree to such unlawful terms pursuant to
     level-playing-field mandates because any such requirement would
     conflict with Title VI. Moreover, the record demonstrates that
     aside from this specific scenario, level-playing-field mandates
     imposed at the local level deter competition in a more fundamental
     manner. The record indicates that in today's market, new entrants
     face "steep economic challenges" in an "industry characterized by
     large fixed and sunk costs," without the resulting benefits
     incumbent cable operators enjoyed for years as monopolists in the
     video services marketplace.[^473] According to commenters, "a
     competitive video provider who enters the market today is in a
     fundamentally different situation" from that of the incumbent cable
     operator: "\[w\]hen incumbents installed their systems, they had a
     captive market," whereas new entrants "have to 'win' every customer
     from the incumbent" and thus do not have "anywhere near the number
     of subscribers over which to spread the costs."[^474] Commenters
     explain that "unlike the incumbents who were able to pay for any of
     the concessions that they grant an LFA out of the supra-competitive
     revenue from their on-going operations," "new entrants have no
     assured market position."[^475] Based on the record before us, we
     thus find that an LFAs refusal to award an additional competitive
     franchise unless the competitive applicant meets substantially all
     the terms and conditions imposed on the incumbent cable operator
     may be unreasonable, and inconsistent with the "unreasonable
     refusal" prohibition of Section 621(a)(1). Accordingly, to the
     extent a locally-mandated level-playing-field requirement is
     inconsistent with the rules, guidance, and findings adopted in this
     *Order*, such requirement is deemed preempted.[^476]

# FURTHER NOTICE OF PROPOSED RULEMAKING

139. As discussed above, this proceeding is limited to competitive
     applicants under Section 621(a)(1).[^477] Yet, some of the
     decisions in this *Order* also appear germane to existing
     franchisees. We asked in the *Local Franchising NPRM* whether
     current procedures and requirements were appropriate for any cable
     operator, including existing operators.[^478] NCTA argues that if
     the Commission establishes franchising relief for new entrants, we
     should do the same for incumbent cable operators because imposing
     similar franchising requirements on new entrants and incumbent
     cable operators promotes competition.[^479] Somewhat analogously,
     the BSPA argues that any new franchise regulatory relief should
     extend to all current competitive operators and new entrants
     equally; otherwise, the inequities would effectively penalize
     existing competitive franchisees simply because they were the first
     to risk competition with the incumbent cable operator.[^480] The
     record does not indicate any opposition by new entrants to the idea
     that any relief afforded them also be afforded to incumbent cable
     operators.[^481] Some incumbent cable operators discussed the
     potential impact of Commission action under Section 621 on
     incumbent cable operators. For example, Charter argues that
     granting competitive cable providers entry free from local
     franchise requirements would affect Charter's ability to satisfy
     its existing obligations; funds that Charter might use to respond
     to competition by investing in new facilities and services would
     instead be tied up in franchise obligations not imposed on
     Charter's competitors, which would undermine the company's
     investment and render its franchise obligations commercially
     impracticable.[^482] AT&T argues that competition will not harm
     incumbent cable operators: cable has handled the competition that
     DBS presents, and analysts predict that the new wave of competition
     will not put them out of business.[^483]

140. We tentatively conclude that the findings in this *Order* should
     apply to cable operators that have existing franchise agreements as
     they negotiate renewal of those agreements with LFAs. We note that
     Section 611(a) states "A franchising authority may establish
     requirements in a franchise with respect to the designation or use
     of channel capacity for public, educational, or governmental use"
     and Section 622(a) provides "any cable operator may be required
     under the terms of any franchise to pay a franchise fee." These
     statutory provisions do not distinguish between incumbents and new
     entrants or franchises issued to incumbents versus franchises
     issued to new entrants. We seek comment on our tentative
     conclusion. We also seek comment on our authority to implement this
     finding. We also seek comment on what effect, if any, the findings
     in this *Order* have on most favored nation clauses that may be
     included in existing franchises. The Commission will conclude this
     rulemaking and release an order no later than six months after
     release of this *Order*.

141. In the *Local Franchising NPRM,* we also sought comment on whether
     customer service requirements should vary greatly from jurisdiction
     to jurisdiction.[^484] In response, AT&T urges us to adopt rules to
     prevent LFAs from imposing various data collection and related
     requirements in exchange for a franchise.[^485] AT&T claims that
     LFAs have imposed obligations that franchisees collect, track, and
     report customer service performance data for individual franchise
     areas.[^486] AT&T states that it operates its call centers and
     systems on a region-wide basis, and that it is not currently
     possible or economically feasible for AT&T to comply with the
     various local customer service requirements on a franchise by
     franchise basis.[^487] AT&T also asks us to affirm that LFAs may
     not, absent the franchise applicant's consent, impose any local
     service quality standards that go beyond the requirements of duly
     enacted laws and ordinances.[^488] Verizon indicates that some
     localities have conditioned the grant of a franchise upon the
     submission of Verizon's data services to local customer service
     regulation.[^489]

142. NATOA opposes AT&T's request for relief from local customer service
     standards, and argues that the Act and the Commission's rules
     explicitly provide for local customer service regulation.[^490]
     Specifically, NATOA asserts that Section 632(d)(2) of the Cable Act
     allows for the establishment and enforcement of local customer
     service laws that go beyond the federal standards.[^491] Other
     parties assert that customer service regulation is necessary to
     ensure that consumers have regulatory relief.[^492]

143. Section 632(d)(2) states that:

> \[n\]othing in this Section shall be construed to preclude a
> franchising authority and a cable operator from agreeing to customer
> service requirements that exceed the standards established by the
> Commission . . . . Nothing in this Title shall be construed to prevent
> the establishment and enforcement of any municipal law or regulation,
> or any State law, concerning customer service that imposes customer
> service requirements that exceed the standards set by the Commission
> under this section, or that addresses matters not addressed by the
> standards set by the Commission under this section.[^493]

Given this explicit statutory language, we tentatively conclude that we
cannot preempt state or local customer service laws that exceed the
Commission's standards, nor can we prevent LFAs and cable operators from
agreeing to more stringent standards. We seek comment on this tentative
conclusion.

# PROCEDURAL MATTERS

144. *Ex Parte Rules*. This is a permit-but-disclose notice and comment
     rulemaking proceeding. Ex Parte presentations are permitted, except
     during the Sunshine Agenda period, provided that they are disclosed
     as provided in the Commission's rules. *See generally* 47 C.F.R. §§
     1.1202, 1.1203, and 1.1206(a).

145. *Comment Information*. Pursuant to sections 1.415 and 1.419 of the
     Commission's rules, 47 CFR §§ 1.415, 1.419, interested parties may
     file comments on or before 30 days after this *Further Notice of
     Proposed Rulemaking* is published in the Federal Register, and
     reply comments on or before 45 days of publication. Comments may be
     filed using: (1) the Commission's Electronic Comment Filing System
     (ECFS), (2) the Federal Government's eRulemaking Portal, or (3) by
     filing paper copies. *See Electronic Filing of Documents in
     Rulemaking Proceedings*, 63 FR 24121 (1998).

-   Electronic Filers: Comments may be filed electronically using the
    Internet by accessing the ECFS: <http://www.fcc.gov/cgb/ecfs/> or
    the Federal eRulemaking Portal:
    [http://www.regulations.gov](http://www.regulations.gov/). Filers
    should follow the instructions provided on the website for
    submitting comments.

    -   For ECFS filers, if multiple docket or rulemaking numbers appear
        in the caption of this proceeding, filers must transmit one
        electronic copy of the comments for each docket or rulemaking
        number referenced in the caption. In completing the transmittal
        screen, filers should include their full name, U.S. Postal
        Service mailing address, and the applicable docket or rulemaking
        number. Parties may also submit an electronic comment by
        Internet e-mail. To get filing instructions, filers should send
        an e-mail to <ecfs@fcc.gov>, and include the following words in
        the body of the message, "get form." A sample form and
        directions will be sent in response.

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-   Paper Filers: Parties who choose to file by paper must file an
    original and four copies of each filing. If more than one docket or
    rulemaking number appears in the caption of this proceeding, filers
    must submit two additional copies for each additional docket or
    rulemaking number.

> Filings can be sent by hand or messenger delivery, by commercial
> overnight courier, or by first-class or overnight U.S. Postal Service
> mail (although we continue to experience delays in receiving U.S.
> Postal Service mail). All filings must be addressed to the
> Commission's Secretary, Office of the Secretary, Federal
> Communications Commission.

-   The Commission's contractor will receive hand-delivered or
    messenger-delivered paper filings for the Commission's Secretary at
    236 Massachusetts Avenue, NE., Suite 110, Washington, DC 20002. The
    filing hours at this location are 8:00 a.m. to 7:00 p.m. All hand
    deliveries must be held together with rubber bands or fasteners. Any
    envelopes must be disposed of [before]{.underline} entering the
    building.

-   Commercial overnight mail (other than U.S. Postal Service Express
    Mail and Priority Mail) must be sent to 9300 East Hampton Drive,
    Capitol Heights, MD 20743.

-   U.S. Postal Service first-class, Express, and Priority mail should
    be addressed to 445 12^th^ Street, SW, Washington DC 20554.

People with Disabilities: To request materials in accessible formats for
people with disabilities (braille, large print, electronic files, audio
format), send an e-mail to <fcc504@fcc.gov> or call the Consumer &
Governmental Affairs Bureau at 202-418-0530 (voice), 202-418-0432 (tty).

146. *Initial Paperwork Reduction Act Analysis*. This *Further Notice of
     Proposed Rulemaking* does not contain proposed information
     collection(s) subject to the Paperwork Reduction Act of 1995 (PRA),
     Public Law 104-13. In addition, therefore, it does not contain any
     new or modified "information collection burden for small business
     concerns with fewer than 25 employees," pursuant to the Small
     Business Paperwork Relief Act of 2002, Public Law 107-198, *see* 44
     U.S.C. 3506(c)(4).

147. *Initial Regulatory Flexibility Analysis*. As required by the
     Regulatory Flexibility Act,[^494] the Commission has prepared an
     Initial Regulatory Flexibility Analysis (IRFA) of the possible
     significant economic impact on a substantial *number* of small
     entities of the proposals addressed in this *Further Notice of
     Proposed Rulemaking*. The IRFA is set forth in Appendix C. Written
     public comments are requested on the IRFA. These comments must be
     filed in accordance with the same filing deadlines for comments on
     the *Second Further Notice*, and they should have a separate and
     distinct heading designating them as responses to the IRFA.

148. *Paperwork Reduction Act Analysis*. This document contains new
     information collection requirements subject to the Paperwork
     Reduction Act of 1995 (PRA), Public Law 104-13. It will be
     submitted to the Office of Management and Budget (OMB) for review
     under Section 3507(d) of the PRA. OMB, the general public, and
     other Federal agencies are invited to comment on the new
     information collection requirements contained in this proceeding.
     In addition, we note that pursuant to the Small Business Paperwork
     Relief Act of 2002, Public Law 107-198, see 44 U.S.C. 3506(c)(4),
     we will seek specific comment on how the Commission might "further
     reduce the information collection burden for small business
     concerns with fewer than 25 employees."

149. In this present document, we have assessed the effects of the
     application filing requirements used to calculate the time frame in
     which a local franchising authority shall make a decision, and find
     that those requirements will benefit companies with fewer than 25
     employees by providing such companies with specific application
     requirements of a reasonable length. We anticipate this specificity
     will streamline this process for companies with fewer than 25
     employees, and that these requirements will not burden those
     companies.

150. *Final Regulatory Flexibility Analysis* As required by the
     Regulatory Flexibility Act,[^495] the Commission has prepared a
     Final Regulatory Flexibility Analysis ("FRFA") relating to this
     *Report and Order and Further Notice of Proposed Rulemaking*. The
     FRFA is set forth in Appendix D.

151. *Congressional Review Act*. The Commission will send a copy of this
     *Report and Order and Further Notice of Proposed Rulemaking* in a
     report to be sent to Congress and the Government Accountability
     Office pursuant to the Congressional Review Act, see 5 U.S.C. §
     801(a)(1)(A).

152. *Additional Information*. For additional information on this
     proceeding, please contact Holly Saurer, Media Bureau at (202)
     418-2120, or Brendan Murray, Policy Division, Media Bureau at (202)
     418-2120.

# ordering clauseS

153. IT IS ORDERED that, pursuant to the authority contained in Sections
     1, 2, 4(i), 303, 303r, 403 and 405 of the Communications Act of
     1934, 47 U.S.C §§ 151, 152, 154(i), 303, 303(r), 403 , this *Report
     and Order and Further Notice of Proposed Rulemaking* IS ADOPTED.

154. IT IS FURTHER ORDERED that pursuant to the authority contained in
     Sections Sections 1, 2, 4(i), 303, 303a, 303b, and 307 of the
     Communications Act of 1934, 47 U.S.C §§ 151, 152, 154(i), 303,
     303a, 303b, and 307, the Commission's rules ARE HEREBY AMENDED as
     set forth in Appendix B. It is our intention in adopting these rule
     changes that, if any provision of the rules is held invalid by any
     court of competent jurisdiction, the remaining provisions shall
     remain in effect to the fullest extent permitted by law.

155. IT IS FURTHER ORDERED that the rules contained herein SHALL BE
     EFFECTIVE 30 days after publication of the *Report and Order and
     Further Notice of Proposed Rulemaking* in the Federal Register,
     except for the rules that contain information collection
     requirements subject to the Paperwork Reduction Act, which shall
     become effective immediately upon announcement in the Federal
     Register of OMB approval.

156. IT IS FURTHER ORDERED that the Commission's Consumer and
     Governmental Affairs Bureau, Reference Information Center, SHALL
     SEND a copy of this *Report and Order and Further Notice of
     Proposed Rulemaking*, including the Final Regulatory Flexibility
     Analysis, to the Chief Counsel for Advocacy of the Small Business
     Administration.

157. IT IS FURTHER ORDERED that the Commission SHALL SEND a copy of this
     *Report and Order and Further Notice of Proposed Rulemaking* in a
     report to be sent to Congress and the General Accounting Office
     pursuant to the Congressional Review Act, see 5 U.S.C. §
     801(a)(1)(A).

FEDERAL COMMUNICATIONS COMMISSION

Marlene H. Dortch

Secretary

**APPENDIX A**

**List of Commenters and Reply Commenters**

1.  Abilene, TX

2.  Access Channel 5, NY

3.  Access Fort Wayne, IN

4.  Access Sacramento, CA

5.  Ad Hoc Telecom Manufacturer Coalition

6.  Ada Township, et al.

7.  Advance/Newhouse Communications

8.  AEI-Brookings Joint Center for Regulatory Studies

9.  Alamance County, NC

10. Albuquerque, NM

11. Alcatel

12. Alhambra, CA

13. Alliance for Public Technology

14. Alpina, MI

15. American Association of Business Persons with Disabilities

16. American Association of People with Disabilities

17. American Cable Association

18. American Consumer Institute

19. American Corn Growers Association

20. American Homeowners Grassroots Alliance

21. Anaheim, CA

22. Angels Camp, CA

23. Anne Arundel County, Carroll County, Charles County, Howard County
    and Montgomery County

24. Apex, NC

25. Apple Valley, MN

26. Appleton, WI

27. Archdale, NC

28. Arlington Independent Media, VA

29. Asheboro, NC

30. Ashland, KY

31. Ashokie, NC

32. Association of Independent Programming Networks

33. AT&T Inc.

34. Atascadero, CA

35. Bailey, NC

36. Banning, CA

37. Barrington, IL

38. Bellefonte, PA

39. Bellflower, CA

40. BellSouth

41. Benson, NC

42. Berks Community TV, PA

43. Beverly Hills, CA

44. Biddeford, ME

45. Billerica Access TV, MA

46. Billerica, MA

47. Birmingham Area Cable Board, MI

48. Blue Lake, CA

49. Bonita Springs, FL

50. Boston Community Access and Programming Foundation (BCAPF)

51. Boston, MA

52. Bowie, MD

53. Branford Commun. TV, CT

54. Brea, CA

55. Brisbane, CA

56. Broadband Service Providers Association

57. Brunswick, ME

58. Bucks County Consortium of Communities, PA

59. Burlington, NC

60. Burnsville/Eagan Telecommunications Commission; The City of
    Minneapolis, MN; The North Metro Telecommunications Commission; The
    North Suburban Communications Commission; and The South Washington
    County Telecommunications Commission ("City of Minneapolis")

61. Cable Access St. Paul, MN

62. Cable Advisory Council of South Central CT

63. Cablevision Systems Corporation

64. Cadillac, MI

65. Calabash, NC

66. California Alliance for Consumer Protection

67. California Farmers Union

68. California Small Business Association

69. California Small Business Roundtable

70. Cambridge Public Access Corp, MA

71. Cambridge, MA

72. Campbell County Cable Board, KY

73. Cape Coral, FL

74. Capital Community TV, OR

75. Carlsbad, CA

76. Carrboro, NC

77. Cary, NC

78. Castalia, NC

79. Caswell County, NC

80. Cavalier Telephone, LLC/Cavalier IP TV, LLC

81. Cedar Rapids, Iowa

82. Center for Digital Democracy

83. Central St. Croix Valley Joint Cable Comm, MN

84. Certain Florida Municipalities

85. Champaign, IL

86. Champaign-Urbana Cable TV and Telecomm Commission, IL

87. Chapel Hill, NC

88. Charlotte, NC

89. Charter Communications, Inc.

90. Chicago Access Corp, IL

91. Chicago, IL

92. Cincinnati Bell, Inc.

93. Cincinnati, OH

94. Citizen\'s Community TV, CO

95. City and County of San Francisco, CA

96. City of Los Angeles

97. City of Philadelphia

98. City of St. Louis, Missouri

99. City of Ventura, California

100. Clackamas County, OR

101. Clark County, NV

102. Clay County, FL

103. Clayton, NC

104. Clinton Township, MI

105. Clovis, CA

106. College Twp, PA

107. Comcast Corporation

108. Communications Support Group, Inc.

109. Community Access TV, IL

110. Community Programming Board of Forest Park et al, OH

111. Concord, CA

112. Concord, NC

113. Consumer Coalition of California

114. Consumer Electronics Association

115. Consumers First

116. Consumers for Cable Choice

117. Coral Springs, Florida

118. Coralville, IA

119. Coronado, CA

120. Cox Communications, Inc.

121. Cypress, CA

122. Daly City, CA

123. Dare County, NC

124. Darlington, SC

125. Davis, CA

126. Del Mar, CA

127. Delray Beach, FL

128. Democratic Processes Center

129. Discovery Institute's Technology & Democracy Project

130. Dortches, NC

131. Dublin, CA

132. Durham, NC

133. Eden, NC

134. El Cerrito, CA

135. Elk Grove, IL

136. Elon, NC\*

137. Enumclaw, WA

138. Escondido, CA

139. Esopus, NY

140. Evanston, IL

141. Fairfax Cable Access, VA

142. Fairfax County, Virginia

143. Fairfax, CA

144. Faith, NC

145. Fall River Community TV, MA

146. Fargo, ND

147. Farmington, MN

148. Ferguson, PA

149. Ferndale, CA

150. Fiber-to-the-Home Council

151. Floral Park, NY

152. Florence, Kentucky

153. Florence, KY

154. Fort Worth, TX

155. Fortuna, CA

156. Foster City, CA

157. Foxboro Cable Access, MA

158. Franklin Lakes, NJ

159. Franklin, KY

160. Free Enterprise Fund

161. Free Press (Reply)

162. Free Press, Consumers Union, Consumer Federation of America

163. Freedomworks

164. Ft. Lauderdale, FL

165. Gainesville, FL

166. Garland, TX

167. Garner, NC

168. Geneva, IL

169. Georgia Municipal Association (GMA)

170. Gibsonville, NC

171. Gilroy, CA

172. Glenview, IL

173. Graham, NC

174. Grand Rapids, MI

175. Granite Quarry, NC

176. Great Neck/North Shore Cable Comm\'n, NY

177. Greater Metro Telecommunications Consortium, et al. (GMTC)

178. Green Spring, K

179. Greensboro, NC\*

180. Greenville, NC

181. Guilford County, NC

182. Harnett County, NC

183. Harris Township, PA

184. Haw River, NC

185. Hawaii Consumers

186. Hawaii Telcom Communications, Inc.

187. Henderson County, NC

188. Henderson, NV

189. Hialeah, FL

190. Hibbing Public Access TV, MN

191. High Point, NC

192. High Tech Broadband Coalition

193. Highlands, NC

194. Hillsborough, NC

195. Holly Springs, NC

196. Huntsville, AL

197. Imperial Beach, CA

198. Independent Multi-Family Communications Council

199. Indianapolis, IN

200. Institute for Policy Innovation

201. Intergovernmental Cable Comm Auth, MI

202. Iowa City, IA

203. Irvine, CA

204. Irwindale, CA

205. Itasca Comm TV, MN

206. Jackson, CA

207. Jamestown, NC

208. Jefferson County League of Cities Cable Comm'n, Kentucky

209. Jenkins, KY

210. Jersey Access Group, NJ

211. Kansas City, Missouri

212. Kernersville, NC

213. Killeen, TX

214. King County, WA

215. Kitty Hawk, NC

216. Knightdale, NC

217. La Puente, CA

218. Lake Forest, CA

219. Lake Lurie, NC

220. Lake Mills, WI

221. Lake Minnetonka Communications Comm, MN

222. Lake Worth, FL

223. Lakewood, CA

224. Las Vegas, NV

225. LaVerne, CA

226. League of Minnesota Cities (LMC)

227. League of United Latin American Citizens of the Northeast Region+

228. Leavenworth, KS

229. Lee County, FL

230. Leibowitz & Associates, P.A.

231. Lenexa, KS

232. Lewisville, NC

233. Lexington, NC

234. Lincoln, CA

235. Lincoln, NE

236. Long Beach, CA

237. Longmont, CO

238. Loomis, CA

239. Los Angeles Cable Televisión Access Corp., CA

240. Los Banos, CA

241. Lynwood, CA

242. Madison Hts, MI

243. Madison, NC

244. Madison, WI

245. Malverne, NY

246. Manatee County, Florida

247. Manhattan Community Access Corp., NY

248. Marin Telecomm Agency, CA

249. Martha\'s Vineyard Comm TV, MA

250. Maxton, NC

251. Mayodan, NC

252. Mayville, NY

253. Maywood, CA

254. Mecklenburg County, NC

255. Medford, OR

256. Medford, OR

257. Media Action Marin, CA

258. Media Bridges Cincinnati, OH

259. Mercatus Center

260. Metheun Comm TV, MA

261. Metropolitan Area Comm Comm\'n, OR

262. Metropolitan Educational Access Corp, TN

263. Miami Valley Comm Council, OH

264. Miami-Dade County, Florida

265. Michigan Municipal League

266. Microsoft Corporation

267. Middlesex, NC

268. Midland, TX

269. Milpitas, CA

270. Minnesota Telecomm Alliance

271. Minority Media and Telecommunications Council, et al.

272. Missouri Chapter -- National Association of Telecommunications
     Officers and Advisors (MO-NATOA)

273. Mobile, AL

274. Momeyer, NC

275. Monrovia, CA

276. Monterey Park, CA

277. Montrose, CO

278. Morrisville, NC

279. Mount Morris, MI

280. Mt. Hood Cable Regulatory Commission (MHCRC)

281. Murfeesboro, TN

282. Murfreesboro, NC

283. Murrieta, CA

284. National Association of Broadcasters

285. National Black Chamber of Commerce

286. National Cable & Telecommunications Association

287. National Caucus and Center on Black Aged

288. National Grange

289. National Hispanic Council on Aging

290. National Taxpayers Union

291. National Telecommunications Cooperative Association

292. NATOA, NLC, NACO, USCM, ACM, and ACD

293. Naval Media Center, US

294. New Jersey Board of Public Utilities (NJBPU)

295. New Jersey Division of the Ratepayer Advocate

296. New York City

297. New York State Conference of Mayors (NYCOM)

298. Newton Comm Access Cntr, MA

299. Norfolk, VA

300. North Kansas City, MO

301. North Liberty, IA

302. North Richland Hills, TX

303. Northbrook, IL

304. Northern Berkshire Comm TV Corp, MA

305. Northern Dakota County Cable Comm Comm\'m

306. Northwest Suburbs Cable Commun Comm\'n, MN

307. Norwalk, CA

308. Oceanside Comm TV, CA

309. Onslow Cnty, NC

310. Ontario, CA

311. Orange County, FL

312. Organization for the Promotion and Advancement of Small
     Telecommunications Companies

313. Orion Neighborhood TV, MI

314. Oxford, NC

315. Pacific Research Institute

316. Pac-West Telecomm, Inc.

317. Palmetto, FL

318. Palo Alto, CA (on behalf of Joint Powers)

319. Pasadena, CA

320. Patton, PA

321. Peachtree City, GA

322. Pennsville, NJ

323. Perris, CA

324. Philadelphia, PA

325. Pike County, Kentucky

326. Pike County, KY

327. Pikeville, Kentucky

328. Pikeville, KY

329. Pinetops, NC

330. Pittsboro, NC

331. Plainfield, MI

332. Pleasant Garden, NC

333. Pleasant Hill, CA

334. Plymouth, MA

335. Pocatello, ID

336. Post Falls, ID

337. Poway, CA

338. Prince George\'s Community TV, Inc.

339. Prince George\'s County, MD

340. Princeton Community TV, NJ

341. Public Cable Television Authority

342. Public Utility Commission of Texas

343. Public, Educational and Government Access Oversight Comm of Metro
     Nashville

344. Queen Anne\'s County, MD

345. Quote Unquote, NM

346. Qwest Communications International Inc.

347. Ramsey/Washington Counties Suburban Cable Commun. Comm\'n, MN

348. Rancho Cordova, CA

349. Rancho Santa Margarita, CA

350. Randolph County, NC

351. RCN Telecom Services, Inc.

352. Red Oak, NC

353. Redding, CA

354. Reidsville, NC

355. Renton, WA

356. Richmond, KY

357. River Bend, NC

358. Rockingham County, NC

359. Rockwell, NC

360. Rolling Hills Estates, CA

361. Rowan County, NC

362. Sacramento Metro Cable TV Commission, CA

363. Saint Charles, MO

364. Salem, OR

365. Salt Lake City, UT

366. San Diego, CA

367. San Dimas, CA

368. San Jose, CA

369. San Juan Capistrano, CA

370. San Marcos, CA

371. San Mateo County Telecomm Auth, CA

372. Sanford, NC

373. Santa Clara, CA

374. Santa Clarita, CA

375. Santa Cruz County Community TV

376. Santa Rosa, CA

377. Santee, CA

378. Saratoga Springs, NY

379. Scotts Valley, CA

380. Seattle, WA

381. Sebastopol, CA

382. Self-Advocacy Association of New York State, Inc.

383. Shaler, PA

384. Sierra Madre, CA

385. Signal Hill, CA

386. Siler City, NC

387. Simi Valley, CA

388. Sjoberg's, Inc.

389. Skokie, IL

390. Smithfield, NC

391. Solana Beach, CA

392. South Orange Village, NJ

393. South Portland, ME

394. South San Francisco, CA

395. South Slope Cooperative Telephone Company

396. Southeast Michigan Municipalities

397. Southwest Suburban Cable Commission (SWSCC)

398. Spring Hope, NC

399. Springfield, MO

400. St. Charles, IL

401. St. Paul, MN\*

402. St. Petersburg, FL

403. Standish, ME

404. State College Bourough, PA

405. State of Hawaii

406. Statesville, NC

407. Sun Prairie Cable Access TV, WI

408. Sunapee, NH\*

409. Sunnyvale, CA

410. Susanville, CA

411. Tabor City, NC

412. Tampa, FL

413. Taylor, MI

414. Telco Retirees Association, Inc.

415. Telecommunications Industry Association

416. Temecula, CA

417. Texas Coalition of Cities for Utility Issues (TCCFUI)

418. Texas Municipal League and the Texas City Attorneys Association

419. The Progress & Freedom Foundation

420. Time Warner Cable

421. Tobaccoville, NC

422. Toppenish, WA

423. Torrance, CA

424. Truckee, CA

425. Tulsa, OK

426. Tuolumne, CA

427. Ukiah, CA

428. United States Internet Industry Association

429. United States Telecom Association

430. United States-Mexico Chamber of Commerce

431. URTV Asheville, NC

432. Valley Voters Organized Toward Empowerment

433. Vancouver Educational Telecommunications Consortium (VETC)

434. Vass, NC

435. Verizon

436. Vermont Public Service Board (VPSB)

437. Video Access Alliance

438. Villages of Larchmont & Mamaroneck, NY

439. Virginia Cable Telecommunications Association (VCTA)

440. Vista, CA

441. Wake Forest, NC

442. Walnut Creek, CA

443. Walnut Creek, California

444. Warrenville, IL

445. Washington State Grange

446. Wayland, MA

447. Wendell, NC

448. West Allis, WI

449. West Palm Beach, FL

450. Westport, WI

451. Wheaton, IL

452. Whitakers, NC

453. White Plains Cable Access TV, NY

454. White, SD

455. Whittier, CA

456. Wilbraham, MA

457. Wilson, NC

458. Winchester, KY & KY Regional Cable Comm.

459. Windham Community TV, NH

460. Winston-Salem, NC

461. Wisconsin Association of Public, Educational and Government Access
     Channels (WAPC)

462. Women Impacting Public Policy

463. Worchester, MA

464. World Institute on Disability

465. Yanceyville, NC

466. Yuma, AZ

467. Zebulon, NC

468. Zeeland, MI

**APPENDIX B**

**Rule Changes**

Part 76 of Title 47 of the Code of Federal Regulations is amended as
follows:

Part 76 --MULTICHANNEL VIDEO AND CABLE TELEVISION SERVICE

1\. Revise Subpart C title to read as follows:

**Subpart C -- Cable Franchise Applications**

2\. Insert into new Subpart C the following:

**§76.41 Franchise Application Process**

\(a\) Definition. *Competitive Franchise Applicant.* For the purpose of
this section, an applicant for a cable franchise in an area currently
served by another cable operator or cable operators in accordance with
47 U.S.C. § 541(a)(1).

\(b\) A competitive franchise applicant must include the following
information in writing in its franchise application, in addition to any
information required by applicable state and local laws:

> \(1\) the applicant's name;
>
> \(2\) the names of the applicant's officers and directors;
>
> \(3\) the business address of the applicant;
>
> \(4\) the name and contact information of a designated contact for the
> applicant;
>
> \(5\) a description of the geographic area that the applicant proposes
> to serve;
>
> \(6\) the PEG channel capacity and capital support proposed by the
> applicant;
>
> \(7\) the term of the agreement proposed by the applicant;
>
> \(8\) whether the applicant holds an existing authorization to access
> the public rights-of-way in the subject franchise service area as
> described under subsection (b)(5);
>
> \(9\) the amount of the franchise fee the applicant offers to pay; and
>
> \(10\) any additional information required by applicable state or
> local laws.

\(c\) A franchising authority may not require a competitive franchise
applicant to negotiate or engage in any regulatory or administrative
processes prior to the filing of the application.

\(d\) When a competitive franchise applicant files a franchise
application with a franchising authority and the applicant has existing
authority to access public rights-of-way in the geographic area that the
applicant proposes to serve, the franchising authority must grant or
deny the application within 90 days of the date the application is
received by the franchising authority. If a competitive franchise
applicant does not have existing authority to access public
rights-of-way in the geographic area that the applicant proposes to
serve, the franchising authority must grant or deny the application
within 180 days of the date the application is received by the
franchising authority. A franchising authority and a competitive
franchise applicant may agree in writing to extend the 90-day or 180-day
deadline, whichever is applicable.

e\) If a franchising authority does not grant or deny an application
within the time limit specified in subsection (d), the competitive
franchise applicant will be authorized to offer service pursuant to an
interim franchise in accordance with the terms of the application
submitted under subsection (b).

f\) If after expiration of the time limit specified in subsection (d) a
franchising authority denies an application, the competitive franchise
applicant must discontinue operating under the interim franchise
specified in subsection (e) unless the franchising authority provides
consent for the interim franchise to continue for a limited period of
time, such as during the period when judicial review of the franchising
authority's decision is pending. The competitive franchise applicant may
seek judicial review of the denial under 47 U.S.C. § 555.

g\) If after expiration of the time limit specified in subsection (d) a
franchising authority and a competitive franchise applicant agree on the
terms of a franchise, upon the effective date of that franchise, that
franchise will govern and the interim franchise will expire.

**APPENDIX C**

**Initial Regulatory Flexibility Analysis**

1.  As required by the Regulatory Flexibility Act of 1980, as amended
    (the "RFA"),[^496] the Commission has prepared this Initial
    Regulatory Flexibility Analysis ("IRFA") of the possible significant
    economic impact of the policies and rules proposed in the *Further
    Notice of Proposed Rulemaking* ("*Further Notice*") on a substantial
    number of small entities.[^497] Written public comments are
    requested on this IRFA. Comments must be identified as responses to
    the IRFA and must be filed by the deadlines for comments on the
    *Further* *Notice* provided in paragraph 145 of the item. The
    Commission will send a copy of the *Further* *Notice*, including
    this IRFA, to the Chief Counsel for Advocacy of the Small Business
    Administration ("SBA").[^498] In addition, the *Further* *Notice*
    and IRFA (or summaries thereof) will be published in the Federal
    Register.[^499]

## Need for, and Objectives of, the Proposed Rules

2.  The *Further* *Notice* continues a process to implement Section
    621(a)(1) of the Communications Act of 1934, as amended, in order to
    further the interrelated goals of enhanced cable competition and
    accelerated broadband deployment as discussed in the *Report and
    Order* ("*Order*"). Specifically, the *Further* *Notice* solicits
    comment on whether the Commission should apply the rules and
    guidelines adopted in the *Order* to cable operators that have
    existing franchise agreements, and if so, whether the Commission has
    authority to do so. The *Further* *Notice* also seeks comment on
    whether the Commission can preempt state or local customer service
    laws that exceed Commission standards.

## Legal Basis

3.  The *Further* *Notice* tentatively concludes that the Commission has
    authority to apply the findings in the *Order* to cable operators
    with existing franchise agreements. In that regard, the *Further*
    *Notice* finds that neither Section 611(a) nor Section 622(a)
    distinguishes between incumbents and new entrants or franchises
    issued to incumbents and franchises issued to new entrants.[^500]

## Description and Estimate of the Number of Small Entities to Which the Proposed Rules Will Apply

4.  The RFA directs agencies to provide a description of, and where
    feasible, an estimate of the number of small entities that may be
    affected by the proposed rules, if adopted.[^501] The RFA generally
    defines the term "small entity" as having the same meaning as the
    terms "small business," "small organization," and "small
    governmental jurisdiction."[^502] In addition, the term "small
    business" has the same meaning as the term "small business concern"
    under the Small Business Act.[^503] A "small business concern" is
    one which: (1) is independently owned and operated; (2) is not
    dominant in its field of operation; and (3) satisfies any additional
    criteria established by the Small Business Administration
    ("SBA").[^504]

5.  *Small Businesses*. Nationwide, there are a total of approximately
    22.4 million small businesses, according to SBA data.[^505]

6.  *Small Organizations*. Nationwide, there are approximately 1.6
    million small organizations.[^506]

7.  The Commission has determined that the group of small entities
    possibly directly affected by the proposed rules herein, if adopted,
    consists of small governmental entities. A description of these
    entities is provided below. In addition the Commission voluntarily
    provides descriptions of a number of entities that may be merely
    indirectly affected by any rules that result from the *Further*
    *Notice*.

### Small Governmental Jurisdictions {#small-governmental-jurisdictions .unnumbered}

8.  The term "small governmental jurisdiction" is defined as
    "governments of cities, towns, townships, villages, school
    districts, or special districts, with a population of less than
    fifty thousand."[^507] As of 1997, there were approximately 87,453
    governmental jurisdictions in the United States.[^508] This number
    includes 39,044 county governments, municipalities, and townships,
    of which 37,546 (approximately 96.2 percent) have populations of
    fewer than 50,000, and of which 1,498 have populations of 50,000 or
    more. Thus, we estimate the number of small governmental
    jurisdictions overall to be 84,098 or fewer.

### Miscellaneous Entities {#miscellaneous-entities .unnumbered}

9.  The entities described in this section are affected merely
    indirectly by our current action, and therefore are not formally a
    part of this RFA analysis. We have included them, however, to
    broaden the record in this proceeding and to alert them to our
    tentative conclusions.

#### Cable Operators {#cable-operators .unnumbered}

10. The "Cable and Other Program Distribution" census category includes
    cable systems operators, closed circuit television services, direct
    broadcast satellite services, multipoint distribution systems,
    satellite master antenna systems, and subscription television
    services. The SBA has developed small business size standard for
    this census category, which includes all such companies generating
    \$13.0 million or less in revenue annually.[^509] According to
    Census Bureau data for 1997, there were a total of 1,311 firms in
    this category, total, that had operated for the entire year.[^510]
    Of this total, 1,180 firms had annual receipts of under \$10 million
    and an additional 52 firms had receipts of \$10 million or more but
    less than \$25 million. Consequently, the Commission estimates that
    the majority of providers in this service category are small
    businesses that may be affected by the rules and policies adopted
    herein.

11. *Cable System Operators (Rate Regulation Standard)*. The Commission
    has developed its own small-business-size standard for cable system
    operators, for purposes of rate regulation. Under the Commission\'s
    rules, a "small cable company" is one serving fewer than 400,000
    subscribers nationwide.[^511] The most recent estimates indicate
    that there were 1,439 cable operators who qualified as small cable
    system operators at the end of 1995.[^512] Since then, some of those
    companies may have grown to serve over 400,000 subscribers, and
    others may have been involved in transactions that caused them to be
    combined with other cable operators. Consequently, the Commission
    estimates that there are now fewer than 1,439 small entity cable
    system operators that may be affected by the rules and policies
    adopted herein.

12. *Cable System Operators (Telecom Act Standard)*. The Communications
    Act of 1934, as amended, also contains a size standard for small
    cable system operators, which is "a cable operator that, directly or
    through an affiliate, serves in the aggregate fewer than 1 percent
    of all subscribers in the United States and is not affiliated with
    any entity or entities whose gross annual revenues in the aggregate
    exceed \$250,000,000."[^513] The Commission has determined that
    there are 67,700,000 subscribers in the United States.[^514]
    Therefore, an operator serving fewer than 677,000 subscribers shall
    be deemed a small operator, if its annual revenues, when combined
    with the total annual revenues of all its affiliates, do not exceed
    \$250 million in the aggregate.[^515] Based on available data, the
    Commission estimates that the number of cable operators serving
    677,000 subscribers or fewer, totals 1,450.[^516] The Commission
    neither requests nor collects information on whether cable system
    operators are affiliated with entities whose gross annual revenues
    exceed \$250 million,[^517] and therefore is unable, at this time,
    to estimate more accurately the number of cable system operators
    that would qualify as small cable operators under the size standard
    contained in the Communications Act of 1934.

13. *Open Video Services*. Open Video Service ("OVS") systems provide
    subscription services.[^518] As noted above, the SBA has created a
    small business size standard for Cable and Other Program
    Distribution.[^519] This standard provides that a small entity is
    one with \$13.0 million or less in annual receipts. The Commission
    has certified approximately 25 OVS operators to serve 75 areas, and
    some of these are currently providing service.[^520] Affiliates of
    Residential Communications Network, Inc. (RCN) received approval to
    operate OVS systems in New York City, Boston, Washington, D.C., and
    other areas. RCN has sufficient revenues to assure that they do not
    qualify as a small business entity. Little financial information is
    available for the other entities that are authorized to provide OVS
    and are not yet operational. Given that some entities authorized to
    provide OVS service have not yet begun to generate revenues, the
    Commission concludes that up to 24 OVS operators (those remaining)
    might qualify as small businesses that may be affected by the rules
    and policies adopted herein.

## Description of Projected Reporting, Recordkeeping and Other Compliance Requirements

14. We anticipate that any rules that result from this action would have
    at most a *de minimis* impact on small governmental jurisdictions
    (*e.g.*, one-time proceedings to amend existing procedures regarding
    the method of granting competitive franchises). Local franchising
    authorities ("LFAs") today must review and decide upon competitive
    cable franchise applications, and will continue to perform that role
    upon the conclusion of this proceeding; any rules that might be
    adopted pursuant to this *Notice* likely would require at most only
    modifications to that process.

## Steps Taken to Minimize Significant Economic Impact on Small Entities and Significant Alternatives Considered

15. The RFA requires an agency to describe any significant, specifically
    small business, alternatives that it has considered in reaching its
    proposed approach, which may include the following four alternatives
    (among others): "(1) the establishment of differing compliance or
    reporting requirements or timetables that take into account the
    resources available to small entities; (2) the clarification,
    consolidation, or simplification of compliance and reporting
    requirements under the rule for such small entities; (3) the use of
    performance rather than design standards; and (4) an exemption from
    coverage of the rule, or any part thereof, for such small
    entities."[^521]

16. As discussed in the *Further* *Notice*, Sections 611(a) and 622(a)
    do not distinguish between new entrants and cable operators with
    existing franchises.[^522] As discussed in the *Order*, the
    Commission has the authority to implement the mandate of Section
    621(a)(1) to ensure that LFAs do not unreasonably refuse to award
    competitive franchises to new entrants, and adopts rules designed to
    ensure that the local franchising process does not create
    unreasonable barriers to competitive entry for new entrants. Such
    rules consist of specific guidelines (*e.g.*, maximum timeframes for
    considering a competitive franchise application) and general
    principles regarding franchise fees designed to provide LFAs with
    the guidance necessary to conform their behavior to the directive of
    Section 621(a)(1). As noted above, applying these rules regarding
    the franchising process to cable operators with existing franchises
    likely would have at most a *de minimis* impact on small
    governmental jurisdictions. Even if that were not the case, however,
    we believe that the interest of fairness to those cable operators
    would outweigh any impact on small entities. The alternative
    (*i.e.*, continuing to allow LFAs to follow procedures that are
    unreasonable) would be unacceptable, as it would be inconsistent
    with the Communications Act. We seek comment on the impact that such
    rules might have on small entities, and on what effect alternative
    rules would have on those entities. We also invite comment on ways
    in which the Commission might implement the tentative conclusions
    while at the same time imposing lesser burdens on small entities.

## Federal Rules that May Duplicate, Overlap, or Conflict with the Proposed Rules

17. None.

**APPENDIX D**

**Final Regulatory Flexibility Act Analysis**

1.  As required by the Regulatory Flexibility Act of 1980, as amended
    ("RFA")[^523] an Initial Regulatory Flexibility Analysis ("IRFA")
    was incorporated in the *Notice of Proposed Rulemaking* ("*NPRM*")
    to this proceeding.[^524] The Commission sought written public
    comment on the proposals in the NPRM, including comment on the IRFA.
    The Commission received one comment on the IRFA. This present Final
    Regulatory Flexibility Analysis ("FRFA") conforms to the RFA.[^525]

## Need for, and Objectives of, the Report and Order

18. This Report and Order ("*Order*") adopts rules and provides guidance
    to implement Section 621 of the Communications Act of 1934, as
    amended (the "Communications Act").[^526] Section 621 of the
    Communications Act prohibits franchising authorities from
    unreasonably refusing to award competitive franchises for the
    provision of cable services.[^527] The Commission has found that the
    current franchising process constitutes an unreasonable barrier to
    entry for competitive entrants that impedes enhanced cable
    competition and accelerated broadband deployment. The Commission
    also has determined that it has authority to address this problem.
    To eliminate the unreasonable barriers to entry into the cable
    market, and to encourage investment in broadband facilities, in this
    *Order* the Commission (1) adopts maximum time frames within which
    local franchising authorities ("LFAs") must grant or deny franchise
    applications (90 days for new entrants with existing access to
    rights-of-way and six months for those who do not); (2) prohibits
    LFAs from imposing unreasonable build-out requirements on new
    entrants; (3) identifies certain costs, fees, and other compensation
    which, if required by LFAs, must be counted toward the statutory 5
    percent cap on franchise fees; (4) interprets new entrants'
    obligations to provide support for PEG channels and facilities and
    institutional networks ("I-Nets"); and (5) clarifies that LFA
    authority is limited to regulation of cable services, not mixed-use
    services. The Commission also preempts local laws, regulations, and
    franchise agreement requirements, including level-playing-field
    provisions, to the extent they impose greater restrictions on market
    entry for competitive entrants than what the *Order* allows. The
    rule and guidelines are adopted in order to further the interrelated
    goals of enhanced cable competition and accelerated broadband
    deployment. For the specific language of the rule adopted, see
    Appendix B.

## Summary of Significant Issues Raised by Public Comments in Response to the IRFA

19. Only one commenter, Sjoberg's, Inc. submitted a comment that
    specifically responded to the IRFA. Sjoberg's, Inc. contends that
    small cable operators are directly affected by the adoption of rules
    that treat competitive cable entrants more favorably than
    incumbents. Sjoberg's Inc. argues that small cable operators are not
    in a position to compete with large potential competitors. These
    arguments were considered and rejected as discussed below.

20. We disagree with Sjoberg's Inc. assertion that our rules will treat
    competitive cable entrants more favorably than incumbents. While the
    actions we take in the *Order* will serve to increase competition in
    the multichannel video programming ("MVPD") market, we do not
    believe that the rules we adopt in the *Order* will put any
    incumbent provider at a competitive disadvantage. In fact, we
    believe that incumbent cable operators are at a competitive
    advantage in the MVPD market; incumbent cable operators have the
    competitive advantage of an existing customer base and significant
    brand recognition in their existing markets. Furthermore, we ask in
    the *Further Notice of Proposed Rulemaking* whether the findings
    adopted in the *Order* should apply to existing cable operators and
    tentatively conclude that they should.

## Description and Estimate of the Number of Small Entities to Which the Proposed Rules Will Apply

### Entities Directly Affected By Proposed Rules {#entities-directly-affected-by-proposed-rules .unnumbered}

21. The RFA directs the Commission to provide a description of and,
    where feasible, an estimate of the number of small entities that
    will be affected by the rules adopted herein.[^528] The RFA
    generally defines the term "small entity" as having the same meaning
    as the terms "small business," "small organization," and "small
    government jurisdiction."[^529] In addition, the term "small
    business" has the same meaning as the term "small business concern"
    under the Small Business Act.[^530] A small business concern is one
    which: (1) is independently owned and operated; (2) is not dominant
    in its field of operation; and (3) satisfies any additional criteria
    established by the Small Business Administration (SBA).[^531]

22. The rules adopted by this *Order* will streamline the local
    franchising process by adopting rules that provide guidance as to
    what constitutes an unreasonable refusal to grant a cable franchise.
    The Commission has determined that the group of small entities
    directly affected by the rules adopted herein consists of small
    governmental entities (which, in some cases, may be represented in
    the local franchising process by not-for-profit enterprises).
    Therefore, in this FRFA, we consider the impact of the rules on
    small governmental entities. A description of such small entities,
    as well as an estimate of the number of such small entities, is
    provided below.

23. *Small governmental jurisdictions.* Small governmental jurisdictions
    are "governments of cities, towns, townships, villages, school
    districts, or special districts, with a population of less than
    fifty thousand."[^532] As of 1997, there were approximately 87,453
    governmental jurisdictions in the United States.[^533] This number
    includes 39,044 county governments, municipalities, and townships,
    of which 37,546 (approximately 96.2 percent) have populations of
    fewer than 50,000, and of which 1,498 have populations of 50,000 or
    more. Thus, we estimate the number of small governmental
    jurisdictions overall to be 84,098 or fewer*.*

###  Miscellaneous Entities {#miscellaneous-entities-1 .unnumbered}

24. The entities described in this section are affected merely
    indirectly by our current action, and therefore are not formally a
    part of this RFA analysis. We have included them, however, to
    broaden the record in this proceeding and to alert them to our
    conclusions.

#### Cable Operators {#cable-operators-1 .unnumbered}

25. The "Cable and Other Program Distribution" census category includes
    cable systems operators, closed circuit television services, direct
    broadcast satellite services, multipoint distribution systems,
    satellite master antenna systems, and subscription television
    services. The SBA has developed small business size standard for
    this census category, which includes all such companies generating
    \$13.0 million or less in revenue annually.[^534] According to
    Census Bureau data for 1997, there were a total of 1,311 firms in
    this category, total, that had operated for the entire year.[^535]
    Of this total, 1,180 firms had annual receipts of under \$10 million
    and an additional 52 firms had receipts of \$10 million or more but
    less than \$25 million. Consequently, the Commission estimates that
    the majority of providers in this service category are small
    businesses that may be affected by the rules and policies adopted
    herein.

26. Cable System Operators (Rate Regulation Standard). The Commission
    has developed its own small-business-size standard for cable system
    operators, for purposes of rate regulation. Under the Commission\'s
    rules, a "small cable company" is one serving fewer than 400,000
    subscribers nationwide.[^536] The most recent estimates indicate
    that there were 1,439 cable operators who qualified as small cable
    system operators at the end of 1995.[^537] Since then, some of those
    companies may have grown to serve over 400,000 subscribers, and
    others may have been involved in transactions that caused them to be
    combined with other cable operators. Consequently, the Commission
    estimates that there are now fewer than 1,439 small entity cable
    system operators that may be affected by the rules and policies
    adopted herein.

27. Cable System Operators (Telecom Act Standard). The Communications
    Act of 1934, as amended, also contains a size standard for small
    cable system operators, which is "a cable operator that, directly or
    through an affiliate, serves in the aggregate fewer than 1 percent
    of all subscribers in the United States and is not affiliated with
    any entity or entities whose gross annual revenues in the aggregate
    exceed \$250,000,000."[^538] The Commission has determined that
    there are 67,700,000 subscribers in the United States.[^539]
    Therefore, an operator serving fewer than 677,000 subscribers shall
    be deemed a small operator, if its annual revenues, when combined
    with the total annual revenues of all its affiliates, do not exceed
    \$250 million in the aggregate.[^540] Based on available data, the
    Commission estimates that the number of cable operators serving
    677,000 subscribers or fewer, totals 1,450.[^541] The Commission
    neither requests nor collects information on whether cable system
    operators are affiliated with entities whose gross annual revenues
    exceed \$250 million,[^542] and therefore is unable, at this time,
    to estimate more accurately the number of cable system operators
    that would qualify as small cable operators under the size standard
    contained in the Communications Act of 1934.

28. Open Video Services. Open Video Service ("OVS") systems provide
    subscription services.[^543] As noted above, the SBA has created a
    small business size standard for Cable and Other Program
    Distribution.[^544] This standard provides that a small entity is
    one with \$13.0 million or less in annual receipts. The Commission
    has certified approximately 25 OVS operators to serve 75 areas, and
    some of these are currently providing service.[^545] Affiliates of
    Residential Communications Network, Inc. (RCN) received approval to
    operate OVS systems in New York City, Boston, Washington, D.C., and
    other areas. RCN has sufficient revenues to assure that they do not
    qualify as a small business entity. Little financial information is
    available for the other entities that are authorized to provide OVS
    and are not yet operational. Given that some entities authorized to
    provide OVS service have not yet begun to generate revenues, the
    Commission concludes that up to 24 OVS operators (those remaining)
    might qualify as small businesses that may be affected by the rules
    and policies adopted herein.

#### Telecommunications Service Entities {#telecommunications-service-entities .unnumbered}

29. As noted above, a "small business" under the RFA is one that, *inter
    alia*, meets the pertinent small business size standard (e.g., a
    telephone communications business having 1,500 or fewer employees),
    and "is not dominant in its field of operation."[^546] The SBA\'s
    Office of Advocacy contends that, for RFA purposes, small incumbent
    local exchange carriers are not dominant in their field of operation
    because any such dominance is not "national" in scope.[^547] We have
    therefore included small incumbent local exchange carriers in this
    RFA analysis, although we emphasize that this RFA action has no
    effect on Commission analyses and determinations in other, non-RFA
    contexts.

30. *Incumbent Local Exchange Carriers ("LECs").* Neither the Commission
    nor the SBA has developed a small business size standard
    specifically for incumbent local exchange services. The appropriate
    size standard under SBA rules is for the category Wired
    Telecommunications Carriers. Under that size standard, such a
    business is small if it has 1,500 or fewer employees.[^548]
    According to Commission data,[^549] 1,303 carriers have reported
    that they are engaged in the provision of incumbent local exchange
    services. Of these 1,303 carriers, an estimated 1,020 have 1,500 or
    fewer employees and 283 have more than 1,500 employees.
    Consequently, the Commission estimates that most providers of
    incumbent local exchange service are small businesses that may be
    affected by our action. In addition, limited preliminary census data
    for 2002 indicate that the total number of wired communications
    carriers increased approximately 34 percent from 1997 to 2002.[^550]

31. *Competitive Local Exchange Carriers, Competitive Access Providers
    (CAPs), "Shared-Tenant Service Providers," and "Other Local Service
    Providers."* Neither the Commission nor the SBA has developed a
    small business size standard specifically for these service
    providers. The appropriate size standard under SBA rules is for the
    category Wired Telecommunications Carriers. Under that size
    standard, such a business is small if it has 1,500 or fewer
    employees.[^551] According to Commission data,[^552] 769 carriers
    have reported that they are engaged in the provision of either
    competitive access provider services or competitive local exchange
    carrier services. Of these 769 carriers, an estimated 676 have 1,500
    or fewer employees and 93 have more than 1,500 employees. In
    addition, 12 carriers have reported that they are "Shared-Tenant
    Service Providers," and all 12 are estimated to have 1,500 or fewer
    employees. In addition, 39 carriers have reported that they are
    "Other Local Service Providers." Of the 39, an estimated 38 have
    1,500 or fewer employees and one has more than 1,500 employees.
    Consequently, the Commission estimates that most providers of
    competitive local exchange service, competitive access providers,
    "Shared-Tenant Service Providers," and "Other Local Service
    Providers" are small entities that may be affected by our action. In
    addition, limited preliminary census data for 2002 indicate that the
    total number of wired communications carriers increased
    approximately 34 percent from 1997 to 2002.[^553]

## Description of Projected Reporting, Record Keeping and other Compliance Requirements

32. The rule and guidance adopted in the *Order* will require *de
    minimus* additional reporting, record keeping, and other compliance
    requirements. The most significant change requires potential
    franchisees to file an application to mark the beginning of the
    franchise negotiation process. This filing requires minimal
    information, and we estimate that the average burden on applicants
    to complete this application is one hour. The franchising authority
    will review this application in the normal course of its franchising
    procedures. The rule will not require any additional special skills
    beyond any already needed in the cable franchising context.

## Steps Taken to Minimize Significant Impact on Small Entities, and Significant Alternatives Considered

33. The RFA requires an agency to describe any significant alternatives
    that it has considered in reaching its proposed approach, which may
    include the following four alternatives (among others): (1) the
    establishment of differing compliance or reporting requirements or
    timetables that take into account the resources available to small
    entities; (2) the clarification, consolidation, or simplification of
    compliance or reporting requirements under the rule for small
    entities; (3) the use of performance, rather than design, standards;
    and (4) an exemption from coverage of the rule, or any part thereof,
    for small entities.[^554]

34. In the *NPRM*, the Commission sought comment on the impact that
    rules interpreting Section 621(a)(1) might have on small entities,
    and on what effect alternative rules would have on those entities.
    The Commission also invited comment on ways in which the Commission
    might implement Section 621(a)(1) while at the same time impose
    lesser burdens on small entities. The Commission tentatively
    concluded that any rules likely would have at most a *de minimis*
    impact on small governmental jurisdictions, and that the
    interrelated, high-priority federal communications policy goals of
    enhanced cable competition and accelerated broadband deployment
    necessitated the establishment of specific guidelines for LFAs with
    respect to the process by which they grant competitive cable
    franchises. We agree with those tentative conclusions, and we
    believe that the rules adopted in the *Order* will not impose a
    significant impact on any small entity.

35. In the *Order*, we provide that LFAs should reasonably review
    franchise applications within 90 days for entities existing
    authority to access rights-of way, and within six months for
    entities that do not have such authority. This will result in
    decreasing the regulatory burdens on cable operators. We declined to
    adopt shorter deadlines that commenters proposed (*e.g.*, 17 days,
    one month) in order to provide small entities more flexibility in
    scheduling their franchise negotiation sessions. In the *Order*, we
    also provide guidance on whether an LFA may reasonably refuse to
    award a competitive franchise based on certain franchise
    requirements, such as build-out requirements and franchise fees. As
    an alternative, we considered providing no guidance on any
    franchising terms. We conclude that the guidance we provide
    minimizes any adverse impact on small entities because it clarifies
    the terms within which parties must negotiate, and should prevent
    small entities from facing costly litigation over those terms.

## Report to Congress

36. The Commission will send a copy of the *Order*, including this FRFA,
    in a report to be sent to Congress pursuant to the *Small* Business
    Regulatory Enforcement Fairness Act of 1996.[^555] In addition, the
    Commission will send a copy of the *Order*, including the FRFA, to
    the Chief Counsel for Advocacy of the Small Business Administration.
    A copy of the *Order* and FRFA (or summaries thereof) will also be
    published in the Federal Register.[^556]

    **STATEMENT OF**

**CHAIRMAN KEVIN J. MARTIN**

*Re: Implementation of Section 621(a)(1) of the Cable Communications
Policy Act of 1984 as amended by the Cable Television Consumer
Protection and Competition Act of 1992 (MB Docket No. 05-311)*

Greater competition in the market for the delivery for multichannel
video programming is a primary and long-standing goal of federal
communications policy. In passing the 1992 Cable Act, Congress
recognized that competition between multiple cable systems would be
beneficial, would help lower cable rates, and specifically encouraged
local franchising authorities to award competitive franchises. Section
621 of the statute reads, "A franchising authority may not grant an
exclusive franchise and *may not unreasonably refuse to award an
additional competitive franchise*."

Telephone companies are investing billions of dollars to upgrade their
networks to provide video. As new providers began actively seeking entry
into video markets, we began to hear that some local authorities were
making the process of getting franchises unreasonably difficult, despite
clear statutory language. The record collected by the Commission in this
proceeding cited instances where LFAs sat on applications for more than
a year or required extraordinary in kind contributions such as the
building of public swimming pools and recreation centers.

Such unreasonable requirements are especially troubling because
competition is desperately needed in the video market. As we just found,
from 1995 to 2005, cable rates have risen 93%. In 1995 cable cost
\$22.37 per month. Last year, cable cost \$43.04 per month. Today's
Communications Daily reports that prices for expanded basic are now
about \$50 per month. The trend in pricing of cable services is of
particular importance to consumers. Since 1996 the prices of every other
communications service have declined while cable rates have risen year
after year after year.

This item appropriately removes such regulatory barriers by giving
meaning to the words Congress wrote in section 621 of the Cable Act.
Specifically, the Commission finds that an LFA is unreasonably refusing
to grant a competitive franchise when it does not act on an application
within a reasonable time period, imposes taxes on non-cable services
such as broadband, requires a new entrant to provide unrelated services
or imposes unreasonable build-out requirements.

The widespread deployment of broadband remains my top priority as
Chairman and a major Commission objective. During my tenure as Chairman,
the Commission has worked hard to create a regulatory environment that
promotes broadband deployment. We have removed legacy regulations, like
tariffs and price controls, that discourage carriers from investing in
their broadband networks, and we worked to create a regulatory level
playing-field among broadband platforms. And we have begun to see some
success as a result of the Commission's policies. High-speed connections
to the Internet have grown over 400% since I became Commissioner in July
200.

The ability to deploy broadband networks rapidly however, is
intrinsically linked to the ability to offer video to consumers. As the
Commission stated in the Notice in this proceeding: "The construction of
modern telecommunications facilities requires substantial capital
investment and such networks, once completed, are capable of providing
not only voice and data, but video as well. As a consequence, the
ability to offer video offers the promise of an additional revenue
stream from which deployment costs can be recovered."

Similarly, in a 2005 Policy Paper, the Phoenix Center found that video
is "is now the key driver for new fiber deployment in the residential
market." The Phoenix Center went on to say that: "If a new entrant
cannot readily provide consumers multichannel video over an advanced
network, then the prospects for success will be diminished substantially
due to a reduction in the entrant's potential revenues. Quite simply,
the ability to sell video services over these fiber networks may be a
crucial factor in getting those fiber networks deployed." By enhancing
the ability of new entrants to provide video services then we are
advancing our goal of universal affordable broadband access for
Americans, as well as our goal of increased video competition.

I am also committed to seeing that consumers are able to realize the
benefits of competition in the forms of better services and lower
prices. In recent years however, consumers have had limited choice among
video services providers and ever increasing prices for those services.
But as was just demonstrated in our annual price survey, cable
competition can impact cable bills. Again, it found that only in areas
where there was competition from a second cable operator did average
price for cable service decrease. I am pleased that the steps taken by
the Commission today will expressly further this type of competition and
help ensure that lower prices are available to as many Americans as
possible as quickly as possible.

Addressing build-out requirements was particularly difficult. This item
seeks to strike a balance between encouraging as widespread deployment
of broadband as possible while not deterring entry altogether. I
believed it would have been appropriate to provide examples of build-out
requirements that would be reasonable in addition to illustrating those
that could not be.[^557]

**DISSENTING STATEMENT OF**

**COMMISSIONER MICHAEL J. COPPS**

*Re: Implementation of Section 621(a)(1) of the Cable Communications
Policy Act of 1984 as amended by the Cable Television Consumer
Protection and Competition Act of 1992 (MB Docket No. 05-311)*

I think that all of my colleagues and I can agree on the central
importance of encouraging video competition. It is abundantly clear that
cable rates are rising faster than inflation and that wireline cable
competition can be helpful in bringing those rates down. Consumers
deserve rules that will bring such competition to their doorsteps
because consumers are not being well-served by the lack of competition
today.

I think my colleagues and I can also agree on the central importance of
broadband deployment. As I have often pointed out, our nation is falling
behind in the international broadband race. Encouraging new entrants
into the video market could at least assist in the challenge of building
out broadband infrastructure, although it doesn't represent anything
near the totality of what a real broadband strategy would look like.

But agreeing on the many benefits of video competition is hardly the
same thing as coming up with rules that will actually encourage
honest-to-goodness competition within the framework of the statutes that
Congress has given us. The item before us today doesn't get us there and
I cannot support it as written.

In recent days we had discussions attempting to craft an item with which
I would feel more comfortable. Chairman Martin engaged in those
discussions in good faith and I thank him for that. My goal was to
encourage an item that preserves a local authority's statutory right to
seek specific and far-reaching build-out requirements, protects each
community's ability to negotiate for PEG and I-NET facilities, and
maintains truly meaningful local ability to deal with the huge companies
that are coming into our cities and towns to build important
infrastructure.

Throughout the consideration of this item and even as we discussed ways
to improve it in recent days, I have been troubled at the lack of a
granular record that would demonstrate that the present franchising
system is irretrievably broken and that traditional federal-state-local
relationships have to be so thoroughly upended. If we are going to
preempt and upend the balances inherent in long-standing
federal-state-local jurisdictional authorities, we should have a record
clearly demonstrating that those local authorities are not up to the
task of handling this infrastructure build-out and that competition can
be introduced only by preempting and upsetting these long-standing
principles of federalism. My colleagues may recall that when we launched
the NPRM on this item, I made it very clear how important the
compilation of a compelling granular record would be in my consideration
of this proceeding. I do not believe that either today's item or the
record behind it makes such a showing. The various examples of
"unreasonable" franchise requirements that the item enumerates are not
closely or carefully supported by the record and often fail to rise
beyond isolated episodes or anecdotal evidence.

Many people questioned, and continue to question, the Commission's legal
authority to do what it is doing today. It is clear that those questions
remain and that the Commission has been asked by those with oversight
powers to more conclusively demonstrate our authority to undertake the
actions we initiate today. I believe it is the better course of wisdom
in so far-reaching a proceeding, in light of the concern being expressed
by those with oversight responsibilities of this Commission, to
thoroughly answer those questions, to lay out the basis of our claimed
legal authority, and to explain what legal risks this action entails
before taking action. Under the circumstances, proceeding on such a
controversial decision today does not put an end to this issue. It only
invites more delay, more confusion, and more possibility of legal
challenge.

As we face the challenge of providing ubiquitous high-speed broadband to
all our citizens, we need the certainty of a national strategy to get
the job done. Right now this nation is hobbled because it has no such
strategy, no plan for the infrastructure build-out our people need to be
productive and competitive citizens of the world. The United States is
ranked number twenty-one in the International Telecommunications Union's
Digital Opportunity Index. It is difficult to take much comfort from
being twenty-first in the Twenty-first century. The kind of broadband
strategy I am talking about demands a level of consensus and national
buy-in by the many diverse interests and entities that would be
responsible for implementing it. While I have never equated franchise
reform as anything remotely equivalent to a national broadband strategy,
I do believe a properly-crafted and legally-certain franchising reform
could facilitate some level of broadband build-out. That is what I
attempted to work toward here. But if our decision is only going to
increase concern, increase the questions and increase the risk, then I
think we should pause, take a deep breath, answer the questions and
reach out for more consensus. I don't say unanimity, of course, but at
least a level of comfort that builds an environment wherein the next few
years can see the job actually getting done rather than spent in
contentious debate or court challenge because our reasoning was deemed
inadequate.

So I thank my colleagues, and especially the Chairman, for the
discussions we have had---discussions that were both in good faith and
substantive---but in light of the concerns I have just discussed, I
cannot support this afternoon's outcome. Unlike so many other
proceedings coming before the Commission, I was nowhere near certain as
I came to work this morning how the vote on this item would go. I
actually thought that perhaps we would take the short time needed,
answer the questions that had been posed, and then reassess where we
were as to proceeding with an item. That was my preference. Instead it
appears a majority will proceed to approve an item that, as drafted
right now, is without important enhancements I have been advocating and
without sufficient buy-in from the world beyond the FCC to assure its
effectiveness. I must therefore respectfully dissent.

**DISSENTING STATEMENT OF**

**COMMISSIONER JONATHAN S. ADELSTEIN**

*Re: Implementation of Section 621(a)(1) of the Cable Communications
Policy Act of 1984 as amended by the Cable Television Consumer
Protection and Competition Act of 1992 (MB Docket No. 05-311)*

The policy goals of this *Order*, to promote competitive video offerings
and broadband deployment, are laudable. But while I support these goals,
today's item goes out on a limb in asserting federal authority to
preempt local governments, and then saws off the limb with a highly
dubious legal scheme. It substitutes our judgment as to what is
reasonable -- or unreasonable -- for that of local officials -- all in
violation of the franchising framework established in the Communications
Act.

Today's *Order* is certain to offend many in Congress, who worked long
and hard on this important issue, only to have a Commission decision
rushed through with little consultation. The result will be heavy
oversight after-the-fact, and a likely rejection by the courts. It will
solve nothing, create much confusion, and provide little certainty or
progress on our shared goal of promoting real video competition and
universal broadband deployment.

This outcome is disappointing because I believe we must do everything we
can to encourage competitive video offerings. As I was driving to work
this morning, I saw a line of Verizon trucks installing FiOS in my
neighborhood. I must admit, I am very excited about this new service,
and plan to subscribe. FiOS is now available because our local county
officials approved a franchise for Verizon. If they had not, I imagine
many of my neighbors would have complained loudly. Maybe that is why
Verizon has repeatedly told Wall Street investors, "\[e\]ven in those
states where we don't have the whole state, places like Pennsylvania, we
have become very successful now in getting franchising. So we don't see
that as an issue going forward."[^558] I am pleased with their efforts
and their success, and want to encourage their continued investment.

As I said in the underlying *Notice of Proposed Rule Making*, "Congress
clearly sought to promote competitive cable offerings and to facilitate
the approval of competitive cable franchises in the Cable Act of
1992."[^559] I agree the Commission should do what it can within the
current legal framework to facilitate increased video competition
because it benefits American consumers, promotes U.S. deployment of
broadband networks and services, and enhances the free exchange of ideas
in our democratic society.  

Notwithstanding these worthy goals, I, unfortunately, cannot support
this *Order* because the FCC is a regulatory agency, not a legislative
body. In my years working on Capitol Hill, I learned enough to know that
today's *Order* is legislation disguised as regulation. The courts will
likely reverse such action because the Commission cannot act when it
"does not really define specific statutory terms, but rather takes off
from those terms and devises a comprehensive regulatory regimen.... This
extensive quasi-legislative effort to implement the statute does not
strike \[me\] as merely a construction of statutory phrases."[^560]

 

Today's *Order* is disappointing because while there is bipartisan
agreement that the current video franchising framework should be refined
to better reflect marketplace realities, technological advancement, and
consumer demands, the decision skips the fine-tuning and performs an
extreme makeover. The majority accomplishes today what the elected
representatives of the American people have tried to do through the
legislative process. In doing so, the Commission not only disregards
current law and exceeds its authority, but it also usurps congressional
prerogatives and ignores the plain meaning of Title VI, the cannons of
statutory construction, and the judicial remedy Congress already
provided for unreasonable refusals. In crafting a broadly aggressive and
legally tenuous solution, the majority attempts the legal equivalent of
triple axels and quadruple toe loops that would only impress an Olympic
judge who is willing to overlook slips, stumbles, and falls.

We might keep in mind former President Ronald Reagan's views on
federalism and the role of local governments. In his first State of the
Union Address, President Reagan exhorted Americans to give power back to
local governments:

> Together, after 50 years of taking power away from the hands of the
> people in their states and local communities we have started returning
> power and resources to them. ... Some will also say our states and
> local communities are not up to the challenge of a new and creative
> partnership. Well, that might have been true 20 years ago. ... It\'s
> no longer true today. This Administration has faith in state and local
> governments and the constitutional balance envisioned by the Founding
> Fathers.[^561]

More recently, President George W. Bush echoed this trust in local
government, asserting that "government closest to the people is more
responsive and accountable."[^562] While the Commission has long viewed
the cable franchising process as "a deliberately structured
dualism,"[^563] today's decision is a clear rebuke of this storied
relationship with local government.

Congressional action in 1984, 1992, and 1996 re-affirmed further that it
is Congress' intent that "the franchise process take\[s\] place at the
local level where city officials have the best understanding of local
communities' needs and can require cable operators to tailor the cable
system to meet those needs."[^564] This is clearly set forth in the
purposes of Title 6, wherein Congress made clear that Title 6 would
establish the proper local, state and federal roles.[^565] Congress
established a framework whereby state and local authorities, within
certain federal limits, are primarily responsible for the administration
of the franchising process. That process is inherently local and
fact-specific. Indeed, a one-size-fits-all approach is antithetical to
clear congressional intent that cable systems be "responsive to needs
and interests of local community."[^566]

To be sure, the franchising process is not perfect and, by definition,
negotiations may result in some delay. But Congress, after much
deliberation, created this process to achieve certain stated policy
objectives, which are clearly set out in the Act. [^567] Regardless of
how commenters now feel about this carefully calibrated and negotiated
balance, Congress delegated authority to state and local governments to
make certain decisions and to determine the merit of granting cable
franchises in their respective communities. It then set forth a judicial
remedy if a party is aggrieved by a denial of franchising.[^568] While
Congress has the power to revisit this scheme, and has strongly
considered doing so, until then this Commission must adhere to the law
as written.

Yet today, the Commission is federalizing the franchising process,
taking it upon itself to decide, in every local dispute, what is
"unreasonable," without actually looking at specific, local examples to
determine the real situation.[^569] Instead of acknowledging the vast
dispute in the record as to whether there are actually any unreasonable
refusals being made today, the majority simply accepts in every case
that the phone companies are right and the local governments are wrong,
all without bothering to examine the facts behind these competing
claims, or conduct any independent fact-finding. This is breathtaking in
its disrespect of our local and state government partners and in its
utter disregard for agency action based on a sound record.

Today's *Order* also displays a fundamental misunderstanding about the
commitment of franchising authorities to bring competition to their
citizens. By law, a franchise under Title 6 confers a right of access to
people's property.[^570] Unlike members of this Commission, many state
and local officials are elected and directly accountable to their
citizens. Our knee-jerk embrace of everything interested companies say
while discounting local elected officials on a matter grounded in local
property rights certainly does not inspire a great deal of confidence in
the Commission's ability on the federal level to arbitrate every local
dispute in the country and fairly decide who is unreasonable and who is
not. Even if the Commission had such power, there is no mechanism
outlined in this *Order* to establish how that process would work.
Consequently, the end result will likely be litigation, confusion, abuse
of the process, and a certain amount of chaos. It is sadly ironic that
this agency, which has been recently in violation of one of its own 90
day statutory deadlines, is telling localities to do as I say, not as I
do.[^571]

Over the past two years, Congress held nearly two dozen hearings on
franchising, and sought to amend the Cable Act in an effort to reform
the current franchising process and "strike the right balance between
national standards and local oversight."[^572] Yet, the Commission has
finalized in the dark of night what Congress was unable to resolve in
two years of intensive public deliberations. In contrast to the Senate
where I used to work, one might call the FCC the world's least
deliberative body. And the final product shows it.

Congress would not have expended effort on a major piece of legislation
had its members believed it was not necessary to grant the Commission
explicit authority to do what the majority now contends the Commission
can do under existing law. The House bill proposed a national cable
franchising regime, while the Senate bill proposed an expedited
competitive franchise process which would have required local
authorities to issue franchises pursuant to a standard application
drafted by the Commission. Today's *Order* turns federalism on its head
by putting the Commission in the role of sole arbiter of what is a
"reasonable" or "unreasonable" LFA practice and short-circuiting the
franchising process if an arbitrary shot clock has expired.

While Congress worked to change federal law to create a role for the
Commission in the franchising process, there was and continues to be
considerable state and local activity to reform the local franchising
process. To date, nearly half of all states have adopted state-wide
franchise reform or mandatory state franchise terms, or have engaged in
a democratic process to enact meaningful franchise reform
legislation.[^573] Hundreds of other localities have approved new
franchises, and many more are in the works.

When we launched this proceeding, the central question was "whether the
local franchising process truly is a hindrance to the deployment of
alternative video networks, as some new entrants assert\[ed\]."[^574]
Indeed, the *Local Franchising NPRM* explicitly solicited "empirical
data" and "concrete examples" regarding problems in the franchising
process that FCC could resolve. In response, the record evidence
provides scant, dated, isolated, and unverified examples that fall far
short of demonstrating a systematic failure of state and local
governments to negotiate in good faith and in a reasonable fashion.

According to the Telecommunications Industry Association, "some recent
examples of overly-burdensome, and ... 'unreasonable,' extraneous
obligations"[^575] included: (1) Merton Group's two year negotiations
with Hanover, New Hampshire, which concluded in December, 2004; (2)
Knology's negotiations with Louisville, Kentucky in early 2000; (3)
Knology's franchise negotiations with the greater Nashville, Tennessee
area in March 2000; and (4) Grande Communication's negotiations with San
Antonio and Corpus Christi, Texas in 2002. Additionally,
Fiber-To-The-Home Council cites the efforts of Guadalupe Valley
Telephone Cooperative to seek a franchise in the City of Bulverde, Texas
in 2004. The *Order* itself relies on unconfirmed allegations by Verizon
and AT&T about unreasonable demands and negotiations being drawn out
over an extended period of time; and complaints by U.S. Telecom
Association, Qwest, and Bell South about new entrants accepting
franchise terms that they considered unreasonable in order to avoid
further delay in obtaining the franchise, or, in one case, filing a
"friendly lawsuit."

These examples, based on my review of the record evidence, represent the
extent to which competitive video providers argue that LFAs are delaying
in acting on franchise applications. However, considering the current
franchising process has been in place nearly 15 years and there are over
30,000 LFAs, I find these sporadic examples, individually and
collectively, wholly insufficient to justify the Commission's
quasi-legislative attempt to federalize the local franchising process.
These sparse allegations and anecdotal evidence do not rise to a level
that warrants today's drastic, substantive measures. The Commission's
blind acceptance of a few alleged instances as illustrative of a much
broader problem is a poor and unfortunate reflection of the disregard
for proper agency process. The Commission neither attempted to conduct
any independent fact-finding or due diligence, nor verify the
allegations made by parties who have a vested interest in the outcome of
this proceeding.[^576] Even more shocking, the Commission and the
commenters fail to cite to a single actual, present day problem pending
with any specific LFA.[^577]

Notwithstanding the scant record evidence to justify agency preemption
and the creation of a national, unified franchising process in
contravention of federal law, the Commission conjures its authority to
reinterpret and, in certain respects, rewrite section 621 and Title VI
of the Communications Act, on just two words in section 621(a)(1)[^578]
-- "unreasonably refuse." The Commission ignores the verb that follows:
"to award." A plain reading section 621(a)(1) does not provide a
wholesale "unreasonable" test for all LFA action. Rather, the statutory
language focuses on the act of awarding a franchise. While I agree that
the Commission has authority to interpret and implement the
Communications Act, including Title VI,[^579] the Commission does not
have authority to ignore the plain meaning, structure and legislative
history of section 621, and judicial precedent. [^580]

While the Commission purports to limit its action today to interpreting
"unreasonably refuse," the *Order* stretches section 621 well beyond the
meaning that the statute can bear and, consequentially, changes the
franchising process in fundamental ways. There are certain salient
features of today's *Order* that raise serious legal and policy
implications, requiring careful scrutiny. Most notably, the *Order*: (1)
imposes a 90-day shot clock on LFAs to render a decision on the
franchise application of a competitive applicant with existing
rights-of-way; (2) deems a competitive entrant's franchise application
granted after 90-days; (3) prohibits the denial of a competitive
entrant's application based upon the entrant's refusal to comply with
any build-out obligations; (4) prohibits the denial of a competitive
entrant's application based upon the entrant's refusal to build and
support PEG and I-net; and (5) authorizes a new entrant to refrain from
obtaining a franchise when it is upgrading "mixed use" facilities that
will be used for the delivery of video content.

The *Order* finds that franchising negotiations that extend beyond the
time frames created today by the Commission amount to an unreasonable
refusal to award a competitive franchise within the meaning of
621(a)(1). This finding ignores the plain reading of the first sentence
of section 621(a)(1), which provides that a franchising authority "may
not *unreasonably refuse* *to award* an additional competitive
franchise."[^581] On its face, Section 621(a)(1) does not impose a time
limitation on an LFA's authority to consider, award, or deny a
competitive franchise. The second and final sentence of section
621(a)(1) provides judicial relief, with no Commission involvement
contemplated, when the competitive franchise has been "denied by *a
final decision* of the franchising authority."[^582] There is no
ambiguity here: Congress simply did not impose a time limit on franchise
negotiations, as it did on other parts of Title VI (see discussion
*infra*). Hence, whether you read the first sentence alone or in context
of the entire statutory provision or title, its plain and unambiguous
meaning is contrary to the Commission's interpretation. Section
621(a)(1) provides an expressed limitation on the *nature*, not the
timing, of the refusal to award a competitive franchise.[^583]

Even if I were able to move beyond this *Order*'s facially defective
reading of 621(a)(1), the Commission's selection of 90 days as the only
reasonable time frame for an LFA to consider the franchise application
of a competitive provider that already has rights-of-way access before
it is "deemed granted" is demonstrably inconsistent with the overall
framework of Title VI, unsupported by the record evidence, and quite
arbitrary.

The franchising framework established in Title VI does not support the
Commission's decision to select 90 days as the deadline for a default
grant -- another Commission creation -- to become effective.[^584]
Throughout Part III (Franchising and Regulation) of Title VI, when
Congress specifically decided to impose a deadline for LFAs to consider
sales of cable systems, modification of franchise obligations, and
renewals of existing franchises, in all three instances, Congress chose
120 days.[^585] In other sections of the Act, the prevalent time frame
Congress imposed on LFAs and the Commission is 180 days.[^586] Today,
the Commission, without authority, cannot take the place of Congress and
impose a tighter time frame than Congress ever contemplated to impose on
LFAs in the franchising process. This is well beyond Commission
"line-drawing" authority, which requires the Commission to operate
within the established framework of the authorizing legislation.

While a 90-day deadline arguably could be considered "reasonable," that
is not the statutory standard the Commission is purporting to use as the
basis of its authority. We can only define "*unreasonable*" refusal,
[^587] which could be "foot-dragging" or "stonewalling" that amounts to
a *defacto* denial of a franchise application. This is not the same as
establishing an arbitrary, inflexible 90-day time frame, which overlooks
the fact that 120 or 180 days may be reasonable under certain
circumstances. While the Commission has line-drawing authority in some
cases, the position taken in the *Order* is untenable on its face, given
that Congress set a 120-day deadline for franchise transfers, which tend
to be simpler than awarding new franchises, unless one is willing to
assert that Congress itself was unreasonable. The aggressive schedule
set here, while understandable and even desirable from a policy
perspective, is evidence of the legislative nature of the *Order*.

To make matters worse, the Commission-created 90-day shot clock seems to
function more like a waiting period, during which time the new entrant
has little incentive to engage in meaningful negotiations. An objective
review of the evidence shows that there is sufficient blame on both
sides of the negotiation table. Sometimes, there are good reasons for
delay; and at other times, one side might stall to gain leverage.[^588]
While the majority is certainly aware of these tactics, they fail to
even mention the need for LFAs and new entrants to abide by, or so much
as to have, reciprocal good faith negotiation obligations. The majority
also has ignored the apparent need to develop a complaint or grievance
mechanism for the parties to ensure compliance. Perhaps Congress might
consider imposing on the Commission a binding deadline to resolve
complaints, which would inject an incentive for both sides to negotiate,
meaningfully and in good faith.[^589]

Without anything other than the asserted authority to interpret
"unreasonably refuse," the Commission creates a regulatory reprimand for
an LFA's failure to render a final decision within the
Commission-created time limits. The consequences of the failure to reach
agreement within 90 days is that the LFA will be deemed to have granted
the competitive entrant an interim franchise based on the terms proposed
in the entrant's franchise application. In practicality, this will
confer rights-of-way access over local property. In selecting this
remedy, the Commission purportedly "seeks to provide a meaningful
incentive for local franchising authority to abide by the deadlines
contained in the *Order*."[^590] While the policy goal is understandable
and arguably consistent with congressional intent to encourage the award
of competitive cable franchises, we do not have legal authority to
establish punitive, one-sided consequences, in order to create an
"incentive." Moreover, the Commission ignores that by establishing a
default grant of franchise applications effectively confers local
property rights unilaterally and without regard for inherent local
police powers and public health, safety and welfare.

The Commission cites no credible authority that empowers it to deem a
new entrant's franchise application granted by the LFA and thus confer
local property rights.[^591] When construing a statute, principles of
construction caution against any interpretation that may contravene
existing law or U.S. Constitution. In this case, I am wary of a federal
agency, which purports not to preempt any state-based franchising law,
but yet is prepared to step into the shoes of an LFA -- an
instrumentality of the state -- to grant a franchise application with
all the attendant rights-of-way privileges.[^592]

The Commission rejected an approach that would have deemed an
application "denied" once the shot clock expired without LFA action.
This approach, I maintain, would have expedited the judicial review that
was Congress' chosen remedy, and is infinitely more consistent with the
letter and spirit of the Communications Act, Title VI, and specifically
sections 621(a)(1) and 635. Nowhere in the Act is the Commission granted
the authority to force localities to grant franchises. Simply put, the
Commission's "deemed granted" approach in the *Order* is not a
justifiable choice to fill the perceived gap left open by Congress when
it did not provide a specific remedy against LFA action that is short of
an outright denial of a franchise application. While it is generally
proper for the Commission to exercise its "predictive judgment," that is
only when the Commission has the requisite authority to act within a
certain area and it stays within its authority. Neither exists in this
case.

In terms of build-out, the Commission seems to make a deliberate effort
to overlook the plain meaning of the statute and to substitute its
policy judgment for that of Congress. The Commission concludes that it
is unlawful for LFAs to refuse to grant a competitive franchise on the
basis of an applicants' refusal to agree to any build-out obligations.
The Commission's analysis in this regard is anemic and facially
inadequate.

Section 621(a)(4)(A) provides that "\[i\]n awarding a franchise *the
franchising authority* shall allow the applicant's cable system a
*reasonable period of time* to become capable of providing cable service
to all households in the franchise area." Absent express statutory
authority, the Commission cannot declare it unreasonable for LFAs to
require build-out to all households in the franchise area over a
reasonable period of time. The Commission's argument in this regard is
particularly spurious in light of the stated objective of this *Order*
to promote broadband deployment and our common goal of promoting
affordable broadband to all Americans. In the end, this is less about
fiber to the home and more about fiber to the McMansion.

The Commission is correct on one point, that section 621(a)(4)(A) is
actually a limitation on LFA authority. However, consistent with plain
reading of the provision and its legislative history, Section
621(a)(4)(A) surely is not a grant of authority to the Commission and
does not impose a limitation on the *scope* of a competitive provider's
build-out obligations. Indeed, section 621(a)(4)(A) explicitly limits
the "period of time" to build-out, but an LFA is unrestrained to impose
full, partial, or no build-out obligations on all cable service
providers. As long as an LFA gives a competitive provider "a reasonable
period of time to become capable of providing cable service to all
households in the franchise area," section 621(a)(4)(A) essentially
shields build-out requirement from constituting an "unreasonable
refusal" to grant a competitive franchise. While this policy could be
changed by Congress to facilitate competitive entry, that is not the
current state of the law. An LFA cannot be prohibited from requiring
build-out to all households in the franchise area if an LFA allows "a
reasonable period of time" to do so. The Commission has not been
ordained with a legislative "blue pencil" to rewrite law. Congress
specifically directed LFAs -- not the FCC -- to allow a reasonable
period of time for build-out. As much as the Commission would like it be
its role, Congress gave the role to LFAs, and it is Congress' purview to
modify that explicit delegation of authority.

Assuredly, Section 621(a)(4)(A) does not impose "universal" or "uniform"
build-out requirements on franchise applicants. This may be a reflection
of congressional intent to focus on the needs of the locality.[^593]
However, it does not prohibit LFAs from requiring build-out obligations
as a condition of franchise approval, so long as the competitive
applicant is given a reasonable period of time.

The rapid deployment of broadband has been a goal of mine since I joined
this Commission. Wireline competition in the video market, particularly,
is critical as a means to constrain prices, which in itself is a worthy
goal after year upon year of price hikes. It is also critical to the
future of our democracy that Americans have access to as many forms of
video content as possible so they can make up their own minds about the
issues of the day and not remain subject to a limited number of
gatekeepers who decide what deserves airing based on their own financial
or ideological interests. But, in order for the Commission to promote
these goals effectively, we must operate within our legal authority.

Perhaps the majority has failed to consider the real life consequences
of today's *Order*. For instance, in New York City, competitive entrants
could file the Commission-mandated informational filing that proposes to
serve only Broadway, Madison, or Park Avenue. Under today's *Order*, the
New York City franchising authority would be forbidden from denying the
competitive franchise based solely on the fact that the new entrant
refuses to certain build-out requirements. The LFA is placed in the
difficult position of either denying outright the franchise and absorb
the costs and fees for the ensuing litigation, or agree to a franchise
that is not responsive to needs and interests of local community.

How can the majority declare build-out to be an impediment to entry when
one of the major incumbent phone companies, AT&T, claims that it does
not need a franchise to operate its video service, and the other,
Verizon, has agreed to different, but favorable, build-out obligations
with various states and localities? Under the federalist scheme of the
Act, different jurisdictions can choose models that best suit their
specific needs. For example, in New Jersey, the state-wide franchise
reform law correlates build-out principally to population density, while
build-out obligations in Virginia principally track the entrant's
existing wireline facilities. And in New York City, Verizon and the LFA
were actively negotiating universal build-out over a period of a few
years.

The broad pen with which the majority writes today's *Order* does not
stop with build-out. The *Order* also uses the Commission's alleged
authority under Section 621(a)(1) to determine that any LFA refusal to
award a competitive franchise because of a new entrant's refusal to
support PEG or I-Net is *per se* unreasonable. Although the *Order*
purports to provide clarification with respect to which franchise fees
are permissible under the Act, it muddles the regime and leaves
communities and new entrants with conflicting views about funding PEG
and I-Net. Indeed, Congress provided explicit direction on what
constitutes or does not constitute a franchise fee, with a remedy to the
courts for aggrieved parties.

Today's Order should make clear that, while any requests made by an LFA
unrelated to the provision of cable service *and* unrelated to PEG or
I-NET are subject to the statutory five percent franchise fee cap, these
are not the type of costs excluded from the term "franchise fee" by
section 622(g)(2)(C). That provision excludes from the term "franchise
fee" any "capital costs that are required by the franchise to be
incurred by the cable operator for public, educational, or governmental
access facilities." The legislative history of the 1984 Cable Act
clearly indicates that "any franchise requirement for the provision of
services, facilities or equipment is not included as a 'fee.'" [^594]

PEG facilities and access provide an important resource to thousands of
communities across this country. Equally important, redundancy or even
duplicative I-Net provides invaluable homeland security and public
health, safety and welfare functions in towns, cities, and
municipalities across America. It is my hope that today's decision does
not undermine these and other important community media resource needs.

While my objections to today's *Order* are numerous and substantial,
that should not overlook the real need I believe there is for franchise
reform. Indeed, there is bipartisan support for reform in Congress, and
most LFAs throughout this country are committed to bring video
competition to their jurisdictions. My fundamental concern with this
*Order* is that it is based on such paper-thin jurisdiction, but it is
truly broad in scope. It ignores the plain reading of the section 621,
usurps congressional prerogative and pre-empts LFAs in certain important
respects that directly contradict the Act.

The sum total here is an arrogant case of federal power riding roughshod
over local governments. It turns federalism on its head. While I can
support certain efforts to streamline the process and preclude local
authorities from engaging in unreasonable practices, this item blatantly
and unnecessarily tempts the federal courts to overturn this clearly
excessive exercise of the limited role afforded to us by the law. The
likely outcome of being reversed in Federal Court could have pernicious
and unintended consequences in limiting our flexibility to exercise our
discretion in future worthy endeavors.

Accordingly, I dissent.

**STATEMENT OF**

**COMMISSIONER DEBORAH TAYLOR TATE**

> *Re: Implementation of Section 621(a)(1) of the Cable Communications
> Policy Act of 1984 as amended by the Cable Television Consumer
> Protection and Competition Act of 1992 (MB Docket No. 05-311)*

Today's item, like most we address as an expert agency, is full of
sophisticated technical, legal, and policy arguments. At a high level,
however, I view this as a continuation down a path of deregulatory
policies designed to encourage new market entry, innovation, and
investment. Indeed, "encourag\[ing\] more robust competition in the
video marketplace" by limiting franchising requirements has long been a
stated goal of the Commission as well as a driving force behind
statutory terms we interpret today.

Section 621(a)(1) of the Communications Act of 1934, as amended (the
"Act"), states that franchising authorities ("LFAs") may not
"unreasonably refuse to award" a competitive franchise to provide cable
services. I agree with our conclusion that we have the jurisdictional
authority to interpret this section of the Act and adopt rules to
implement it. In amending Section 621(a)(1) to include the phrase
"unreasonably refuse to award," Congress explicitly limited the
authority of LFAs. However, if an LFA does not make a final decision for
months on end, or perhaps even years as the record indicates, new
entrants are given no recourse. Also, unreasonable demands, similar to
long delays, serve as a further barrier to competitive entry. It is
nonsensical to contend that, despite the limitation on LFA authority in
the Act, LFAs remain the sole arbiters of whether their actions in the
franchise approval process are reasonable. Since the section's judicial
review provision applies only to final decisions by LFAs, absent
Commission action to identify "unreasonable" terms and conditions,
franchise applicants would have no avenue for redress. I conclude that
our broad and well-recognized authority as the federal agency
responsible for administering the Act, including Title VI, permits us to
identify such terms and conditions, and I support our exercise of that
authority.

As with most orders, we explored numerous ways to achieve our goals. I
ultimately support today's item, because I believe that, by streamlining
timeframes for action and providing practical guidelines for both LFAs
and new entrants, the item encourages the development of competition in
the video marketplace and speeds the deployment of broadband across the
country in a platform-neutral manner. These beneficial policy results
should not be underestimated. Our annual reports to Congress on cable
prices, including the report we adopt today, consistently show that
prices are lower where wireline competition is present. And, of course,
broadband deployment enhances our ability to educate our children for
the jobs of tomorrow and ensures that the United States remains
competitive in this global communications age.

Additionally, I am pleased that we recognize -- and do not preempt --
the actions of those states that have reformed their franchise rules.
Their efforts to streamline the process for competitive entry are
laudable.

Finally, it is critical that as we advance pro-competitive policies, we
ensure that our policies do not unreasonably create asymmetry in the
marketplace. Accordingly, I am encouraged that we resolve to address
open issues regarding existing franchise agreements on an expedited
basis. I encourage all interested parties to use your energies toward
assisting us as we seek a way to apply more broadly our conclusions
across all companies.

**STATEMENT OF**

**COMMISSIONER ROBERT M. MCDOWELL**

*Re: In the matter of: Implementation of Section 621(a)(1) of the Cable
Communications Policy Act of 1984 as amended by the Cable Television
Consumer Protection and Competition Act of 1992* *(MB Docket No.
05-311)*

I have long advocated the Commission doing all that it can to open new
opportunities for entrepreneurs to have the freedom to construct new
delivery platforms for innovative new services. More delivery platforms
mean more competition. More competition means consumers can choose among
more innovative offerings. As consumers become more empowered, prices
fall and, as a result, new technologies become more available to help
improve the lives of [all]{.underline} Americans. In short, creating a
de-regulatory environment where competition is given the chance to
flourish kicks off a virtuous cycle of hope, investment, growth and
opportunity.

Today, the Commission is taking a step forward in what I hope will be a
noble quest to spur more competition *across* many delivery platforms
and, where appropriate, *within* delivery platforms. While we already
have some competition in the video market, American consumers are
demanding even more competition. And that's the goal of our action
today: more competition through de-regulation. Perhaps President Ronald
Reagan foresaw an issue like this one when he said, "We have a healthy
skepticism of government, checking its excesses at the same time we're
willing to harness its energy when it helps improve the lives of our
citizens." That is precisely what we are doing today: checking any
government excesses at the local level to unleash free markets which
will help improve the lives of all Americans.

This order strikes a careful balance between establishing a
de-regulatory national framework to clear unnecessary regulatory
underbrush, while also preserving local control over local issues. It
guards against localities making [unreasonable]{.underline} demands of
new entrants, while still allowing those same localities to be able to
protect important local interests through meaningful negotiations with
aspiring video service providers. Local franchising authorities are
still free to deny deficient applications on their own schedule, but we
are imposing a "shot clock" to guard against [unreasonable]{.underline}
delay. After the shot clock runs out, if the locality has not granted or
denied the application, an interim or temporary authority will be
granted to give the parties more time to reach a consensus. If the LFA
feels as though it cannot grant a franchise during this period, they are
free to deny the application. And unhappy applicants still have the
liberty to go to court, as codified under federal law.

Additionally, should communications companies decide to upgrade their
existing [non]{.underline}-cable services networks, localities may not
require them to obtain a franchise. However, this order does not address
whether video service providers can avoid local or federal jurisdiction
over those video services because those services are carried over
differing protocols, such as Internet protocol. That question is
explicitly left for another docket.

In the same spirit of deference to localities, we are [not]{.underline}
pre-empting recently enacted [state]{.underline} laws that make it
easier for new video service providers to enter the market. Those
important frameworks will remain intact. Similarly, on the important
issue of build-out requirements, we preserve local flexibility to
implement important public policy objectives, but we don't allow
localities to require new entrants to serve everybody before they serve
anybody.

Many commenting parties, Members of Congress, and two of my
distinguished colleagues, have legitimately raised questions regarding
the Commission's authority to implement many of these initiatives. I
have raised similar questions. However, as the draft of this item has
evolved and, I think, improved, my concerns have been assuaged, for the
most part. The Commission has ample general and specific authority to
issue these rules under several sections including, but not limited to,
sections: 151, 201, 706, 621, 622, and many others. Furthermore, a
careful reading of applicable case law shows that the courts have
consistently given the Commission broad discretion in this arena. While
I understand the concerns of others, after additional study, I feel as
though we are now on safe legal ground. But I know that reasonable minds
will differ on this point and that appellate lawyers are already on
their way to the court house. That is the American way, I suppose.

This order is not perfect. If it were, it would say that all of the
de-regulatory benefits we are providing to new entrants we are also
providing to [all]{.underline} video providers, be they incumbent cable
providers, over-builders or others. I want to ensure that no
governmental entities, including those of us at the FCC, have any thumb
on the scale to give a regulatory advantage to any competitor. But the
record in this proceeding does not allow us to create a regulatory
parity framework just yet. That's why I am pleased that today's order
and further notice contain the tentative conclusion that the relief we
are granting to new entrants will apply to [all]{.underline} video
service providers once they renew their franchises.

Also, I have consistently maintained during my time here that if shot
clocks are good for others then they are good for the FCC itself.
Accordingly, I am pleased that the Chairman has agreed to release an
order as a result of the further notice no later than six months from
the release date of this order, and regardless of the appellate posture
of this matter. Resolving these important questions soon will give
much-needed regulatory certainty to all market players, spark
investment, speed competition on its way, and make America a stronger
player in the global economy. By the same token, it is no secret that I
would also like to see the Commission act more quickly on petitions
filed by any individual or industry group, especially if those petitions
may help spur competition in any market, be it video, voice, data,
wireless, or countless others. We should never let government inaction
create market distortions.

I thank my entire staff, especially Cristina Pauzé, for their long
hours, dedication and insight regarding this order. I also thank the
tireless Media Bureau and the General Counsel's office for their
tremendous efforts on this important matter. Lastly, I would like to
thank Chairman Martin for his strong leadership on this issue.

[^1]: 47 U.S.C. § 541(a)(1).

[^2]: While there is a sufficient record before us to generally
    determine what constitutes an "unreasonable refusal to award an
    additional competitive franchise" at the local level under Section
    621(a)(1), we do not have sufficient information to make such
    determinations with respect to franchising decisions where a state
    is involved, either by issuing franchises at the state level or
    enacting laws governing specific aspects of the franchising process.
    We therefore expressly limit our findings and regulations in this
    *Order* to actions or inactions at the local level where a state has
    not specifically circumscribed the LFA's authority. In light of the
    differences between the scope of franchises issued at the state
    level and those issued at the local level, we do not address the
    reasonableness of demands made by state level franchising
    authorities, such as Hawaii, which may need to be evaluated by
    different criteria than those applied to the demands of local
    franchising authorities. Additionally, what constitutes an
    unreasonable period of time for a state level franchising authority
    to take to review an application may differ from what constitutes an
    unreasonable period of time at the local level. Moreover, as
    discussed *infra*, many states have enacted comprehensive franchise
    reform laws designed to facilitate competitive entry. Some of these
    laws allow competitive entrants to obtain statewide franchises while
    others establish a comprehensive set of statewide parameters that
    cabin the discretion of LFAs. *Compare* [Tex. Util. Code
    Ann]{.smallcaps}. §§ 66.001-66.017 *with* [Va. Code
    Ann]{.smallcaps}. §§ 15.2-2108.19 et seq. In light of the fact that
    many of these laws have only been in effect for a short period of
    time, and we do not have an adequate record from those relatively
    few states that have had statewide franchising for a longer period
    of time to draw general conclusions with respect to the operation of
    the franchising process where there is state involvement, we lack a
    sufficient record to evaluate whether and how such state laws may
    lead to unreasonable refusals to award additional competitive
    franchises. As a result, our *Order* today only addresses decisions
    made by county- or municipal-level franchising authorities. *See*
    *U.S. Cellular Corp. v. FCC*, 254 F.3d 78, 86 (D.C. Cir. 2001)
    ("agencies need not address all problems in one fell swoop")
    (citations and internal quotation marks omitted); *Personal
    Watercraft Industry Assoc. v. Dept. of Commerce,* 48 F.3d 540, 544
    (D.C. Cir. 1995) ("An agency does not have to 'make progress on
    every front before it can make progress on any front.') (quoting
    *United States v. Edge Broadcasting Co*., 509 U.S. 418, 434 (1993));
    *National Association of Broadcasters v. FCC,* 740 F.2d 1190, 1207
    (D.C. Cir. 1984) ("\[A\]gencies, while entitled to less deference
    than Congress, nonetheless need not deal in one fell swoop with the
    entire breadth of a novel development; instead, 'reform may take
    place one step at a time, addressing itself to the phase of the
    problem which seems most acute to the \[regulatory\] mind.'")
    (citations and internal quotation marks omitted, alteration in
    original). Moreover, it does not address any aspect of an LFA's
    decision-making to the extent that such aspect is specifically
    addressed by state law. For example, the state of Massachusetts
    provides LFAs with 12 months from the date of their decision to
    begin the licensing process to approve or deny a franchise
    application. 207 Mass. Code Regs. 3.02 (2006). These laws are not
    addressed by this decision. Consequently, unless otherwise stated,
    references herein to "the franchising process" or "franchising"
    refer solely to processes controlled by county- or municipal-level
    franchising authorities, including but not limited to the ultimate
    decision to award a franchise.

[^3]: References throughout this *Order* to "video programming" or
    "video services" are intended to mean cable services.

[^4]: *See USTA v. FCC*, 359 F.3d 554, 579-80 (D.C. Cir. 2004).

[^5]: Section 602(6) of the Communications Act, 47 U.S.C. § 522(6)
    (defining "cable service" as "(A) the one-way transmission to
    subscribers of (i) video programming, or (ii) other programming
    service, and (B) subscriber interaction, if any, which is required
    for the selection or use of such video programming or other
    programming service").

[^6]: Section 602(5) of the Communications Act, 47 U.S.C. § 522(5)
    (defining "cable operator" as "any person or group of persons
    (A) who provides cable service over a cable system and directly or
    through one or more affiliates owns a significant interest in a
    cable system, or (B) who otherwise controls or is responsible for,
    through any arrangement, the management and operation of such a
    cable system").

[^7]: 47 U.S.C. § 541(b)(1) ("Except to the extent provided in paragraph
    (2) and subsection (f), a cable operator may not provide cable
    service without a franchise.").

[^8]: 47 U.S.C. § 541(a)(1) (stating that "\[a\] franchising authority
    may award, in accordance with the provisions of this title, 1 or
    more franchises within its jurisdiction"). A "franchising authority"
    is defined to mean "any governmental entity empowered by Federal,
    State, or local law to grant a franchise." Section 602(10) of the
    Communications Act, 47 U.S.C. § 522(10). As noted above, references
    herein to "local franchising authorities" or "LFAs" mean only the
    county or municipal governmental entities empowered to grant
    franchises.

[^9]: Cable Communications Policy Act of 1984, Pub. L No. 98-549, 98
    Stat. 2779.

[^10]: *See*, *e.g.*, H.R. [Rep. No]{.smallcaps}. 98-934, at 19 (1984)
    ("\[The 1984 Cable Act\] establishes a national policy that
    clarifies the current system of local, state and federal regulation
    of cable television. This policy continues reliance on the local
    franchising process as the primary means of cable television
    regulation, while defining and limiting the authority that a
    franchising authority may exercise through the franchise process.
    ... \[This legislation\] will preserve the critical role of
    municipal governments in the franchise process, while providing
    appropriate deregulation in certain respects to the provision of
    cable service."); *id*. at 24 ("It is the Committee's intent that
    the franchise process take place at the local level where city
    officials have the best understanding of local communications needs
    and can require cable operators to tailor the cable system to meet
    those needs. However, if that process is to further the purposes of
    this legislation, the provisions of these franchises, and the
    authority of the municipal governments to enforce these provisions,
    must be based on certain important uniform federal standards that
    are not continually altered by Federal, state and local
    regulation.").

[^11]: Cable Communications Policy Act of 1984, Pub. L. No. 98-549, 98
    Stat. 2779, § 621 (1984).

[^12]: *See generally Competition, Rate Deregulation and the
    Commission's Policies Relating to the Provision of Cable Television
    Service*, 5 FCC Rcd 4962 (1990) ("Report").

[^13]: *Id*. at 4974; s*ee also id*. at 5012 ("This Commission is
    convinced that the most effective method of promoting the interests
    of viewers or consumers is through the free play of competitive
    market forces."). The Report also recommended that Congress
    "prohibit franchising rules whose intent or effect is to create
    unreasonable barriers to the entry of potential competing
    multichannel video providers," "limit local franchising requirements
    to appropriate governmental interests (*e.g.*, public health and
    safety, repair and good condition of public rights-of-way, and the
    posting of an appropriate construction bond)," and "permit
    competitors to enter a market pursuant to an initial, time-limited
    suspension of any 'universal \[build-out\]' obligation." *Id*.

[^14]: *See* H.R. [Rep. No]{.smallcaps}. 102-628, at 47 (1992) ("The
    Commission recommended that Congress, in order to encourage more
    robust competition in the local video marketplace, prevent local
    franchising authorities from unreasonably denying a franchise to
    potential competitors who are ready and able to provide service.").
    The Commission has previously recognized that "Congress incorporated
    the Commission's recommendations in the 1992 Cable Act by amending
    § 621(a)(1) of the Communications Act." *Implementation of Section
    19 of the Cable Television Consumer Protection and Competition Act
    of 1992 (Annual Assessment of the Status of Competition in the
    Market for the Delivery of Video Programming)*, 9 FCC Rcd 7442, 7469
    (1994).

[^15]: Cable Television Consumer Protection and Competition Act of 1992,
    Pub. L. No. 102-385, 106 Stat. 1460.

[^16]: 47 U.S.C. § 541(a)(1) (emphasis added).

[^17]: H.R. [Conf]{.smallcaps}. [Rep. No]{.smallcaps}. 102-862, at 1231
    (1992).

[^18]: S. [Rep. No.]{.smallcaps} 102-92, at 47 (1991).

[^19]: *Id.*

[^20]: [S. Rep. No]{.smallcaps}. 102-92, at 9 (quoting members of the
    cable industry who acknowledged that "because the franchise limits
    the customers to a single provider in the market, other
    'customer-oriented' intangibles relating to the expectation of
    future patronage do not exist for a cable system. There is a
    goodwill in a monopoly. Customers return, not because of any sense
    of satisfaction with the monopolist, but rather because they have no
    other choices"); *see also id*. at 3-9, 13-14, 20-21.

[^21]: 47 U.S.C. § 541(a)(1).

[^22]: 47 U.S.C. § 555(a).

[^23]: *See Implementation of Section 621(a)(1) of the Cable
    Communications Policy Act of 1984 as amended by the Cable Television
    Consumer Protection and Competition Act of 1992*, 20 FCC Rcd 18581,
    18584 (2005) ("*Local Franchising NPRM*") (citing comments of
    Alcatel, BellSouth, Broadcast Service Providers Assoc., and
    Consumers for Cable Choice, filed in MB Docket No. 05-255).

[^24]: We refer herein to "new entrants," "new cable entrants," and "new
    cable competitors" interchangeably. Specifically, we intend these
    terms to describe entities that opt to offer "cable service" over a
    "cable system" utilizing public rights-of-way, and thus are defined
    under the Communications Act as "cable operator\[s\]" that must
    obtain a franchise. Although we recognize that there are numerous
    other ways to enter the MVPD market (*e.g.*, direct broadcast
    satellite ("DBS"), wireless cable, private cable), our actions in
    this proceeding relate to our authority under Section 621(a)(1) of
    the Communications Act, and thus are limited to competitive entrants
    seeking to obtain cable franchises.

[^25]: *Local Franchising NPRM*, 20 FCC Rcd at 18588.

[^26]: *Id*.

[^27]: *Id.*

[^28]: *Id.* at 18591.

[^29]: *Id.* at 18588.

[^30]: *Id.* at 18592.

[^31]: *Id. See also* Comments of Verizon, MB Docket No. 05-255 at 12
    (filed Sept. 19, 2005) (arguing that "\[m\]any local franchising
    authorities unfortunately view the franchising process as an
    opportunity to garner from a potential new video entrant concessions
    that are in no way related to video services or to the rationales
    for requiring franchises"). *See* Appendix A for a list of all
    commenters and reply commenters.

[^32]: *Local Franchising NPRM*, 20 FCC Rcd at 18592.

[^33]: *Id.* at 18590.

[^34]: *Id.* at 18581.

[^35]: *Id.* at 18590.

[^36]: Section 706 of the Telecommunications Act of 1996, 47 U.S.C. §
    157 nt.

[^37]: *See USTA v. FCC*, 359 F.3d 554, 580, 583 (D.C. Cir. 2004). *See
    also* USTelecom Comments at 15; TIA Comments at 16-17.

[^38]: *See, e.g.*, [Md. Ann. Code]{.smallcaps} art. 23A § 2(b)(13);
    [Or. Const. Art. I,]{.smallcaps} § 21 (2005); [Colo. Rev. Stat.
    Ann.]{.smallcaps} § 30-35-201 (West 2005). We also note that several
    states have adopted statutes governing the franchising process. For
    example, some states require public hearings or special elections.
    *See* League of Minnesota Cities ("LMC") Comments at 6-8, South
    Slope Comments at 6. Other states have laws limiting the range of
    issues that can be negotiated in a franchise. *See* Cablevision
    Comments at 12, LMC Comments at 15. As we discuss below, certain
    states have adopted new franchising laws that allow providers to
    apply for franchises through state franchising authorities ("SFAs"),
    and we note that lawmakers in those states adopted these new
    franchising laws to address the needs of the current marketplace.
    Furthermore, certain states have traditionally considered franchise
    applications at the state level. *See, e.g.*, [Haw. Rev.
    Stat.]{.smallcaps} § 440G-4 (2006), [Conn. Gen. Stat.
    Ann]{.smallcaps}. § 16-331 (West 2006), [Vt. Stat. Ann]{.smallcaps}.
    tit. 30, § 502 (2006). The record indicates that state level
    franchising may provide a practical solution to the problems that
    facilities-based entrants face when seeking to provide competitive
    services on a broader basis than county or municipal boundaries and
    seek to provide service in a significant number of franchise areas.
    *See, e.g.*, AT&T Reply at 21, 37, NTCA Comments at 10.

[^39]: *See, e.g.*, Mobile, Ala. Comments at 2 (discussing its Master
    Cable Services Regulatory Ordinance that was created to ensure all
    potential entrants were treated in a uniform manner); Ontario, Cal.
    Comments at 5-6 (discussing draft master ordinance that will ensure
    a "fair and equitable application process" for all new entrants).

[^40]: *See, e.g.*, MO-NATOA Comments at 8 ("some localities work
    together to franchise and manage rights-of-way"); MHRC Comments at 1
    (MHRC is a consolidated regulatory authority for six Oregon
    localities).

[^41]: *See, e.g.*, Verizon Comments at 27, Att. A, para. 10, 59-75;
    BellSouth Comments at 2, 11; Letter from Jeffrey S. Lanning,
    Associate General Counsel, USTelecom, to Marlene H. Dortch,
    Secretary, Federal Communications Commission at 17-18 (July 28,
    2006) ("USTelecom *Ex Parte*").

[^42]: Verizon Comments at 27, Att. A, para. 10.

[^43]: AT&T Comments at 17.

[^44]: BellSouth Comments at 11.

[^45]: Qwest Comments at 14.

[^46]: *See* BSPA Comments at 1-2; Cavalier Telephone Comments at 2;
    South Slope Comments at 2; Cincinnati Bell Comments at 1; Hawaiian
    Telcom Comments at 1; Minnesota Telecom Alliance Comments at 2. In
    addition to video services, many of these new entrants also intend
    to provide broadband services. *See, e.g.*, Verizon Comments at i;
    BSPA Comments at 1; Cavalier Telephone Comments at 2.

[^47]: [Tex. Util. Code Ann]{.smallcaps}. §§ 66.001, 66.003. Holders of
    these franchises are required to pay franchise fees, comply with
    customer service standards, and provide the capacity for PEG access
    channels that a municipality has activated under the incumbent cable
    operator's franchise agreement. *Id.* at §§ 66.005, 66.006, 66.008,
    66.009, 66.014. Franchisees are not required to comply with any
    build-out requirements, but they are prohibited from denying service
    to any area based on the income level of that area. *Id.* at §
    66.007.

[^48]: [Ind. Code]{.smallcaps} § 8-1-34-16 (2006); 2006 Kan. Sess. Laws
    93 (codified at [Kan. Stat. Ann]{.smallcaps}. § 17-1902); [S.C. Code
    Ann.]{.smallcaps} § 58-12-310 et seq. (2006); Assemb., No. 804,
    212th Leg. (N.J. 2006); 2006 N.C. Sessions Laws 151 (to be codified
    1/1/2007 at [N.C. Gen Stat. Ann]{.smallcaps}. § 66-351 (West 2006);
    [Cal. Pub. Util. Code]{.smallcaps} § 401, et seq.;.

[^49]: [Va. Code Ann]{.smallcaps}. § 15.2-2108.1:1 et seq.

[^50]: 2006 Mich. Pub. Acts 480.

[^51]: S 1984, 2006 Sess. (Fla. 2006), HB 1199, 2006 Sess. (Fla. 2006).

[^52]: HB 699, 2006 Reg. Sess. (La. 2006).

[^53]: LR 2800, 2006 Leg., 2d. Reg. Sess. (Me. 2005).

[^54]: SB 816, 2006 Sess. (Mo. 2006).

[^55]: *See Local Franchising NPRM*, 20 FCC Rcd at 18588.

[^56]: For example, in Michigan, a number of LFAs have granted
    competitive franchises to local telecommunications companies. *See*
    Ada Township, *et al.*, Comments at 18-26. Vermont has granted
    franchises to competitive operators in Burlington, Newport, Berlin,
    Duxbury, Stowe, and Moretown. VPSB Comments at 5. Mt. Hood Cable
    Regulatory Commission ("MHRC"), a consolidated regulatory authority
    for six Oregon localities, has negotiated franchises with cable
    overbuilders, although those companies ultimately were unable to
    deploy service. MHRC Comments at 20-21. Similarly, the City of Los
    Angeles has granted two competitive franchises, but each of the
    competitors went out of business shortly after negotiating the
    franchise. City of Los Angeles Comments at 15; *see also* San Diego
    County, Cal. Comments at 4. Miami-Dade has granted 11 franchises to
    six providers, and currently is considering the application of
    another potential entrant. Miami-Dade Comments at 1-2. New Jersey
    has granted five competitive franchises, but only two ultimately
    provided service to customers. NJBPU Comments at 3. *See also,
    e.g.*, AT&T Reply Comments at 11-13; Chicago, Ill. Comments at 2-3;
    City of Charlotte and Mecklenburg County, N.C. Comments at 12-13;
    Henderson, Nev. Comments at 5.

[^57]: For example, Verizon has obtained franchises covering
    approximately 200 franchise areas. *See*
    http://newscenter.verizon.com/press-releases/verizon/2006/verizon-to-bring-western.html.

[^58]: Qwest Reply at 13-14; USTelecom *Ex Parte* at 17-18.

[^59]: Verizon Comments at 31-34; AT&T Reply at 22-23; BellSouth
    Comments at 10; Cavalier Telephone Comments at 1. *See also*
    Mercatus Center Comments at 39-43.

[^60]: *See, e.g.,* DOJ *Ex Parte* at 3

[^61]: FTTH Council Comments at 26.

[^62]: Verizon Reply Comments at 35. These figures do not include
    Verizon's franchise applications in Texas, which now authorizes
    statewide franchises. *See supra* para. 16.

[^63]: Verizon Comments at 31-32.

[^64]: BellSouth Comments at 2.

[^65]: BellSouth Comments at 11. BellSouth's franchise in Cobb County,
    Ga. took approximately 32 months to obtain; its franchises in Davie,
    Fla. and Orange County, Fla. took 29 and 28 months, respectively.
    BellSouth Comments Decl. of Thompson T. Rawls, II, Exh. A.

[^66]: AT&T Reply at 6.

[^67]: BellSouth Reply at 7.

[^68]: AT&T Reply at 24.

[^69]: The term "local exchange carrier" means any person that is
    engaged in the provision of telephone exchange service or exchange
    access. 47 U.S.C. § 153(26). For the purposes of Section 251 of the
    Communications Act, "the term 'incumbent local exchange carrier'
    means, with respect to an area, the local exchange carrier that (A)
    on the date of enactment of the Telecommunications Act of 1996,
    provided telephone exchange service in such area; and (B)(i) on such
    date of enactment, was deemed to be a member of the exchange carrier
    association ...; or (B)(ii) is a person or entity that, on or after
    such date of enactment, became a successor or assign of a member
    \[of the exchange carrier association\]." 47 U.S.C. § 251(h)(1). A
    competitive LEC is any LEC other than an incumbent LEC. A LEC will
    be treated as an ILEC if "(A) such carrier occupies a position in
    the market for telephone exchange service within an area that is
    comparable to the position occupied by a carrier described in
    paragraph \[251(h)\](1); (B) such carrier has substantially replaced
    an incumbent local exchange carrier described in paragraph
    \[251(h)\](1); and (C) such treatment is consistent with the public
    interest, convenience, and necessity and the purposes of this
    section." 47 U.S.C. § 251(h)(2).

[^70]: NTCA Comments at 4, 10.

[^71]: We note that certain franchising authorities may have existing
    authority to regulate LECs through state and local rights-of-way
    statutes and ordinances.

[^72]: Recognizing this distinction, some states have enacted or
    proposed streamlined franchising procedures specifically tailored to
    entities with existing access to public rights-of-way. *See, e.g.*,
    [Virginia Code Ann]{.smallcaps}. § 15.2-2108.1:1 et seq.); HF-2647,
    2006 Sess. (Iowa 2006) (this proposed legislation would grant
    franchises to all telephone providers authorized to use the
    right-of-way without any application or negotiation requirement).
    *See also* South Slope Comments at 11 (duplicative local franchising
    requirements imposed on a competitor with existing authority to
    occupy the rights-of-way are unjustified and constitute an
    unreasonable barrier to competitive video entry).

[^73]: *See* Northwest Suburbs Cable Communications Commission Comments
    at 5-6 (rare instance of competitive franchise denial).

[^74]: *See* 47 U.S.C. §§ 541(a)(1), 555(a).

[^75]: *See* Verizon Comments at 30-34; Verizon Reply Comments at 2,
    34-37; AT&T Reply Comments at 24; NTCA Comments at 4, 10.

[^76]: *See, e.g.,* USTelecom *Ex Parte* at 20 (Grand Rapids, Minnesota
    insisted that Paul Bunyan Telephone Cooperative provide fiber
    connections to every municipal building in the City, including a
    water treatment plant); Qwest *Ex Parte* at 7 (initially agreed to
    mandatory build-out provisions in certain situations); BellSouth
    Comments at 15-16 (in Dekalb County, Georgia, BellSouth makes PEG
    payments and I-Net support payments that drive total fees
    significantly above 5 percent of gross revenue).

[^77]: For example, in Maryland, Verizon filed suit against Montgomery
    County, seeking to invalidate some of the County's franchise rules,
    and requesting that the County be required to negotiate a franchise
    agreement, after the parties unsuccessfully attempted to negotiate a
    franchise beginning in May 2005. *See* Complaint, *Verizon Maryland,
    Inc. v. Montgomery County, Md*., No. 06-01663-MJG (N.D. Md. June 29,
    2006). The court denied Verizon's Motion for Preliminary Injunction
    in August, and ordered the parties to mediation. *See* *Verizon
    Maryland, Inc. v. Montgomery County, Md*., Order, No. 06-01663-MJG
    (N.D. Md. August 8, 2006). Since then, the parties have negotiated a
    franchise agreement and the County held a public hearing on the
    draft franchise agreement. *See* Press Release, Montgomery County,
    Md., County Negotiates Cable Franchise Agreement with Verizon;
    Agreement Resolves Litigation, Provides Increased Competition for
    Cable Service (Sept. 13, 2006) *available at*
    [http://www.montgomerycountymd.gov/apps/News/press/PR_details.asp?PrID=2582]{.underline}.
    The County Council granted the negotiated franchise on November 28,
    2006. Neil Adler, *Montgomery officials approve Verizon cable
    franchise*, [Washington Business Journal,]{.smallcaps} Nov. 28,
    2006, *available at* http://washington.bizjournals.com/
    washington/stories/2006/11/27/daily23.html. Qwest's experience with
    the City of Colorado Springs, Colorado is a particularly onerous
    example. *See* Letter from Melissa E. Newman, Vice President,
    Federal Regulatory, Qwest, to Marlene H. Dortch, Secretary, Federal
    Communications Commission (June 13, 2006), Letter from Kenneth L.
    Fellman, Counsel to Colorado Springs, Colorado, to Marlene H.
    Dortch, Secretary, Federal Communications Commission (July 26,
    2006). The city charter in Colorado Springs requires that a
    franchise agreement be approved by voters rather than a franchising
    authority. Despite the fact that the Communications Act and federal
    case law deem this approach unlawful, the Colorado Springs City
    Counsel would not grant a franchise absent a vote, and invited Qwest
    to file a "friendly lawsuit" (presumably at Qwest's expense) to
    invalidate that provision of the city charter. 47 U.S.C. §§ 522(10),
    541, *Qwest Broadband Services, Inc. v. City of Boulder*, 151
    F.Supp.2d 1236 (D. Colo. 2001), Letter from Melissa E. Newman, Vice
    President, Federal Regulatory, Qwest, to Marlene H. Dortch,
    Secretary, Federal Communications Commission at 2 (June 13, 2006).

[^78]: *See* Qwest Comments at 9.

[^79]: *See, e.g.*, South Slope Comments at 7.

[^80]: Cablevision Reply at 5; Orange County Comments at 5; Palm Beach
    County Comments at 3. *See* Comcast Comments at 8-9.

[^81]: Comcast Comments at 16; Cablevision Reply at 2. The incumbent
    cable operators accuse Verizon of making unreasonable demands
    through its model franchise. Verizon asserts that it submits a model
    franchise to begin negotiations because uniformity is necessary for
    its nationwide service deployment. Verizon Reply at 40. Verizon
    states that it is willing to negotiate and tailor the model
    franchise to each locality's needs. *Id.*

[^82]: LMC Comments at 18.

[^83]: We recognize that some franchising authorities move quickly, as a
    matter of law or policy. The record indicates that some LFAs have
    stated that they welcome competition to the incumbent cable
    operator, and actively facilitate such competition. *See, e.g.*,
    Manatee County, Fla. Comments at 4, Ada Township, *et al*. Comments
    at 16-27. For example, a consolidated franchising authority in
    Oregon negotiated and approved competitive franchises within 90
    days. *See* Mt. Hood Cable Regulatory Commission Comments at 20. An
    advisory committee in Minnesota granted two competitive franchises
    in six months, after a statutorily imposed eight-week notice and
    hearing period. *See* Southwest Suburban Cable Commission Comments
    at 5, 7. While we laud the prompt disposition of franchise
    applications in these particular areas, the record shows that these
    examples are atypical.

[^84]: *See* Chicago Comments at 4; Indianapolis Comments at 8.

[^85]: Miami-Dade Comments at 3.

[^86]: *See, e.g.*, ANC Reply at 5-6. Commenters assert that Verizon's
    model agreement prevents LFAs from exercising control over
    rights-of-way, does not require Verizon to repair damage to
    municipal property due to construction, does not require service to
    all residents, and contains an "opt-out" provision that allows
    Verizon to abandon an area it does not find profitable. ANC Reply at
    8-10.

[^87]: Verizon Reply at 38-40.

[^88]: Verizon Comments at 53.

[^89]: Cablevision Comments at 3.

[^90]: *See* AT&T Comments at 14; Verizon Comments at 27. In addition to
    negotiating with LFAs, competitors also have lobbied for broad
    franchising reform. To be sure, when prospective entrants anticipate
    franchise reform may occur at the state level, there is evidence in
    the record they often have not sought franchises at the local level.
    *See* Fairfax County, Va. Comments at 4. Such tactics, however, do
    not indicate that prospective entrants are not serious about
    entering the market but rather represent a strategic judgment as to
    the best method of accomplishing that goal.

[^91]: Qwest Comments at 9.

[^92]: NCTA Comments at 11; Comcast Reply at 16; Cablevision Reply at 9;
    City of Murrieta, Ca. Comments at 2.

[^93]: *See* Verizon Reply Comments at 37.

[^94]: Verizon Reply Comments at 37-38. *See also* NTCA Comments at
    10-11 (citing Texas PUC testimony at February Commission Meeting
    held in Keller, Texas, which revealed that 15 companies have filed
    applications to serve 153 discrete communities in Texas since
    adoption of the new statewide franchising scheme).

[^95]: Comcast Comments at 17. For example, Comcast reports that when it
    acquired AT&T Broadband, it received timely approval from more than
    1,800 LFAs within eight months. The company also states that it was
    well along in the process of receiving approvals from more than
    1,500 LFAs for the Adelphia transaction.

[^96]: AT&T Reply at 22.

[^97]: The term "overbuild" describes the situation in which a second
    cable operator enters a local market in direct competition with an
    incumbent cable operator. In these markets, the second operator, or
    "overbuilder," lays wires in the same area as the incumbent,
    "overbuilding" the incumbent's plant, thereby giving consumers a
    choice between cable service providers*. See Implementation of
    Section 3 of the Cable Television Consumer Protection and
    Competition Act of 1992, Statistical Report on Average Prices for
    Basic Service, Cable Programming Services, and Equipment*, 20 FCC
    Rcd 2718, 2719 n.6 (2005).

[^98]: Cablevision Reply at 6. Comcast states that the overbuilder
    industry as a whole has more than 16 million households under active
    franchise and two million households under franchise in anticipation
    of future network build-outs. Comcast Comments at 5-6 (citing
    Broadband Service Providers Association Comments, MB Docket No.
    05-255, at 7 (filed Sept. 19, 2005)).

[^99]: Charter Comments at 4. Specifically, Charter states that it
    entered the cable market in earnest in the late 1990s and has spent
    the last five years investing billions of dollars to upgrade its
    cable systems and deploy advanced broadband services in more than
    4,000 communities. Charter Comments at 2. During Charter's peak
    period of growth, it secured over 2,000 franchise transfers with
    LFAs and invested several billion dollars to upgrade systems, all
    while subject to significant competition from DBS. Charter Comments
    at 5.

[^100]: BellSouth Reply at 11.

[^101]: Comcast Comments at 4-5.

[^102]: BellSouth Reply at 13 (citing RCN's petition to deny the
    AT&T/Comcast merger application).

[^103]: *See, e.g.*, Qwest Comments at 2; Cincinnati Bell Comments at
    10-11; South Slope Comments at 7-9; NTCA Comments at 6-7; Cavalier
    Telephone Comments at 5; BSPA Comments at 6. *See also* Letter from
    Lawrence Spiwak, President, Phoenix Ctr. for Advanced Legal and
    Econ. Pub. Policy Studies, to Marlene Dortch, Secretary, Federal
    Communications Commission, at Att., *Phoenix Center Policy Paper
    Number 22:* *The Consumer Welfare Cost of Cable "Build-out" Rules*,
    at 3 ("build-out requirements are, on average, counterproductive and
    serve to *slow down* deployment of communications networks") (March
    13, 2006) ("*Phoenix Center Build-Out Paper*").

[^104]: Qwest Comments at 2.

[^105]: Cincinnati Bell Comments at 10-11; South Slope Comments at 7-9;
    NTCA Comments at 6-7 (because the risk is great, the service
    provided by the new entrants must be guided by sound business
    principles; forcing a new entrant to build out an entire area before
    such action is financially justified is tantamount to forcing that
    entrant out of the video business); USTelecom *Ex Parte* at 8-11.

[^106]: Cavalier Telephone Comments at 5; BSPA Comments at 6 (a number
    of competitive franchises have been renegotiated or converted to OVS
    because the operator could not comply with unreasonable and
    uneconomic build-out requirements).

[^107]: *See* MMTC Comments at 13-24; Consumers for Cable Choice
    Comments at 8; DOJ *Ex Parte* at 12-13, 15 (stating that build-out
    requirements lead to abandonment of entry, less efficient
    competition, or higher prices).

[^108]: *See, e.g.*, USTelecom Comments at 24 (citing example of
    Shenandoah Telecommunications, which cannot provide service to an
    entire county, and thus cannot provide service at all). *See also
    Phoenix Center Build-Out Paper* at 1, 3; DOJ *Ex Parte* at 12-13,
    15.

[^109]: *See, e.g.*, Alcatel Comments at 10-11; AT&T Comments at 44;
    BellSouth Reply at 6; NTCA Comments at 6.

[^110]: *See, e.g.*, AT&T Comments at 44; Qwest Comments at 2; Ad Hoc
    Telecom Manufacturer Coalition Comments at 5; DOJ *Ex Parte* at
    12-13, 15.

[^111]: Not all new entrants to the video market with existing
    telecommunications facilities are engaging in the upgrades to which
    Verizon and AT&T have committed. Cavalier Telephone, for example, is
    delivering IPTV over copper lines. Such delivery is limited,
    however, by ADSL-2 technology. Cavalier Telephone argues that it is
    unreasonable to require that it become capable of providing service
    to all households in a franchise area, which would require Cavalier
    Telephone to dig up rights-of-way and install duplicative
    facilities, which it has specifically sought to avoid doing by
    virtue of relying on the unbundled local loop. Cavalier Telephone
    Comments at 5. Similarly, Guadalupe Valley Telephone Cooperative
    (GVTC) could not deploy service in the face of differing build-out
    requirements across jurisdictions. *See* AT&T Reply at 37. Once
    Texas's new statewide franchising law went into effect, however,
    deployment became economically feasible for GVTC. *See id. See also*
    *Phoenix Center Build-out Paper at* 1, 3, 4 (build-out rules can
    significantly increase the costs of a new video entrant, and are
    actually counter-productive, serving primarily to deter new video
    entry and slow down deployment of communications networks); *Phoenix
    Center Redlining Paper* at 3 (even when build-out requirements are
    applied to new entrants altruistically, the requirements can be
    self-defeating and often erect insurmountable barriers to entry for
    new firms); BSPA at 4 (When a new network operator is forced to
    comply with a build-out that is equal to the existing incumbent
    cable footprint, it is forced to a build on a timeframe and in
    geographic areas where the cost to build and customer density will
    likely produce an economic loss for both network operators.), DOJ
    *Ex Parte* at 12-13, 15.

[^112]: Verizon Comments at 41-42. Before the new statewide legislation,
    a Texas community had made the same request.

[^113]: *See* Qwest Comments at 9.

[^114]: *Id*. at 10.

[^115]: *See, e.g.*, GMTC Comments at 15; Philadelphia Reply at 2; FTTH
    Council at 33-34; US Telecom at 30-31; TCCFUI Comments at 11, 15.

[^116]: BSPA Comments at 5-6; BellSouth Comments at 44; Verizon Comments
    at 33-34 (noting that some LFAs are requesting indemnification from
    competitive applicants). For example, Insight Communications filed
    suit against the City of Louisville and Knology. Although the LFA
    and Knology ultimately won, the delay resulted in Knology declining
    to enter that market. BSPA Comments at 5-6.

[^117]: *See* AT&T Comments at 51.

[^118]: Qwest Comments at 8.

[^119]: FTTH Council Comments at 33-34.

[^120]: Verizon Reply at 70-71.

[^121]: NTCA Comments at 7. *See* *also* DOJ *Ex Parte* at 12-13, 15;
    FTTH Council Comments at 29 (competitive entrants face a riskier
    investment than incumbents faced when they entered; moreover,
    incumbent firms have market power in the video market, their
    customers have little choice, and their costs can be spread over a
    large base, whereas new entrants do not have this same advantage).
    Although it is sometimes possible to renegotiate a build-out
    requirement if the new entrant cannot meet it, in many cases the LFA
    imposes substantial penalties for failure to meet a build-out
    requirement. *See* Anne Arundel County *et al*. Comments at 4, FTTH
    Council Comments at 34 (citing Grande Communications franchise
    agreement establishing penalty of \$2,000 per day); Letter from
    Melissa E. Newman, Vice President-Federal Regulatory, Qwest, to
    Marlene H. Dortch, Secretary, Federal Communications Commission,
    (Apr. 26, 2006), Attachment at 7 ("Qwest *Ex Parte*").

[^122]: *Id.* at 13.

[^123]: Mercatus Center Comments at 39-41; *Phoenix Center Build-Out
    Paper* at 1; Letter from Stephen Pociask, President, American
    Consumer Institute, to Marlene Dortch, Secretary, Federal
    Communications Commission (March 3, 2006).

[^124]: *See id*.

[^125]: Mercatus Center Comments at 41. The Mercatus Center bases this
    assertion on the evidence that cable rate regulation does not affect
    cable rates significantly, which suggests that cable providers are
    not subsidizing less-profitable areas with the returns from
    more-profitable areas. *Id.*

[^126]: *Phoenix Center Build-Out Paper* at 1.

[^127]: ACI Comments at 7.

[^128]: AT&T Comments at 48 (citing Thomas Hazlett & George Ford, *The
    Fallacy of Regulatory Symmetry: An Economic Analysis of the "Level
    Playing Field" in Cable TV Franchising Statutes*, 3 [Business and
    Politics]{.smallcaps} issue 1, at 25-26 (2001)).

[^129]: AT&T Comments at 48 (citing Thomas Hazlett & George Ford, *The
    Fallacy of Regulatory Symmetry: An Economic Analysis of the "Level
    Playing Field" in Cable TV Franchising Statutes*, 3 [Business and
    Politics]{.smallcaps} issue 1, at 25-26 (2001)).

[^130]: Qwest Comments at 10.

[^131]: *Implementation of Section 3 of the Cable Television Consumer
    Protection and Competition Act of 1992: Statistical Report on
    Average Rates for Basic Service, Cable Programming Service, and
    Equipment*, MM Docket. No. 92-266, FCC 06-179, para. 12 (rel. Dec.
    27, 2006) ("2005 Cable Price Survey"). *See also* *Annual Assessment
    of the Status of Competition in the Market for the Delivery of Video
    Programming*, 20 FCC Rcd 2755, 2772-73 (2005) ("*2005 Video
    Competition Report*").

[^132]: State of Hawaii Reply Comments at 4-5; Ada Township, *et al*
    Comments at 8-9; Manatee County, Fla. Comments at 19;
    Burnsville/Eagan Reply Comments at 19-20; New Jersey Board of Public
    Utilities Comments at 11-12.

[^133]: *Local Franchising NPRM,* 20 FCC Rcd at para. 618595.

[^134]: *See* NTCA Comments at 15; South Slope Comments at 8-9
    (mandatory build-out of entire franchise areas unreasonably impedes
    competitive entry where entrants' proposed service area is not
    located entirely within an LFA-defined local franchise area).

[^135]: *See, e.g.*, FTTH Council Comments at 33-34; South Slope
    Comments at 8-9; NTCA Comments at 15; BellSouth Reply at 25.
    BellSouth has a franchise to serve unincorporated Cherokee County,
    Ga., but the geographic area of this franchise is much larger than
    the boundaries of BellSouth's wire center. *Id.* BellSouth faces a
    similar issue in Orange County, Fla. *Id.* *See* *also* Linda
    Haugsted, *Franchise War in Texas*, [Multichannel News]{.smallcaps},
    May 2, 2005 (noting that, although Verizon had negotiated
    successfully a cable franchise with the City of Keller, Texas, "it
    will not build out all of Keller: It only has telephone plant in 80%
    of the community. SBC serves the rest of the locality."). NTCA
    states that theoretically the incumbent LEC could extend its
    facilities, but to do so within another provider's incumbent LEC
    territory would require an incumbent LEC to make a financially
    significant business decision, solely for purposes of providing
    video programming. *See* NTCA Comments at 15.

[^136]: *See* Letter from Leora Hochstein, Executive Director, Federal
    Regulatory, Verizon, to Marlene H. Dortch, Secretary, FCC, MB Docket
    No. 05-311 at 3 (filed May 3, 2006). In this *Order* we use "wire
    center service area" to mean the geographic area served by a wire
    center as defined in Part 51 of the Commission\'s rules, except wire
    centers that have no line-side functionality, such as switching
    units that exclusively interconnect trunks*.* See 47 C.F.R. § 51.5.
    *See also* *Unbundled Access to Network Elements: Review of the
    Section 251 Unbundling Obligations of Incumbent Local Exchange
    Carriers*, 20 FCC Rcd 2533, 2586 (2005), para. 87 n.251 ("*Triennial
    Review Remand Order*") ("By 'wire center,' we mean any incumbent LEC
    switching office that terminates and aggregates loop facilities").
    The Commission's rules define "wire center" to mean "the location of
    an incumbent LEC local switching facility containing one or more
    central offices as defined in Part 36 \[of the Commission\'s
    rules\]. The wire center boundaries define the area in which all
    customers served by a given wire center are located." 47 C.F.R. §
    51.5. The term "wire center" is often used interchangeably with the
    term "central office." Technically, the wire center is the location
    where a LEC terminates subscriber local loops, along with the
    facilities necessary to maintain them.

[^137]: New entrants also point out that some wire center service areas
    are low in population density (measured by homes per cable plant
    mile). The record suggests, however, that LFAs generally have not
    required franchisees to provide service in low-density areas. *See,
    e.g.,* Madison, WI Comments at 4 (limiting build-out to areas with
    40 dwelling units per cable mile); Renton, WA Comments at 3
    (limiting build-out to 35 dwelling units per mile); West Palm Beach,
    Fla. Comments at 11 (limiting build-out to areas with 20 homes per
    mile). Nevertheless, density is likely to be of greater concern to a
    new entrant than to an incumbent cable operator, because the new
    entrant has to lure customers from the incumbent cable operator, and
    therefore cannot count on serving as many of the customers in a
    cable plant mile.

[^138]: BSPA Comments at 5 (when the footprint of an existing system
    does not match the territory of an LFA, build-out requirements
    restrict the growth of competition that could be created by
    incremental expansion of existing networks into adjacent territories
    because the operator must have the financial means to build out the
    entire adjacent franchise area before commencing any build-out);
    NTCA Comments at 15 (requiring small, rural incumbent LECs to deploy
    service beyond their existing telephone service areas would prohibit
    some carriers from offering video services to any community, thereby
    preventing competition). *See also* DOJ *Ex Parte* at 12-13, 15.

[^139]: *See* Cablevision Reply at 16-17; Charter Reply at 8.

[^140]: *See* BSPA Comments at 5; South Slope Comments at 8-9; NTCA
    Comments at 15.

[^141]: Comcast Reply at 21 (citing comments of NATOA and Torrance,
    Cal.).

[^142]: *Compare* Tele Atlas Wire Center Premium v10.1 (April 2006) Maps
    for Bergen County, NJ and Los Angeles, Ca. and surrounding areas
    *with* The BRIDGE Data Group CableBounds Maps for Bergen County, NJ
    and Los Angeles, Ca. and surrounding areas (filed by the Media
    Bureau), *available at*
    http://gullfoss2.fcc.gov/prod/ecfs/retrieve.cgi?native_or_pdf=pdf&id_document=6518618170,
    http://gullfoss2.fcc.gov/prod/ecfs/retrieve.cgi?native_or_pdf=pdf&id_document=6518618171.

[^143]: *See* FTTH Council Comments at 32; NTCA Comments at 7; Qwest
    Comments at 2, 8; Verizon Comments at 39-40.

[^144]: 47 U.S.C. § 544(a)(1).

[^145]: *See* *Annual Assessment of the Status of Competition in the
    Market for the Delivery of Video Programming*, MB Docket No. 05-255,
    Twelfth Annual Report, FCC 06-11, at ¶ 41 (rel. Mar. 3, 2006)
    (noting that overbuild competition, when present, often leads to
    lower cable rates and higher quality service).

[^146]: Section 706 of the Telecommunications Act of 1996, 47 U.S.C. §
    157 nt.

[^147]: AT&T Comments at 45. *See also infra* para. 63*.*

[^148]: *See* NTCA Comments at 7; Verizon Reply at 54-55; American
    Consumer Institute Comments at 7; *Review of the Section 251
    Unbundling Obligations of Incumbent Local Exchange Carriers,* 18 FCC
    Rcd 16978, 17142-17143 (2003) ("*Triennial Review Order*"); *See
    also* High Tech Broadband Coalition Comments at 4-5
    (fiber-to-the-home deployment increased 5300 percent since the
    *Triennial Review Order*, due in large part to the elimination of
    barriers to entry in that Order).

[^149]: Verizon Comments at 57 & Attachment A at 16-17. The *Wall Street
    Journal* reported "\[Tampa, Florida\] City officials presented
    \[Verizon\] with a \$13 million wish list, including money for an
    emergency communications network, digital editing equipment and
    video cameras to film a math-tutoring program for kids." Another
    community presented Verizon with "requests for seed money for
    wildflowers and a video hookup for Christmas celebrations." Dionne
    Searcey, *As Verizon Enters Cable Business, it Faces Local Static*,
    [Wall St. J.]{.smallcaps}, Oct. 28, 2005, at A1. *But see* Verizon
    Comments at 65, filed February 13, 2006 (stating that "one
    franchising authority in Florida demanded that Verizon meet the
    incumbent cable operator's cumulative payments for PEG, which would
    exceed \$6 million over 15 years of Verizon's proposed franchise
    term. When Verizon rejected this demand, the LFA doubled its
    request, asking for a fee in excess of \$13 million that it said
    would be used for both PEG support and the construction of a
    redundant institutional network."); Verizon Revised Comments, filed
    March 6, 2006 at 65 (amending the second sentence of their comments
    above, in response to a request from the City of Tampa, to state
    that "\[w\]hen Verizon rejected this demand and asked for an
    explanation, the LFA provided a summary 'needs assessment' in excess
    of \$13 million for both PEG support."); Tampa Reply at 3-4 (noting
    that Verizon's errata "clarified that the City of Tampa has not
    demanded Verizon provide \$13.5 million dollars as a condition of
    granting a cable television franchise," and calling the *Wall Street
    Journal* article assertions an "urban legend"); John Dunbar*, FCC's
    Cable TV Ruling Criticized,* [Associated Press,]{.smallcaps} Jan.
    29, 2007 (stating that "\[The Tampa City Attorney\] said Tampa gave
    Verizon a \$13 million 'needs assessment' that was required by law
    in order to obtain contributions for equipment for public access and
    government channels" and also quoting the City Attorney saying that
    "it is possible the 'needs assessment' included video cameras to
    film shows such as the math class, but that there was never 'a
    specific quid pro quo.' Nor was anything like that mentioned in the
    franchise agreement.").

[^150]: Verizon Comments at 75.

[^151]: AT&T Comments at 24.

[^152]: FTTH Council Comments at 38.

[^153]: BSPA Comments at 8. BSPA argues that under the current
    franchising process, LFAs are able to bargain for capital payments
    to use on infrastructure needs when LFAs should use the capital to
    benefit consumers. BSPA claims that LFAs use the capital to build
    and maintain I-Nets, city broadcasting facilities, and traffic light
    control systems. *Id*.

[^154]: *See, e.g.*, AT&T Comments at 64-67; BellSouth Comments at
    38-40; Cavalier Telephone Comments at 7; FTTH Council Comments at
    38-40. *But see* NATOA Reply at 27-35.

[^155]: 47 U.S.C. § 542(b).

[^156]: Verizon Comments at 59.

[^157]: *Id*. at 59-60.

[^158]: *Id*. at 63.

[^159]: AT&T Comments at 65-67; BellSouth Comments at 39.

[^160]: AT&T Reply at 31-32.

[^161]: *See, e.g.*, AT&T Comments at 67-70; BellSouth Comments at 39;
    Consumers for Cable Choice Comments at 8; FTTH Council Comments at
    36-37, 66-67; Verizon Comments at 65-75. *But see* NATOA Reply at
    30-42.

[^162]: FTTH Council Comments at 36; Verizon Comments at 65-66.

[^163]: Verizon Comments at 65.

[^164]: *Id*. at 65-66.

[^165]: Consumers for Cable Choice Comments at 8; Verizon Comments at
    71.

[^166]: Verizon Comments at 73.

[^167]: *See, e.g.*, Orange County, Fla. Comments at 3; Northwest
    Suburbs Cable Communications Commission Comments at 3;
    Winston-Salem, N.C. Comments at 5; Albuquerque, N.M. Comments at 3;
    Tulsa, Okla. Comments at 2-4; Enumclaw, Wash. Comments at 2;
    Madison, Wis. Comments at 5-6.

[^168]: *See Local Franchising NPRM*, 20 FCC Rcd at 18588. At least 10
    states impose level-playing-field requirements upon LFAs, and those
    laws vary significantly in the subject matters they encompass. For
    example, compare Minnesota's requirement that a competitive entrant
    face similar build-out, franchise fee, and PEG requirements to
    Illinois's requirement that the competitive franchise be no more
    favorable with respect to the territorial extent of the franchise,
    system design, technical performance standards, construction
    schedules, bonds, standards for construction and installation of
    facilities, service to subscribers, PEG channels and programming,
    production assistance, liability and indemnification and franchise
    fees. [Minn. Stat. Ann. § 238.08]{.smallcaps} (West
    2006[),]{.smallcaps} 55 [Ill. Comp. Stat. Ann]{.smallcaps}.
    5/5-1095(e)(4) (West 2006), *see also* [Ala. Code]{.smallcaps} §
    11-27-2 (2005)[, Conn. Gen. Stat]{.smallcaps}. § 16-331(g) (2006),
    [Fla. Stat]{.smallcaps}. § 166.046(3) (2006), N.H[. Rev. Stat.
    Ann]{.smallcaps}. § 53-C:3-b (2005), [Okla. Stat. Ann.]{.smallcaps}
    tit. 11, § 22-107.1(B) (West 2006). S[.D. Codified Laws]{.smallcaps}
    § 9-35-27 (2005), [Tenn. Code. Ann.]{.smallcaps} § 7-59-203 (2005).

[^169]: *See* GMTC *et al.* Comments at 15; Pasadena, Ca. Comments at
    10-11; Philadelphia, Pa. Comments at 7. *See also* AT&T Reply at 14.

[^170]: LMC Comments at 12-15.

[^171]: BellSouth Reply at 7.

[^172]: NATOA Reply at 43.

[^173]: *See, e.g.*, NATOA Reply at 44; Burnsville/Eagan Comments at 44;
    City of Philadelphia Reply at 2.

[^174]: *See, e.g.*, South Slope Comments at 7-8 (build-out); Verizon
    Comments at 60-61, 71 (PEG requirements); AT&T Comments at 67
    (redundant facilities). *See also* FTTH Council Comments at 29-30
    (quoting Hazlett & Ford study concluding that the result of
    level-playing-field laws "is that incumbents and \[LFAs\] can force
    entrants to incur sunk costs considerably in excess of what free
    market conditions would imply"). We note that, as described below,
    we do not address -- and therefore do not preempt -- state laws
    governing the franchising process including state
    level-playing-field mandates.

[^175]: *See* *supra* para. 34; *see also* DOJ *Ex Parte* at 15-16.

[^176]: Comcast Reply at 17-18 (citing Comcast's involvement in
    Verizon's Howard County, Maryland, franchise approval process).

[^177]: Mercatus Center at 39-40; *Phoenix Center Competition Paper* at
    7.

[^178]: *Id.*

[^179]: *See* BSPA Comments 4; USTelecom Comments at 51-53; Mercatus
    Comments at 39-40.

[^180]: 47 U.S.C. § 521(2); *Id.*

[^181]: Mercatus Comments at 46.

[^182]: Verizon Reply at 5-8. *See also* DOJ *Ex Parte* at 1, 3.

[^183]: FTTH Council Comments at 13. *See* *also* U.S. General
    Accountability Office, *Subscriber Rates and Competition in the
    Cable Television Industry*, GAO-04-262T (Mar. 2004)
    ("\[S\]ubscribers in areas with a wire-based competitor had monthly
    cable rates about \$5 lower, on average, than subscribers in similar
    areas without a wire-based competitor. Our interviews with cable
    operators also revealed that these companies generally lower rates
    and/or improve customer service where a wire-based competitor is
    present."); U.S. General Accounting Office, GAO-04-8, *Issues
    Related to Competition and Subscriber Rates in the Cable Television
    Industry*, Report to the Chairman, Committee on Commerce, Science
    and Transportation, U.S. Senate (2003) ("*2003 GAO Report*") at 3
    (noting that cable rates are about 15 percent lower in markets where
    wireline competition is present), and at 10 (estimating that with an
    average monthly cable rate of approximately \$34 that year,
    subscribers in areas with a wire-based competitor had monthly cable
    rates about \$5 lower, on average, than subscribers in areas without
    such a competitor); U.S. General Accounting Office, GAO-03-130,
    *Issues in Providing Cable and Satellite Television Services*,
    Report to the Subcommittee on Antitrust, Competition, and Business
    and Consumer Rights, Committee on the Judiciary, U.S. Senate (2002)
    ("*2002 GAO Report*") at 9 (noting that in franchise areas with a
    second cable provider, cable prices are approximately 17 percent
    lower than in comparable areas without a second cable provider).
    *See also* *Annual Assessment of the Status of Competition in the
    Market for the Delivery of Video Programming*, MB Docket No. 05-255,
    Twelfth Annual Report, FCC 06-11, at para. 41 (rel. Mar. 3, 2006)
    and 2005 Cable Price Survey at paras. 2, 14 (noting that cable
    prices are 17 percent lower and decrease substantially when wireline
    cable competition is present).

[^184]: FTTH Council Comments at 15-16, including chart and declaration.

[^185]: AT&T Comments at 12. *See also* BSPA Comments at 7; Freedomworks
    Comments at 15; Mercatus Center Comments at 34-35.

[^186]: Technology and Democracy Project Comments at 4.

[^187]: AT&T Comments at 12. The Government Accountability Office
    reached this same conclusion in its review of the video service
    market. *See Issues in Providing Cable and Satellite Television
    Services*, GAO 03-130 at 2 (2002).

[^188]: Letter from Lawrence Spiwak, President, Phoenix Ctr. for
    Advanced Legal and Econ. Pub. Policy Studies, to Marlene Dortch,
    Secretary, Federal Communications Commission, at Att., *Phoenix
    Center Policy Paper Number 23: The Impact of Video Service
    Regulation on the Construction of Broadband Networks to Low-Income
    Households*, pg 23 (March 13, 2006) ("*Phoenix Center Redlining
    Paper*").

[^189]: DOJ *Ex Parte* at 3-4.

[^190]: FTTH Council Comments at 4.

[^191]: AT&T Comments at 15.

[^192]: DOJ *Ex Parte* at 7-8.

[^193]: Section 706 of the Telecommunications Act of 1996, 47 U.S.C. §
    157 nt.

[^194]: *See* The White House, *A New Generation of American
    Innovation*, 11-12 (April 2004), *available at*
    http://www.whitehouse.gov/infocus/technology/economic_policy200404/innovation.pdf.

[^195]: *See* Federal Communications Commission, *Strategic Plan
    2006-2011* at 3 (2005).

[^196]: AT&T Reply at 9; Alcatel Comments at 1; Letter from Danielle
    Jafari, Director and Legal Counsel of Government Affairs,
    Telecommunications Industry Association, to Marlene Dortch,
    Secretary, Federal Communications Commission (March 9, 2006).

[^197]: *Local Franchising NPRM*, 20 FCC Rcd at 18589.

[^198]: 47 U.S.C. § 541(a)(1).

[^199]: *Local Franchising NPRM*, 20 FCC Rcd at 18589.

[^200]: *United States v. Southwestern Cable Co*., 392 U.S. 157, 167-68
    (1968) (quotation omitted).

[^201]: *United Telegraph Workers, AFL-CIO v. FCC*, 436 F.2d 920, 923
    (D.C. Cir. 1970) (citations and quotations omitted).

[^202]: 47 U.S.C. § 201(b) ("The Commission may prescribe such rules and
    regulations as may be necessary in the public interest to carry out
    the provisions of this Act.").

[^203]: *AT&T Corp. v. Iowa Utilities Board*, 525 U.S. 366, 378 (1999).

[^204]: *See also* 47 U.S.C. § 151 (the Commission "shall execute and
    enforce the provisions of this Act").

[^205]: 47 U.S.C. § 154(i).

[^206]: 47 U.S.C. § 152 ("The provisions of this Act shall apply with
    respect to cable service, to all persons engaged within the United
    States in providing such service, and to the facilities of cable
    operators which relate to such service, as provided in title VI.").

[^207]: *Local Franchising NPRM*, 20 FCC Rcd at 18589.

[^208]: *See City of Chicago v. FCC,* 199 F.3d 424 (7th Cir. 1999)
    (finding that the FCC is charged by Congress with the administration
    of the Cable Act, including Section 621). *See also City of New York
    v. FCC*, 486 U.S. 57, 70 n.6 (1988) (explaining that Section 303
    gives the FCC rulemaking power with respect to the Cable Act);
    *Nat'l Cable Television Ass'n v. FCC*, 33 F.3d 66, 70 (D.C. Cir.
    1994) (upholding Commission finding that certain services are not
    subject to the franchise requirement in Section 621(b)(1)); *United
    Video v. FCC*, 890 F.2d 1173, 1183 (D.C. Cir. 1989) (denying
    petitions to review the Commission's syndicated exclusivity rules);
    *ACLU v. FCC*, 823 F.2d 1554 (D.C. Cir. 1987) (upholding the
    Commission's interpretive rules regarding Section 621(a)(3)).

[^209]: 47 U.S.C. § 541(a)(1) ("\[a\]ny applicant whose application for
    a second franchise has been denied by a final decision of the
    franchising authority may appeal such final decision pursuant to the
    provisions of section 635 for failure to comply with this
    subsection"). Section 635 sets forth the specific procedures for
    such judicial proceedings. 47 U.S.C. § 555.

[^210]: *See* NCTA Reply, at 11-13 (given the courts have concurrent
    jurisdiction to review many provisions of Title VI, Section 635(a)
    only has meaning if it is read to grant exclusive jurisdiction to
    the courts); Comcast Comments at 27-28 (Congress provided no role
    for the Commission in the franchising process); Comcast Reply at
    27-28 (621(a)(1)'s "unreasonably refuse" language and court review
    are inextricably linked and thus enforcement authority over the
    franchising approval process lies with the courts); NATOA Comments
    at 7-8 (same).

[^211]: *See ACLU v. Texas*, 823 F.2d 1554, 1574 (D.C. Cir 1987)
    (recognizing that despite a reference to "court action" in Section
    622(d), in the absence of more explicit guidance from Congress, the
    Commission has concurrent jurisdiction to take enforcement action
    with respect to franchise fee disputes).

[^212]: *See* BellSouth Reply at 35; USTelecom Reply at 14-16.

[^213]: *AT&T v. Iowa Utilities Board,* 525 U.S. 366, 385 (1999). In
    *Iowa Utilities Board*, the Supreme Court reviewed Commission rules
    implementing provisions of the Telecommunications Act of 1996. In
    particular, states challenged Commission rules implementing Section
    252(c)(2), which provides, "a State commission shall ... establish
    any rates for interconnection, services, or network elements." 47
    U.S.C. § 252(c)(2). Although this and other provisions in the 1996
    Act entrusted the states with certain tasks, the Supreme Court held
    that "these assignments ... do not logically preclude the
    Commission's issuance of rules to guide the state-commission
    judgments." *Iowa Utilities Board*, 525 U.S. at 385. The same
    reasoning applies to the judicial review provisions in Sections
    621(a)(1) and 635.

[^214]: *See, e.g.*, 47 U.S.C. § 255(f) ("The Commission shall have
    exclusive jurisdiction with respect to any complaint under this
    section."). We do not find persuasive commenters' argument that the
    only way to give Section 635(a) any meaning is to construe it as
    giving courts exclusive jurisdiction with regard to the three Title
    VI provisions enumerated in Section 635(a), *i.e.,* Sections
    621(a)(1), 625, and 626. *See* NATOA Comments at 9. None of the
    cases cited by commenters support this proposition. Rather, they
    suggest that in the absence of an exclusivity provision in the
    statute, the Commission and courts share jurisdiction. *See, e.g.,*
    NATOA Comments at 9 (citing *ACLU v. FCC,* 823 F.2d 1554, 1573-75
    (D.C. Cir. 1987)).

[^215]: 47 U.S.C. § 541(a)(1) ("Any applicant whose application for a
    second franchise has been *denied by a final decision* of the
    franchising authority may appeal such *final decision* pursuant to
    the provisions of section 635 for failure to comply with this
    subsection") (emphasis added); 47 U.S.C. §555(a) ("Any cable
    operator adversely affected by any *final determination* made by a
    franchising authority under section 621(a)(1)" may commence an
    action in federal district court or State court) (emphasis added).

[^216]: *See* USTelecom Reply at 14.

[^217]: *See* Comcast Reply at 27.

[^218]: *Capital Network System, Inc. v. FCC,* 28 F.3d 201, 204 (D.C.
    Cir. 1994) ("Because 'just,' 'unjust,' 'reasonable,' and
    'unreasonable' are ambiguous statutory terms, this court owes
    substantial deference to the interpretation the Commission accords
    them.").

[^219]: 47 U.S.C. § 541(a)(1) (emphasis added).

[^220]: *See NCTA v. Brand X Internet Services,* 545 U.S. 967, \--, 125
    S. Ct. 2688, 2700-02 (2005) (where statute is ambiguous, and
    implementing agency\'s construction is reasonable, *Chevron*
    requires federal court to accept agency\'s construction of statute,
    even if agency\'s reading differs from prior judicial construction).

[^221]: *See* NCTA Comments at 28-29; Comcast Reply at 31.

[^222]: *See* NCTA Comments at 29; Comcast Reply at 32*.*

[^223]: *See* NATOA Comments at 30-31; NCTA Comments at 28-29;
    Burnsville/Eagan Comments at 31-32; Comcast Reply at 32-33.

[^224]: *See Bailey v. United States,* 516 U.S. 137, 143-45 (1995) ("We
    assume that Congress used two terms because it intended each term to
    have a particular, nonsuperfluous meaning.").

[^225]: *See, e.g., Tribune Co. v. FCC,* 133 F.3d 61, 66 (D.C. Cir.
    1998) (imposing an "intolerable" condition on the grant of a license
    application may be deemed a *de facto* denial of that license for
    purposes of the appeal provisions under § 402(b) of the Act, citing
    *Mobile Communications Corp. of America v. FCC,* 77 F.3d 1399 (D.C.
    Cir. 1996)). *See also* DOJ *Ex Parte* at 7 (stating that
    unnecessary delays, demands for goods and services unrelated to the
    provision of cable services, and imposition of build-out
    requirements are tantamount to a "refusal" to award an additional
    competitive franchise).

[^226]: 47 U.S.C. §§ 541(a), 555. *See also Puget Sound Energy, Inc. v.
    U.S.,* 310 F.3d 613, 624-25 (9th Cir. 2002) (for purposes of
    determining when power administration\'s rate determination becomes
    a "final action" under statutory judicial review provision, court
    will turn for guidance to general doctrine of finality in
    administrative law, which "is concerned with whether the initial
    decision-maker has arrived at a definitive position on the issue
    that inflicts an actual, concrete injury").

[^227]: *See* Qwest Reply at 10-11.

[^228]: *See* NCTA Comments at 22-23; Florida Municipalities Comments at
    9-10.

[^229]: H[.R. Rep. No.]{.smallcaps} 102-862, at 77-78 (1992) (Conf.
    Rep.), *as reprinted in* 1992 U.S.C.C.A.N. 1231, 1259-1260.

[^230]: [S. Rep. No.]{.smallcaps} 102-92, at 185 (1991) (explaining that
    "\[i\]t shall not be considered unreasonable for purposes of this
    provision for local franchising authorities to deny the application
    of a potential competitor if it is technically infeasible. However,
    the Committee does not intend technical infeasibility to be the only
    justification for denying an additional franchise").

[^231]: [H.R. Rep. No.]{.smallcaps} 102-862, at 77-78 (1992) (Conf.
    Rep.), *as reprinted in* 1992 U.S.C.C.A.N. 1231, 1259-1260 (listing
    five examples of reasonable denials identified in the House
    amendment to include: (1) technical infeasibility; (2) failure of
    the applicant to assure that it will provide adequate public,
    educational, and governmental access channel capacity, facilities,
    or financial support; (3) failure of the applicant to assure that it
    will provide service throughout the entire franchise area within a
    reasonable period of time; (4) the award would interfere with the
    ability of the franchising authority to deny renewal of a franchise;
    and (5) failure to demonstrate financial, technical, or legal
    qualifications to provide cable service."); [H.R. Rep.
    No.]{.smallcaps} 102-628, at 90 (1992). *See* NCTA Comments at 22;
    Florida Municipalities Comments at 9-10.

[^232]: H[.R. Rep. No.]{.smallcaps} 102-862, at 77-78 (1992) (Conf.
    Rep.), *as reprinted in* 1992 U.S.C.C.A.N. 1231, 1259-1260.

[^233]: *See City of Chicago v. FCC,* 199 F.3d at 428. *See also AT&T
    Corp. v. Iowa Utilities Board,* 525 U.S. at 377-380.

[^234]: 47 U.S.C. § 521(6).

[^235]: *See Competition, Rate Deregulation and the Commission's
    Policies Relating to the Provision of Cable Television Service,* 5
    FCC Rcd 4962, 4974 (1990).

[^236]: 47 U.S.C. § 541(a)(1). *See also* [H.R. Rep. No.]{.smallcaps}
    102-628, at 47 (1992) (noting the Commission's recommendation that,
    in order to encourage competition, Congress should prevent LFAs from
    unreasonably denying a franchise to potential competitors);
    *Implementation of Section 19 of the Cable Television Consumer
    Protection and Competition Act of 1992 Annual Assessment of the
    Status of Competition in the Market for the Delivery of Video
    Programming*, 9 FCC Rcd 7442, 7469 (1994) (recognizing that
    "Congress incorporated the Commission's recommendation in the 1992
    Cable Act by amending § 621(a)(1) of the Communications Act...").
    The legislative history explained that the purpose of this
    abridgement of local government authority was to promote greater
    cable competition. [S. Rep. No.]{.smallcaps} 102-92, at 47 (1991)
    (the prohibition on local franchising authorities from unreasonably
    refusing to grant second franchises is based on evidence in the
    record that there are benefits from competition between two cable
    systems and the Committee's belief that LFAs should be encouraged to
    award second franchises).

[^237]: Section 706 of the Telecommunications Act of 1996, 47 U.S.C. §
    157 nt.

[^238]: *See USTA v. FCC*, 359 F.3d 554, 580, 583 (D.C. Cir. 2004); *see
    also* USTelecom Comments at 15; TIA Comments at 16.

[^239]: *See* Alcatel Comments at 5-6; USTelecom Comments at 6
    (broadband growth is tied to bundled services; firm's perceived need
    to compete for "triple play" customers is the driving force for
    broadband investment); AT&T Comments at 39-40 (the local franchising
    process discourages broadband infrastructure investment that
    supports video along with other broadband services).

[^240]: *See* Ad Hoc Telcom Manufacturer Coalition Comments at 1-3 (the
    franchising process threatens to slow down incumbent LECs' capital
    expenditures, thereby slowing competition in the video service
    market and reducing output throughout the high-tech manufacturing
    industry); AT&T Reply at 31-32 (the lack of clear regulatory
    guidance is chilling investment because new entrants cannot gauge
    the cost of entry); BellSouth Comments at 20-22 (the current
    franchising process impedes the deployment of BellSouth's broadband
    network).

[^241]: DOJ *Ex Parte* at 4.

[^242]: *See, e.g.*, Anne Arundel County *et al.* Comments at 15
    (federal regulation would not allow each locality to tailor
    franchise terms to its specific needs); NCTA Comments at 23
    (universal rules and standards cannot be tailored well enough to
    define what is reasonable; reasonableness must be reviewed on a
    case-by-case basis).

[^243]: NATOA Comments at 27 (quoting Section 601(2) of the
    Communications Act, 47 U.S.C. § 521(2)).

[^244]: *See, e.g.*, NATOA Reply at 43; Verizon Comments at 76-77
    (disagreeing about the reasonableness of level playing fields).

[^245]: *See* Manatee County Comments at 15; Verizon Reply at 35.

[^246]: 47 U.S.C. § 154(i), Section 706 of the Telecommunications Act of
    1996, 47 U.S.C. § 157 nt.

[^247]: *Id.*

[^248]: *See supra* paras. 14-17, 22.

[^249]: *See Local Franchising NPRM,* 20 FCC Rcd at 18590 (quoting 47
    U.S.C. § 541(a)(1)), FTTH Council Comments at 27, South Slope
    Comments at 13, Verizon Reply at 34-35.

[^250]: *See supra* paras. 22-30.

[^251]: 47 U.S.C. §§ 541(a)(1), 555.

[^252]: *See* TIA Comments at 8, 18.

[^253]: *See* AT&T Comments at 77, Cavalier Telephone Comments at 4
    (suggesting a 30-day time limit); BellSouth Comments at 36, NTCA
    Comments at 9, OPASTCO Reply at 4 (suggesting a 90‑day time limit);
    Consumers for Cable Choice Comments at 9, Verizon Comments at 38,
    FTTH Council Comments at 60, State of Hawaii Reply at 3 (suggesting
    a 120‑day time limit); Alliance for Public Technology Comments at 3
    (suggesting a 180-day time limit); Qwest Comments at 26-27.

[^254]: NATOA Comments at 36-37, NATOA Reply at 21-23.

[^255]: Transcript of FCC Agenda Meeting and Panel Discussion at 38
    (Feb. 10, 2006).

[^256]: *See Local Franchising NPRM*, 20 FCC Rcd at 18591.

[^257]: *See* [Haw. Rev. Stat]{.smallcaps}. § 440G-4 (2006); [Conn. Gen.
    Stat. Ann]{.smallcaps}. § 16-331 (West 2006); [Vt. Stat.
    Ann]{.smallcaps}. tit. 30, § 502 (2006); [Tex. Util. Code
    Ann]{.smallcaps}. § 66.003 (West 2006); [Ind. Code]{.smallcaps} §
    8-1-34-16 (2006); 2006 [Kan. Sess. Laws]{.smallcaps} Ch. 93 (West
    2006); [S.C. Code Ann]{.smallcaps}. § 58-12-05 (2006); [N.C. Gen
    Stat. Ann]{.smallcaps}. § 66-351; [Cal. Pub. Util. Code]{.smallcaps}
    § 401, et seq. We note that our *Order* does not affect these
    franchising decisions.

[^258]: We note that a number of other states in addition to Texas have
    adopted or are considering statewide franchising in order to speed
    competitive entry. *See, e.g.*, [Ind. Code]{.smallcaps} § 8-1-34-16
    (2006); [Va. Code Ann.]{.smallcaps} § 15.2-2108.1:1 et seq. (2006);
    SB-816, 2006 Sess. (Mo. 2006). Nothing in our discussion here is
    intended to preempt the actions of any states. The time limit we
    adopt herein is a ceiling beyond which LFA delay in processing a
    franchise application becomes unreasonable. To the extent that
    states and/or municipalities wish to adopt shorter time limits, they
    remain free to do so.

[^259]: NATOA Comments at 38-39; Ada Township Comments at 11-14; TCCFUI
    Reply Comments at 18.

[^260]: Recognizing this distinction, some states have created
    streamlined franchising procedures specifically tailored to entities
    with existing access to public rights-of-way. *See, e.g.*, [Virginia
    Code Ann]{.smallcaps}. § 15.2-2108.1:1 et seq.); HF-2647, 2006 Sess.
    (Iowa 2006) (this proposed legislation would grant franchises to all
    telephone providers authorized to use the right-of-way without any
    application or negotiation requirement). *See also* South Slope
    Comments at 11 (duplicative local franchising requirements imposed
    on a competitor with existing authority to occupy the rights-of-way
    are unjustified and constitute an unreasonable barrier to
    competitive video entry).

[^261]: *See* NATOA Comments at 38-39. Although NATOA contends that an
    applicant's authority to occupy the rights-of-way would not affect
    the length of the negotiations regarding PEG requirements, franchise
    fees, or build-out, we clarify the law concerning those issues below
    to minimize further disputes and delays.

[^262]: Ad Hoc Telecom Manufacturers Comments at 6.

[^263]: AT&T argues that an entity authorized to occupy a right-of-way
    should simply complete a short-form application and agree to general
    cable franchise requirements such as franchise fees and PEG
    capacity, and that the right-of-way holder should receive a
    franchise within one month of filing the short-form application.
    *See* AT&T Comments at 74.

[^264]: *See* BellSouth Comments at 36; Ada Township, *et al*. Comments
    at 23; LMC Comments at 18; Hawaiian Telecom Comments at 7-8
    (recommending a time frame of 90 days from the filing of the
    application). Several state legislators agree that an applicant's
    existing authority to occupy the right-of-way lightens the
    administrative load, and enacted or proposed similar measures to
    streamline the franchising process for entities that hold the
    authority. *See* [Virginia Code Ann]{.smallcaps}. § 15.2-2108.21;
    HF-2647, 2006 Sess. (Iowa 2006) (this proposed legislation would
    grant franchises to all telephone providers authorized to use the
    right-of-way without any application or negotiation requirement). We
    assume generally that state and local regulators are sufficiently
    empowered to deal with any public safety or aesthetic issues that
    may arise by virtue of deployment of new video-related equipment by
    applicants already authorized to use the rights-of way.

[^265]: *See* TIA Comments at 8-9 (a time frame of 17 business days, as
    set forth in the Texas statute, "provides ample time to negotiate an
    agreement reflecting the requirements of Section 621"); AT&T
    Comments at 75, 78-79. *See also supra* paras. 17, 27*.*

[^266]: *See* 47 U.S.C. § 545.

[^267]: Verizon Comments at 36-37.

[^268]: Verizon Reply Comments at 43 n.69.

[^269]: *See* Cablevision Comments at 10-12; GMTC Comments at 3, 6-8;
    State of Hawaii Reply at 3; Mt. Hood Cable Regulatory Commission
    Comments at 20; NJBPU Comments at 5; Southwest Suburban Cable
    Commission Comments at 7. *See also* Fairfax County, Va. Comments at
    4-7 (formal negotiations began April 1, 2005, franchise granted Oct.
    1, 2005).

[^270]: *See, e.g.*, 47 U.S.C. § 537, 47 C.F.R. § 76.502(c).

[^271]: *See* Southwest Suburban Cable Commission Comments at 7.

[^272]: *See supra* paras. 14-17.

[^273]: *See* Qwest Reply at 2 (establish a requirement that an LFA
    "must act on a franchise application within six months of filing").

[^274]: *See* Verizon Reply at 37; Letter from Leora Hochstein,
    Executive Director, Federal Regulatory, Verizon, to Marlene Dortch,
    Secretary, Federal Communications Commission at 1 (April 21, 2006).

[^275]: *Id.*

[^276]: *See infra* paras. 99-104.

[^277]: *See* Letter from Leora Hochstein, Executive Director, Federal
    Regulatory, Verizon, to Marlene Dortch, Secretary, Federal
    Communications Commission at 1 (May 3, 2006).

[^278]: *See infra* para. 138*.* If new entrants were required to adopt
    the same franchises as incumbents, the new entrants would be forced
    to accept terms that violate Section 621(a)(1)'s prohibition on
    unreasonable refusals to grant franchises. *See* Mercatus Center at
    39-40; Phoenix Center Competition Paper at 7.

[^279]: *See supra* Section III.B.

[^280]: *United States v. Southwestern Cable Co.,* 392 U.S. 157, 167-68
    (1968) (citations omitted). 

[^281]: 47 U.S.C. § 201(b). *See also* 47 U.S.C. §§ 151, 154(i), 303(r).

[^282]: *AT&T Corp. v. Iowa Utilites Board,* 525 U.S. 366, 378 (1999). 

[^283]: 47 U.S.C. § 152. 

[^284]: *See supra* note 208.

[^285]: *Amendment of Part 74, Subpart K, of the Commission's Rules and
    Regulations Relative to Community*

    *Antenna Television Systems*, 36 F.C.C.2d 143, ¶ 178 (1972).

[^286]: The Commission ended the certificate requirement and ceded
    additional authority to state and local governments in the late
    1970s, but only for pragmatic reasons. *See*, *e.g.*, Report and
    Order, 66 F.C.C.2d 380, ¶¶ 33, 37 (1977); Memorandum Opinion and
    Order and Further Notice of Proposed Rulemaking, 71 F.C.C.2d 569, ¶
    7 (1979) (withdrawing aspects of Commission franchising
    participation, but only "as long as the actions taken at the local
    level will not undermine important and overriding federal
    interests").

[^287]: *Teleprompter Cable Sys.*, 52 F.C.C.2d 1263, ¶ 9 (1975)
    (emphasis added).

[^288]: *See*, *e.g.*, *Cable Television Reconsideration Order*, 36
    F.C.C.2d 326, ¶ 116 (1972); *Sun Valley Cable*

    *Communications (Sun City, Arizona)*, 39 F.C.C.2d 105 (1973);
    *Mahoning Valley Cablevision, Inc. (Liberty Township, Ohio)*, 39
    F.C.C.2d 939 (1973).

[^289]: *See, e.g.*, 40 C.F.R. 141.716(a) (watershed control plans that
    are submitted to a state and not acted upon by the regulatory
    deadline are "considered approved" until the state subsequently
    withdraws such approval.); 42 C.F.R. 438.56(e)(2) (an application to
    disenroll from a Medicaid managed care plan shall be "considered
    approved" if not acted on by a state agency within the regulatory
    deadline). *See also* 47 U.S.C. § 160(c) (petition for forbearance
    "deemed granted" if Commission fails to deny within the regulatory
    deadline).

[^290]: *See* 47 U.S.C. § 555. 

[^291]: *AT&T Corp. v. Iowa Utils. Bd.*, 525 U.S. 366, 378 n.6 (1999).

[^292]: *See* Section III.A., *supra,* at paras. 31-42.

[^293]: *See, e.g.*, Comcast Reply Comments at 34; NCTA Reply Comments
    at 25-26; NATOA Reply Comments at 24; Southeast Michigan
    Municipalities Reply Comments at 44-45.

[^294]: 47 U.S.C. § 541(a)(4)(A).

[^295]: *Americable Intern., Inc. v. Dep't of Navy*, 129 F.3d 1271,
    1274-75 (D.C. Cir. 1997).

[^296]: *Id*. *See also Americable Intern., Inc. v. U.S. Dept. of Navy*,
    931 F. Supp. 1, 2-3 (D.D.C. 1996) ("Americable argues first that the
    Cable Act establishes a 'requirement' that a franchise 'provide
    universal service throughout the franchise area.' Its authority for
    that position is 47 U.S.C. § 541(a)(4)(A), which requires that a
    franchising authority (here the Navy) allow an applicant's system 'a
    reasonable period of time to become capable of providing cable
    service to all households in the franchise area. . . .' That
    language contains no requirement of universal service, of course.
    Americable's strained argument is at odds with the purpose of the
    Cable Act, which is to promote competition, and of the amendment in
    question, which protects the interests of new franchise applicants
    and not incumbents like Americable").

[^297]: H.R. [Rep. No]{.smallcaps}. 102-628, at 9 (1992).

[^298]: *See* *Doe v. Chao*, 540 U.S. 614, 622-23 (2004) (finding
    relevance in the fact that Congress had cut out the very language in
    the bill that would have achieved the result claimant urged).

[^299]: 47 U.S.C. § 541(a)(3).

[^300]: *See, e.g.*, Comcast Reply at 2 (arguing that incumbent LECs are
    seeking Commission action on build-out requirements in order to
    pursue their "high-value" customers while bypassing "low-value"
    ones).

[^301]: *Implementing the Provisions of the Cable Communications Policy
    Act of 1984*, Report and Order, MM Docket No. 84-1296, 58 Rad. Reg.
    2d (P & F) 1, 62-63 (1985). BSPA Comments at 6 (\"The most
    significant factors affecting where a wireline network will be built
    relate to cost of construction and the density of the population
    that will be served. These factors have a much more significant
    impact on the network expansion plans than the specific customer
    profile in a geographic area\").

[^302]: *ACLU v. FCC*, 823 F.2d 1554, 1580 (D.C. Cir. 1987) (emphasis in
    original). *See also* Consumers for Cable Choice Comments at 8; DOJ
    *Ex Parte* at 4.

[^303]: *See* [H.R. Rep. No]{.smallcaps}. 102-862, at 77-78 (1992)
    (Conf. Rep.), *as reprinted in* 1992 U.S.C.C.A.N. 1231, 1259-1260;
    Mercatus Center Comments at 39-40; *Phoenix Center Competition
    Paper* at 7.

[^304]: *See* FTTH Council Comments at 32-33; BellSouth Comments at 34.

[^305]: *See, e.g.,* AT&T Comments at 50; FTTH Council Comments at
    29-30.

[^306]: *See* FTTH Council Comments at 32-35; DOJ *Ex Parte* at 12-15
    (May 10, 2006); AT&T Reply Comments at 34-36; BellSouth Comments at
    34-35; Verizon Comments at 39-40.

[^307]: *See* FTTH Council Comments at 35; BellSouth Comments at 17-19,
    35; USTA Comments at 22-25; Verizon Comments at 40-42.

[^308]: AT&T Comments at 62-64; BellSouth Comments at 32-33; Qwest
    Comments at 21-22; USTA Comments at 27; Verizon Comments at 44-46.

[^309]: *See supra* paras. 38-40.

[^310]: As we understand these franchising agreements are public
    documents, we find it reasonable to require the new entrant to
    produce the incumbent's current agreement.

[^311]: 47 U.S.C. § 541.

[^312]: MMTC Comments at 22, MMTC Reply at 15. MMTC urges that The State
    Regulators Council of the Advisory Committee on Diversity for
    Communication in the Digital Age should be the oversight committee
    for redlining issues. MMTC Comments at 24.

[^313]: MMTC Reply at 11.

[^314]: MMTC Reply at 11 (providing examples of "rapid buildout plan,"
    "equal service verification plan," and "combined plan").

[^315]: *Local Franchising NPRM,* 20 FCC Rcd at 18588.

[^316]: *See, e.g.*, AT&T Reply at Attachment C at 5 ("Lynbrook, N.Y.
    has asked Verizon to provide cameras to film a holiday visit from
    Santa Claus. Deputy Mayor Thomas Miccio said, 'They know if they
    don't get this process done they're going to be in big, big trouble,
    so we feel we're in a very good position.'") (citing Dionne Searcey,
    *As Verizon Enters Cable Business, it Faces Local Static*, [Wall St.
    J.]{.smallcaps}, Oct. 28, 2005, at A1), Verizon Comments at
    Attachment A at 14 ("Two LFAs in California required application
    fees of \$25,000 and \$20,000, respectively. Another community in
    that state has requested an upfront application fee of \$30,000 plus
    an agreement to pay additional expenses (*i.e.,* attorneys fees) of
    up to an additional \$20,000.").

[^317]: 47 U.S.C. § 542(b).

[^318]: *See ACLU v. FCC*, 823 F.2d 1554, 1574 (D.C. Cir. 1987) ("\[I\]t
    is clear . . . that the *ultimate* responsibility for ensuring a
    'national policy' with respect to franchise fees lies with the
    federal agency responsible for administering the Communications
    Act.") (emphasis in original).

[^319]: *See infra* para. 140.

[^320]: 47 U.S.C. § 542(b) (emphasis added). FTTH Council supports an
    alternative cap based on the actual costs of managing the use of
    public rights-of-way, but we need not address that argument because
    we do not have the discretion to adopt a different limit than that
    set by Congress.

[^321]: 47 U.S.C. § 542(g)(1).

[^322]: 47 U.S.C. § 542(g)(2)(C).

[^323]: 47 U.S.C. § 542(g)(2)(D).

[^324]: H.[R. Rep. No.]{.smallcaps} 98-934, at 65 (1984), *as reprinted
    in* 1984 U.S.C.C.A.N. 4655, 4702.

[^325]: Verizon Comments at 63-64; BellSouth Comments at 41-43.

[^326]: *See supra* paras. 43-45.

[^327]: 125 S. Ct. 2688 (2005). *See infra* note 331*.*

[^328]: Advertising revenue and home shopping commissions have been
    included in an operator's gross revenues for franchise fee
    calculation purposes. *See* *Texas Coalition of Cities for Utility
    Issues v. FCC*, 354 F.3d 802, 806 (5th Cir. 2003) ("A cable
    operator\'s gross revenue includes revenue from subscriptions and
    revenue from other sources-e.g., advertising and commissions from
    home shopping networks.\"); *City of Pasadena, California The City
    of Nashville, Tennessee and The City of Virginia Beach, Virginia*,
    16 FCC Rcd. 18192, 2001 WL 1167612, par. 15 (2001) (\"There is no
    dispute among the parties to this proceeding, or in relevant
    precedent, that advertising revenue and home shopping commissions
    can be considered part of an operator\'s gross revenues for
    franchise fee calculation purposes.").

[^329]: 47 U.S.C. § 542(b) (emphasis added).

[^330]: 47 U.S.C. § 522(6).

[^331]: *In re Inquiry Concerning High Speed Access to the Internet Over
    Cable and Other Facilities*, 17 FCC Rcd 4798, 4851 (2002) ("*Cable
    Modem Declaratory Ruling*"), *rev'd*, *Brand X Internet Services v.
    FCC*, 345 F.3d 1120 (9^th^ Cir. 2003), *rev'd*, *NCTA v. Brand X*,
    545 U.S. 967 (2005). The Commission issued a notice of proposed
    rulemaking ("*Cable Modem NPRM*") concurrently with the *Cable Modem
    Declaratory Ruling*. Certain questions from the *Cable Modem NPRM*
    that are relevant, but not directly related, to this discussion
    remain pending before the Commission. *Cable Modem Declaratory
    Ruling* at 4839-4854.

[^332]: *See* NATOA Reply at 29 (agreeing that non-cable services are
    not subject to franchise fees).

[^333]: 47 U.S.C. § 542(g)(2)(D).

[^334]: AT&T Comments at 65-67; BellSouth Comments at 7, 38-39.

[^335]: BellSouth Comments at 7.

[^336]: BellSouth Comments at 38-39.

[^337]: OPASTCO Reply at 5.

[^338]: Verizon Reply at 59.

[^339]: AT&T Comments at 64.

[^340]: AT&T Comments at 65-67.

[^341]: NATOA Reply at 34-35.

[^342]: NATOA Reply at 35 (citing Random House Dictionary of the English
    Language at 720).

[^343]: *See infra* paras. 105-108.

[^344]: NATOA argues that the Commission is powerless to rewrite the
    meaning of the statute. NATOA Reply at 35. Yet, Section 622(i)
    states "\[a\]ny Federal agency may not regulate the amount of the
    franchise fees paid by a cable operator, or regulate the use of
    funds derived from such fees, *except as provided in this section*."
    Therefore, we are within our Congressionally mandated authority to
    provide clarifying guidance regarding the meaning of this provision.

[^345]: *See Robin Cable Systems v. City of Sierra Vista,* 842 F. Supp.
    380 (D. Ariz. 1993); *Time Warner Entertainment Co. v. Briggs,* 1993
    WL 23710 (D. Mass. Jan. 14, 1993); *Birmingham Cable Comm. v. City
    of Birmingham,* 1989 WL 253850 (N.D. Ala. 1989).

[^346]: *Robin Cable* at 381.

[^347]: *Time Warner* at 23710 \* 6.

[^348]: *Birmingham* at 253850.

[^349]: To the extent that an LFA requires franchise fee payments of
    less than 5 percent an offset may not be necessary. Such LFAs are
    able to request the reimbursement or provision of such costs up to
    the 5 percent statutory threshold.

[^350]: Alcatel Comments at 10; FTTH Council Comments at 36; OPASTCO
    Reply at 4; USTelecom Comments at 48; BPSA Comments at 8; NTCA
    Comments at 13; South Slope Comments at 15. *See also* DOJ *Ex
    Parte* at 11.

[^351]: Some LFAs argue that commenters' allegations about inappropriate
    fees fail to identify the LFAs in question. As a consequence, they
    contend, we should not rely on such unsubstantiated claims unless
    the particular LFAs in question are given a chance to respond.
    Communications Support Group Reply at 7; Anne Arundel County Reply
    at 5. We need not resolve particular disputes between parties,
    however, in order to address this issue. Our clarification that all
    LFA requests not related to cable services must be counted toward
    the 5 percent cap is a matter of statutory construction, and all
    commenters have had ample opportunity to address this issue.

[^352]: Broadband Service Providers Association Comments at 8; AT&T
    Comments at 26; Verizon Comments at 57-58. Parties have indicated
    that they were unwilling to identify specific instances of
    unreasonable requests, since in many cases these parties are still
    trying to negotiate franchise agreements with the communities at
    issue.

[^353]: Broadband Service Providers Association Comments at 8.

[^354]: FTTH Council Comments at 66.

[^355]: *Id.* at 38.

[^356]: NTCA Comments at 4.

[^357]: NTCA Comments at 13.

[^358]: AT&T Comments at 26 (citing Dionne Searcey, *As Verizon Enters
    Cable Business, it Faces Local Static*, [Wall St. J.]{.smallcaps},
    Oct. 28, 2005, at A1). *See also* City of Tampa Reply Comments at 5.

[^359]: Verizon Comments at 54. *See also* USTelecom Comments at 48.

[^360]: H.[R. Rep. No.]{.smallcaps} 98-934, at 65 (1984), *as reprinted
    in* 1984 U.S.C.C.A.N. 4655, 4702.

[^361]: *See, e.g.,* FTTH Council Comments at 36 (noting how Knology
    declined to enter the Louisville market after the Louisville LFA
    requested a PEG grant of \$266,000 at the time of franchise grant,
    with \$1.9 million total due over the 15-year term).

[^362]: 47 U.S.C. § 542(g)(2)(C).

[^363]: *See* [H.R. Rep. No.]{.smallcaps} 98-934, at 19 (1984), *as
    reprinted in* 1984 U.S.C.C.A.N. 4655, 4656.

[^364]: *See* *Cable TV Fund 14-A v.* *City of Naperville,* 1997 WL
    433628 (N.D. Ill. 1997) at 13; *City of Bowie, Maryland*, 14 FCC
    Rcd. 7675 (Cable Service Bureau, 1999); *as clarified* 14 FCC Rcd
    9596 (Cable Services Bureau, 1999).

[^365]: 47 U.S.C. § 542(g)(2)(B).

[^366]: 47 U.S.C. § 541(a)(4)(B).

[^367]: *Local Franchising NPRM*, 20 FCC Rcd at 18590.

[^368]: An I-Net is defined as "a communication network which is
    constructed or operated by the cable operator and which is generally
    available only to subscribers who are not residential customers." 47
    U.S.C. § 531(f).

[^369]: *See infra* Section III.B.2.

[^370]: NATOA Comments at 35; NATOA Reply at 30-31; Hawaii Reply at 2-3;
    Mercatus Comments at 35; Certain Florida Municipalities Comments at
    17-18; Anne Arundel *et al* Comments at 35; City of New York
    Comments at 3-4.

[^371]: NATOA Reply at 30 (quoting 47 U.S.C. § 544(b)).

[^372]: Verizon Reply at 60-61.

[^373]: Verizon Reply at 60 (citing NATOA Comments).

[^374]: 47 U.S.C. § 531(a).

[^375]: 47 U.S.C. § 531(b).

[^376]: 47 U.S.C. § 541(a)(4)(B).

[^377]: *See* *See* [H.R. Rep. No]{.smallcaps}. 102-862, at 78 (1992)
    (Conf. Rep.), *as reprinted in* 1992 U.S.C.C.A.N. 1231, 1260.

[^378]: American Heritage Dictionary, Second College Edition (1991).

[^379]: AT&T Reply at 15.

[^380]: *See* 47 U.S.C. § 541(a)(4)(B); *Time Warner Cable of New York
    City v. City of New York*, 943 F.Supp. 1357, 1367 (S.D.N.Y 1996),
    *aff'd sub nom. Time Warner Cable of New York City v. Bloomberg,
    L.P.*, 118 F.3d 917 (2nd Cir. 1997).

[^381]: Consumers for Cable Choice Comments at 8; Verizon Comments at
    71.

[^382]: BellSouth Comments at 8; Verizon Comments at 71.

[^383]: Ad Hoc Telecom Manufacturer Coalition Comments at 4.

[^384]: Cablevision Reply at 29-30.

[^385]: FTTH Council Comments at 66; Verizon Comments at 71; AT&T
    Comments at 67.

[^386]: AT&T Comments at 67-68; Verizon Reply at 61.

[^387]: FTTH Council Comments at 67.

[^388]: *Id.*

[^389]: *Id.*

[^390]: *Id.*

[^391]: Communications Support Group, Inc. Reply at 12.

[^392]: AT&T Comments at 70.

[^393]: NATOA Reply at 41-42.

[^394]: NATOA Reply at 42.

[^395]: If a new entrant, for technical, financial, or other reasons, is
    unable to interconnect with the incumbent cable operator's
    facilities, it would not be unreasonable for an LFA to require the
    new entrant to assume the responsibility of providing comparable
    facilities, subject to the limitations discussed herein.

[^396]: To determine a new entrant's *per se* reasonable PEG support
    payment, the new entrant should determine the incumbent cable
    operator's per subscriber payment at the time the competitive
    applicant applies for a franchise or submits its informational
    filing, and then calculate the proportionate fee based on its
    subscriber base. A new entrant may agree to provide PEG support over
    and above the incumbent cable operator's existing obligations, but
    such support is at the entrant's discretion. If the new entrant
    agrees to share the *pro rata* costs with the incumbent cable
    operator, the PEG programming provider, be it the incumbent cable
    operator, the LFA, or a third-party programmer, must allow the new
    entrant to interconnect with the existing PEG feeds. The costs of
    such interconnection should be borne by the new entrant. We note
    that we previously have required cost-sharing and interconnection
    for PEG channels and facilities in another context. Section
    75.1505(d) of the Commission's rules requires that if an LFA and OVS
    operator cannot reach an agreement on the OVS operator's PEG
    obligations, the operator is required to match the incumbent cable
    operator's PEG obligations and the incumbent cable operator is
    required to permit the OVS operator to connect with the existing PEG
    feeds, with such costs borne by the OVS operator. 47 C.F.R. §
    76.1505(d).

[^397]: Verizon Comments at 75.

[^398]: *See* Verizon Comments at 21. *See also* South Slope Comments at
    11; NCTA Comments at 12.

[^399]: Verizon Comments at 83.

[^400]: Verizon Comments at 75.

[^401]: 47 U.S.C. § 522(7)(C). *See also* Verizon Comments at 82-87.

[^402]: 47 U.S.C. § 522(7)(C).

[^403]: *See* BellSouth at 42; NATOA Reply at 27-28.

[^404]: 47 U.S.C. § 522(7)(C).

[^405]: 47 U.S.C. § 522(12).

[^406]: *See IP-Enabled Services,* 19 FCC Rcd 4863 (2004); Petition of
    SBC Communications Inc. for a Declaratory Ruling, WC Docket No.
    04-36 (filed Feb. 5, 2004); Letter from James C. Smith, Senior Vice
    President, SBC Services Inc., to Marlene H. Dortch, Secretary,
    Federal Communications Commission, WC Docket No. 04-36 (filed Sept.
    14, 2005).

[^407]: *Florida Lime and Avocado Growers v. Paul*, 373 U.S. 132, 142-43
    (1963).

[^408]: *See supra* note 2.

[^409]: *Id*.

[^410]: 47 U.S.C. § 556(c).

[^411]: U.S. Const., Art. VI, cl.2.

[^412]: *Local Franchising NPRM*, 20 FCC Rcd at 18589.

[^413]: *Id.*

[^414]: U.S. Const. Art. VI, cl. 2. *See also Hillsborough County,
    Florida v. Automated Med. Labs., Inc.*, 471 U.S. 707, 712‑13 (1985).

[^415]: *Cipollone v. Liggett Group, Inc.*, 505 U.S. 504, 517 (1992).

[^416]: *Id*. at 517.

[^417]: *Florida Lime and Avocado Growers*, 373 U.S. at 142-43.

[^418]: *Id*.

[^419]: 47 U.S.C. § 556(c).

[^420]: *See, e.g., Liberty Cablevision of Puerto Rico, Inc. v.
    Municipality of Caguas*, 417 F.3d 216 (1st Cir. 2005) (finding
    municipal ordinances that imposed franchise fees on cable operators
    were preempted under Section 636(c) where inconsistent with Section
    622 of the Communications Act).

[^421]: *See Cipollone*, 505 U.S. at 517; *Capital Cities Cable*, 467
    U.S. 691, 699 (1984).

[^422]: *See supra* paras. 2-4, 61-64.

[^423]: *Florida Lime and Avocado Growers*, 373 U.S. at 142-43.

[^424]: 47 U.S.C. § 521 (1), (2) & (6).

[^425]: *See* [H.R. Rep. No.]{.smallcaps} 98-934, at 19 (1984), *as
    reprinted in* 1984 U.S.C.C.A.N. 4655, 4656; [S. Rep.
    No]{.smallcaps}. 97-518, at 14 (1982) ("free and open competition in
    the marketplace" and the "elimination and prevention of artificial
    barriers to entry" are essential to the growth and development of
    the cable industry[);]{.smallcaps} H[.R. Rep. No.]{.smallcaps}
    102-862, at 77-78 (1992) (Conf. Rep.), *as reprinted in* 1992
    U.S.C.C.A.N. 1231, 1259-60.

[^426]: *See, e.g.,* 47 U.S.C. § 521(6) (stating that one of the
    purposes of Title VI is "to promote competition in cable
    communications"); *FCC v. Beach Communications, Inc.,* 508 U.S. 307,
    309 (1993) (recognizing "\[o\]ne objective of the Cable Act was to
    set out 'franchise procedures and standards which encourage the
    growth and development of cable systems and which assure that cable
    systems are responsive to the needs and interests of the local
    community.'" (citing 47 U.S.C. § 521(2))).

[^427]: *See, e.g.,* AT&T Reply at 6-7 ("today's standardless
    franchising process, and the anticompetitive substantive conditions
    demanded of new entrants by many LFAs ... not only delay entry, but
    often prevent it altogether"); AT&T Comments at 43 (listing several
    conditions commonly imposed in the local franchising process that
    raise the cost of entry, deter broadband investment, and deny
    consumers the benefits of competition and choice); Verizon Comments
    at iv-vi (the franchising process is often marked by inordinate
    delay and is often used by many LFAs "as an opportunity to demand
    all manner of additional concessions, mostly unrelated to the
    provision of video services or the underlying purposes of franchise
    requirements, from the would-be competitor"); TIA Comments at 7-15
    (many LFAs unreasonably delay the grant of competitive franchises
    and demand excessive concessions from potential entrants); USTA
    Comments at 19-20 ("The single biggest obstacle to widespread
    competition in the video service market is the requirement that a
    provider obtain an individually negotiated local franchise in each
    area where it intends to provide service"); FTTH Council Comments at
    59-60 ("the franchising process as implemented by numerous LFAs
    across the country continues to suffer from numerous flaws that
    frustrate the twin Congressional objectives of promoting cable
    competition and fostering deployment of advanced services to all
    Americans"); Alcatel Comments at 19 ("\[t\]he regulatory obstacle of
    thousands of local video franchises potentially wielding their
    authority to adopt unreasonable requirements will invariably impede
    deployment by competitors and negatively impact investment in
    advanced technologies and services").

[^428]: *See supra* Section III.C.1.

[^429]: *See supra* Section III.C.2.

[^430]: *See supra* Section III.C.3.

[^431]: *See, e.g., Louisiana Public Service Commission v. FCC*, 476
    U.S. 355, 369 (1986).

[^432]: *See* Comcast Comments at 36-37; Comcast Reply at 35-37;
    Burnsville/Eagan Comments at 35-36.

[^433]: *City of Dallas,* 165 F.3d at 341.

[^434]: *See* Comcast Comments at 37; Comcast Reply at 36;
    Burnsville/Eagan Comments at 35-36.

[^435]: 47 U.S.C. § 556(c).

[^436]: 47 U.S.C. § 541(a)(1).

[^437]: *See Liberty Cablevision of Puerto Rico v. Municipality of
    Caguas*, 417 F.3d 216, 221 (1st Cir. 2005) (Section 636(c) makes
    clear that Congress "unmistakably" intended to preempt state and
    local franchising decisions that are inconsistent with the Act,
    including Section 621); *Qwest Broadband Services, Inc. v. City of
    Boulder*, 151 F. Supp. 2d. 1236, 1243 (D. Colo. 2001) (a franchise
    provision in the Boulder, Colorado charter was preempted by Section
    621(a)(1) because it conflicted directly with that provision's
    mandate that the "franchising authority" be responsible for granting
    the franchise).

[^438]: *See City of New York v. FCC*, 486 U.S. 57, 64 (1988)
    ("statutorily authorized regulations of an agency will pre-empt any
    state or local law that conflicts with such regulations or
    frustrates the purposes thereof"); *Louisiana Public Serv. Comm.*,
    476 U.S. at 369 ("a federal agency acting within the scope of its
    congressionally delegated authority may pre-empt state regulation");
    *Capital Cities Cable, Inc. v. Crisp,* 467 U.S. 691, 699 (1984)
    (when a federal agency promulgates regulations intended to preempt
    state law, courts uphold preemption as long as the agency's choice
    "represents a reasonable accommodation of conflicting policies that
    were committed to the agency's care by the statute"); *Fidelity
    Federal Savings & Loan Ass'n,* 458 U.S. at 153 ("Federal regulations
    have no less pre-emptive effect than federal statutes").

[^439]: *New York v. FERC*, 535 U.S. 1, 18 (2002).

[^440]: *See supra* paras. 53-64.

[^441]: *See Fidelity Federal Savings & Loan Assn. v. De la Cuesta*, 458
    U.S. 141, 153-58 (1982); *City of New York,* 486 U.S. at 64. *See
    also* AT&T Comments at 41-42.

[^442]: *See* Comcast Comments at 39 (citing 47 U.S.C. § 556(a)). *See
    also* Florida Municipalities Comments at 18-19 (the Cable Act
    provides for limited preemption of local regulatory efforts in
    certain specific areas, none of which cover competitive franchises).
    Commenters further point to the legislative history for Section
    636(a), which noted that a state may "exercise authority over the
    whole range of cable activities, such as negotiations with cable
    operators; consumer protection; construction requirements; rate
    regulation or deregulation; the assessment of financial
    qualifications; the provision of technical assistance with respect
    to cable; and other franchise-related issues -- as long as the
    exercise of that authority is consistent with Title VI." *See*
    Comcast Comments at 39-40 (citing [H.R. Rep. No.]{.smallcaps}
    98-934, at 94 (1984), *as reprinted in* 1984 U.S.C.C.A.N. 4655,
    4731).

[^443]: 47 U.S.C. § 556(a) (emphasis added).

[^444]: *See* Texas Coalition of Cities Comments at 29-35;
    Burnsville/Eagan Comments at 38. Burnsville/Eagan further argues
    that Fifth Amendment concerns would arise if the Commission were to
    interfere with the terms under which a competitive franchise is
    granted, thereby forcing modifications to existing cable franchises,
    pursuant to state and local level-playing-field requirements, thus
    depriving LFAs of lawful and reasonable compensation they negotiated
    with the incumbent cable operators for the use of public
    rights-of-way.

[^445]: U.S. Const. Amend. V.

[^446]: *See Liberty Cablevision,* 417 F.3d at 222.

[^447]: *See New Jersey Payphone Ass'n, Inc. v. Town of West New York,*
    130 F.Supp.2d 631, 638 (D.N.J. 2001); *see also Liberty
    Cablevision,* 417 F.3d at 222 (recognizing that it is "'a mistake to
    suppose ... \[that\] the city is constitutionally and necessarily
    entitled to compensation'" for use of the city streets).

[^448]: *See Liberty Cablevision,* 417 F.3d at 222.

[^449]: *See* Verizon Reply at 25.

[^450]: *See* Verizon Reply at 25; South Slope Comments at 10-11; NCTA
    Comments at 12.

[^451]: *See St. Louis v. Western Union Telegraph Co.,* 149 U.S. 465,
    467 (1893); *Liberty Cablevision,* 417 F.3d at 221.

[^452]: *See City & County of Denver,* 18 P.3d 748, 761 (Colo. 2001).

[^453]: *See* Verizon Reply at 25-26. *See also C/R TV, Inc. v.
    Shannondale, Inc.,* 27 F.3d 104, 109 (4th Cir. 1994) (reasoning that
    the transmission of cable television signals "would not impose an
    additional burden on \[a\] servient estate" on which telephone
    poles, power lines, and telephone wires had previously been
    installed).

[^454]: *See U.S. v. Riverside Bayview Homes,* 474 U.S. 121, 128 (1985)
    (the Fifth Amendment does not prohibit takings, only uncompensated
    ones). Because we find that the statute provides just compensation,
    we need not address whether the takings clause of the Fifth
    Amendment encompasses the property interests of state and local
    governments in the same way that it applies to the property
    interests of private persons.

[^455]: 47 U.S.C. § 542(h)(2).

[^456]: In passing the 1984 Cable Act, Congress recognized local
    government's entitlement to "assess the cable operator a fee for the
    operator's use of public ways," and established "the authority of a
    city to collect a franchise fee of up to 5 percent of an operator's
    annual gross revenues." H.[R. Rep. No.]{.smallcaps} 98-934, at 26
    (1984), *as reprinted in* 1984 U.S.C.C.A.N. 4655, 4663.

[^457]: For the reasons stated above, we need not reach the issue of
    whether a "taking" has occurred with respect to a competitive
    applicant providing cable service over the same network it uses to
    provide telephone service, for which it is already authorized by the
    local government to use the public rights-of-way.

[^458]: *See* Michigan Municipal League Comments at 24 ("\[a\]ny action
    by the Commission to mandate the granting of a franchise directly or
    by means of state actions in favor of any party over the objection
    of the local franchising authority offends the Tenth Amendment of
    the U.S. Constitution"); Anne Arundel County Comments at 50 (same).

[^459]: U.S. Const. Amend. X.

[^460]: *See* Michigan Municipal League Comments at 25; Anne Arundel
    County Comments at 51.

[^461]: *See* Verizon Reply at 27-29.

[^462]: *See New York v. U.S.,* 505 U.S. 144, 156 (1992).

[^463]: *See id.* at 157-58.

[^464]: *See* *Crisp,* 467 U.S. at 700-701 (holding that cable services
    are interstate services).

[^465]: *See Qwest Broadband Services, Inc. v. City of Boulder*, 151
    F.Supp.2d 1236, 1245 ("the inquiries under the Commerce Clause and
    the Tenth Amendment are mirror images, and a holding that a
    Congressional enactment does not violate the Commerce Clause is
    dispositive of a Tenth Amendment challenge) (citing *United States
    v. Baer,* 235 F.3d 561, 563 n.6 (10th Cir. 2000). *See also* Verizon
    Reply at 28.

[^466]: *See* Michigan Municipal League Comments at 25; Anne Arundel
    County Comments at 51.

[^467]: *See New York v. U.S.,* 505 U.S. at 167.

[^468]: *See supra* at Section III.C.1.

[^469]: *See supra* at Section III.C.2.

[^470]: *See supra* at Section III.C.3.

[^471]: *See, e.g.,* GMTC Comments at 15.

[^472]: *See* FTTH Council Comments at 28-31 ("there is substantial
    evidence that level playing field requirements have harmed new
    entrants or simply scared off applicants in the first place");
    Verizon Comments at 76-80 (level-playing-field provisions are
    "protectionist requirements" for the benefit of the incumbent cable
    operator and are often cited as a basis for imposing all manner of
    additional costs and obligations, many of which are unreasonable
    and/or unlawful, on a would-be new entrant into the market); USTA
    Reply at 23-26, 32-34 (level-playing-field laws intrinsically limit
    the ability of LFAs to award franchises); *see also,* GAO Report,
    *Wire-Based Competition Benefited Consumers in Selected Markets*
    (Feb. 2004), GAO-04-241 Report at 21 (noting that one local official
    indicated that the level-playing-field law in his state was a factor
    in an interested competitive cable company's retracting a cable
    application); BSPA Comments at 4-5 (level-playing-field statutes are
    a superficial appeal to fairness that masks the real intent to
    protect the incumbent's market position, and such requirements delay
    or limit the growth of competition by negatively impacting the
    availability or use of capital); Letter from Lawrence Spiwak,
    President, Phoenix Ctr. For Advanced Legal and Econ. Pub. Policy
    Studies, to Marlene Dortch, Secretary, Federal Communications
    Commission at Attachment, *Phoenix Center Policy Paper Number 21:*
    *Competition After Unbundling: Entry, Industry Structure and
    Convergence*, 37 ("presence of a 'first mover' advantage means that
    requiring a new entrant to bear an entry cost simply because the
    incumbent cable operator has already borne it will have the effect
    of deterring entry substantially, even if such costs did not deter
    the incumbent cable operator from offering service") (March 13,
    2006) ("*Phoenix Center Competition Paper*"); DOJ *Ex Parte* at 16.
    *But see* Comcast Comments at 40 (maintaining that state
    level-playing-field statutes are a legitimate and well-established
    exercise of state and local regulatory authority and are not
    inconsistent with the Communications Act); NATOA Reply at 43-44
    (maintaining that there is little or no evidence to suggest that
    state level-playing-field laws have had anywhere near the draconian
    effect on the granting of competitive franchises as the telephone
    industry alleges).

[^473]: *See* USTA Reply at 24. *See also,* Verizon Reply at 65 ("In
    exchange for the costs they incurred to enter the market, the
    incumbent cable operators generally received exclusive franchises
    and enjoyed all of the benefits of being monopoly providers for
    years, often decades."); Mercatus Comments at 40 ("while a second
    cable operator will have to make the same unrecoverable investment
    previously made by the incumbent, it will not have the benefit of a
    monopoly over which to amortize it"); FTTH Council Comments at 3
    ("New entrants are highly unlikely to ever obtain and enjoy the
    fruits of market power. Consequently, the burdens of the
    pre-existing franchising process from the perspective of these new
    entrants are not offset by the benefits that the monopolists
    enjoyed.").

[^474]: *See* FTTH Council Comments at 30 (quoting Andy Sarwal
    Declaration, para. 7); Verizon Comments at 77 (new entrants
    "\[face\] ubiquitous competition from strong and entrenched
    competitors, which in turn leads to lower market share and lower
    profit margins").

[^475]: *See* Verizon Reply at 65. *See also* USTA Reply at 24.

[^476]: We also find troubling the record evidence that suggests
    incumbent cable operators use "level-playing-field" requirements to
    frustrate negotiations between LFAs and competitive providers,
    causing delay and preventing competitive entry. *See, e.g.,* Letter
    from John Goodman, Broadband Service Providers Association, to
    Marlene Dortch, Secretary, Federal Communications Commission (March
    3, 2006) (explaining that the incumbent cable operator used
    level-playing-field requirements to bring litigation against the LFA
    which delayed the negotiation process and made entry so expensive
    that it no longer became feasible for the new entrant); Texas
    Coalition of Cities Comments at 13 ("Most delays in *competitive
    franchise* negotiations result from the incumbent cable provider's
    demands that competitive providers' franchises contain virtually
    identical terms."); Verizon Reply at 65-66 ("incumbents'
    over-eagerness to support these anticompetitive requirements further
    evidences the need for the Commission to remove this roadblock to
    competition").

[^477]: *See* *supra* paras. 1, 113*.*

[^478]: *Local Franchising NPRM*, 20 FCC Rcd at 18588.

[^479]: NCTA Comments at 13 (quoting *Appropriate Framework for
    Broadband Access to the Internet Over Wireline Facilities,* 20 FCC
    Rcd 14853, 14855-56, 14864-65 (2005) "\[T\]reating like services
    alike promotes competition" by allowing the market to determine the
    better operator rather than providing one operator "artificial
    regulatory advantages"). *See also* Cox Reply at 2-4.

[^480]: BSPA Comments at 2-3.

[^481]: *See, e.g.*, BSPA Comments at 2-3 (any new regulatory relief in
    franchising should apply to all current competitive operators and
    potential new entrants). *But see* FTTH Council Comments at 24 (new
    entrants are not treated more favorably than incumbents when they
    are burdened with the same requirements as incumbents but do not
    have the same market power).

[^482]: Charter Comments at 3-4.

[^483]: AT&T Reply at 5.

[^484]: *Local Franchising NPRM*, 20 FCC Rcd at 18588.

[^485]: AT&T Comments at 72-73.

[^486]: *Id.*

[^487]: *Id.* As discussed in Section III.C.2 above, AT&T's existing
    call center regions do not mirror local franchise areas. One region
    can encompass multiple franchise areas, and impose a multitude of
    regulations upon a new entrant.

[^488]: AT&T Comments at 73.

[^489]: Verizon Comments at 75.

[^490]: NATOA Reply at 40-41. *See also* New York City Comments at 3
    (citing 47 U.S.C. § 552).

[^491]: 47 U.S.C. § 552(d)(2). *Accord* 47 C.F.R. § 76.309(b)(4).

[^492]: *See, e.g.,* Alliance for Public Technology Comments at 2-3;
    American Association of People with Disabilities at 2; Cavalier
    Comments at 6.

[^493]: 47 U.S.C. § 552(d)(2). *Accord* 47 C.F.R. § 76.309(b)(4).

[^494]: *See* 5 U.S.C. § 603.

[^495]: *See* 5 U.S.C. § 604.

[^496]: The RFA, *see* 5 U.S.C. §§ 601 -- 612, has been amended by the
    Small Business Regulatory Enforcement Fairness Act of 1996
    ("SBREFA"), Pub. L. No. 104-121, Title II, 110 Stat. 857 (1996).

[^497]: *See* 5 U.S.C. § 603. Although we are conducting an IRFA at this
    stage in the process, it is foreseeable that ultimately we will
    certify this action pursuant to the RFA, 5 U.S.C. § 605(b), because
    we anticipate at this time that any rules adopted pursuant to this
    *Notice* will have no significant economic impact on a substantial
    number of small entities.

[^498]: *See* 5 U.S.C. § 603(a).

[^499]: *See* 5 U.S.C. § 603(a).

[^500]: *See* 47 U.S.C. §§ 531(a), 542(a).

[^501]: 5 U.S.C. § 603(b)(3).

[^502]: 5 U.S.C. § 601(6).

[^503]: 5 U.S.C. § 601(3) (incorporating by reference the definition of
    "small-business concern" in the Small Business Act, 15 U.S.C. §
    632). Pursuant to 5 U.S.C. § 601(3), the statutory definition of a
    small business applies "unless an agency, after consultation with
    the Office of Advocacy of the Small Business Administration and
    after opportunity for public comment, establishes one or more
    definitions of such term which are appropriate to the activities of
    the agency and publishes such definition(s) in the Federal
    Register."

[^504]: 15 U.S.C. § 632.

[^505]: *See* SBA, Programs and Services, SBA Pamphlet No. CO-0028, at
    page 40 (July 2002).

[^506]: Independent Sector, The New Nonprofit Almanac & Desk Reference
    (2002).

[^507]: 5 U.S.C. § 601(5).

[^508]: U.S. Census Bureau, Statistical Abstract of the United States:
    2000, Section 9, pages 299-300, Tables 490 and 492.

[^509]: 13 C.F.R. § 121.201, North American Industry Classification
    System (NAICS) 517510.

[^510]: U.S. Census Bureau, 1997 Economic Census, Subject Series:
    Information, "Establishment and Firm Size (Including Legal Form of
    Organization)," Table 4, NAICS code 513220 (issued October 2000).

[^511]: 47 C.F.R. § 76.901(e). The Commission developed this definition
    based on its determination that a small cable system operator is one
    with annual revenues of \$100 million or less. *See Implementation
    of Sections of the 1992 Cable Act: Rate Regulation, Sixth Report and
    Order and Eleventh Order on Reconsideration*, 10 FCC Rcd 7393
    (1995).

[^512]: Paul Kagan Associates, Inc., Cable TV Investor, February 29,
    1996 (based on figures for December 30, 1995).

[^513]: 47 U.S.C. § 543(m)(2).

[^514]: *See* FCC Announces New Subscriber Count for the Definition of
    Small Cable Operator, Public Notice DA 01-158 (2001).

[^515]: 47 C.F.R. § 76.901(f).

[^516]: *See* FCC Announces New Subscriber Count for the Definition of
    Small Cable Operators, Public Notice, DA 01-0158 (2001).

[^517]: The Commission does receive such information on a case-by-case
    basis if a cable operator appeals a local franchise authority's
    finding that the operator does not qualify as a small cable operator
    pursuant to § 76.901(f) of the Commission's rules. *See* 47 C.F.R.
    § 76.909(b).

[^518]: *See* 47 U.S.C. § 573.

[^519]: 13 C.F.R. § 121.201, NAICS code 517510.

[^520]: *See* http://www.fcc.gov/mb/ovs/csovscer.html (visited December
    19, 2006), http://www.fcc.gov/mb/ovs/\
    csovsarc.html (visited December 19, 2006).

[^521]: 5 U.S.C. §§ 603(c)(1)-(4).

[^522]: 47 U.S.C. §§ 531(a), 542(a).

[^523]: *See* 5 U.S.C. § 603. The RFA, *see* 5 U.S.C. § 601 *et. seq.*,
    has been amended by the Small Business Regulatory Enforcement
    Fairness Act of 1996 ("SBREFA"), Pub. L. No. 104-121, Title II, 110
    Stat. 847 (1996). The SBREFA was enacted as Title II of the Contract
    With America Advancement Act of 1996 ("CWAAA").

[^524]: *Implementation of Section 621(a)(1) of the Cable Communications
    Policy Act of 1984 as amended by the Cable Television Consumer
    Protection and Competition Act of 1992*, 20 FCC Rcd 18581 (2005)
    ("*NPRM*").

[^525]: *See* 5 U.S.C. § 604.

[^526]: 47 U.S.C. § 541(a)(1).

[^527]: *Id*.

[^528]: 5 U.S.C. § 603(b)(3).

[^529]: *Id*. § 601(6).

[^530]: *Id*. § 601(3) (incorporating by reference the definition of
    "small business concern" in 15 U.S.C. § 632). Pursuant to 5 U.S.C. §
    601(3), the statutory definition of a small business applies "unless
    an agency, after consultation with the Office of Advocacy of the
    Small Business Administration and after opportunity for public
    comment, establishes one or more definitions of such term which are
    appropriate to the activities of the agency and publishes such
    definition(s) in the Federal Register." 5 U.S.C. § 601(3).

[^531]: 15 U.S.C. § 632. Application of the statutory criteria of
    dominance in its field of operation and independence are sometimes
    difficult to apply in the context of broadcast television.
    Accordingly, the Commission's statistical account of television
    stations may be over-inclusive.

[^532]: 5 U.S.C. § 601(5).

[^533]: U.S. Census Bureau, Statistical Abstract of the United States:
    2000, Section 9, pages 299-300, Tables 490 and 492.

[^534]: 13 C.F.R. § 121.201, North American Industry Classification
    System (NAICS) code 517510.

[^535]: U.S. Census Bureau, 1997 Economic Census, Subject Series:
    Information, \"Establishment and Firm Size (Including Legal Form of
    Organization),\" Table 4, NAICS code 513220 (issued October 2000).

[^536]: 47 C.F.R. § 76.901(e). The Commission developed this definition
    based on its determination that a small cable system operator is one
    with annual revenues of \$100 million or less. *See Implementation
    of Sections of the 1992 Cable Act: Rate Regulation, Sixth Report and
    Order and Eleventh Order on Reconsideration*, 10 FCC Rcd 7393
    (1995).

[^537]: Paul Kagan Associates, Inc., Cable TV Investor, February 29,
    1996 (based on figures for December 30, 1995).

[^538]: 47 U.S.C. § 543(m)(2).

[^539]: *See* FCC Announces New Subscriber Count for the Definition of
    Small Cable Operator, Public Notice DA 01-158 (2001).

[^540]: 47 C.F.R. § 76.901(f).

[^541]: *See* FCC Announces New Subscriber Count for the Definition of
    Small Cable Operators, Public Notice, DA 01-0158 (2001).

[^542]: The Commission does receive such information on a case-by-case
    basis if a cable operator appeals a local franchise authority\'s
    finding that the operator does not qualify as a small cable operator
    pursuant to § 76.901(f) of the Commission\'s rules. See 47 C.F.R. §
    76.909(b).

[^543]: *See* 47 U.S.C. § 573.

[^544]: 13 C.F.R. § 121.201, NAICS code 517510.

[^545]: *See* http://www.fcc.gov/mb/ovs/csovscer.html (visited December
    19, 2006), http://www.fcc.gov/mb/ovs/csovsarc.html (visited December
    19, 2006).

[^546]: 15 U.S.C. § 632.

[^547]: Letter from Jere W. Glover, Chief Counsel for Advocacy, SBA, to
    William E. Kennard, Chairman, FCC (May 27, 1999). The Small Business
    Act contains a definition of \"small-business concern,\" which the
    RFA incorporates into its own definition of \"small business.\"
    *See* 15 U.S.C. § 632(a) (Small Business Act); 5 U.S.C. § 601(3)
    (RFA). SBA regulations interpret \"small business concern\" to
    include the concept of dominance on a national basis. *See* 13
    C.F.R. § 121.102(b).

[^548]: 13 C.F.R. § 121.201, NAICS code 517110 (changed from 513310 in
    Oct. 2002).

[^549]: FCC, Wireline Competition Bureau, Industry Analysis and
    Technology Division, \"Trends in Telephone Service\" at Table 5.3,
    page 5-5 (June 2005) (\"Trends in Telephone Service\"). This source
    uses data that are current as of October 1, 2004.

[^550]: *See* U.S. Census Bureau, 2002 Economic Census, Industry Series:
    \"Information,\" Table 2, Comparative Statistics for the United
    States (1997 NAICS Basis): 2002 and 1997, NAICS code 513310 (issued
    Nov. 2004). The preliminary data indicate that the total number of
    \"establishments\" increased from 20,815 to 27, 891. In this
    context, the number of establishments is a less helpful indicator of
    small business prevalence than is the number of \"firms,\" because
    the latter number takes into account the concept of common ownership
    or control. The more helpful 2002 census data on firms, including
    employment and receipts numbers, will be issued in late 2005.

[^551]: 13 C.F.R. § 121.201, NAICS code 517110.

[^552]: \"Trends in Telephone Service\" at Table 5.3.

[^553]: *See supra* note 28.

[^554]: 5 U.S.C. § 603(c)(1)-(c)(4)

[^555]: *See* 5 U.S.C. § 801(a)(1)(A).

[^556]: *See* *id*. § 604(b).

[^557]: For example, I would have been willing to find that it would
    seem reasonable for an LFA to require that, beginning five years
    after the effective date of a new entrant's franchise and every 3
    years thereafter, if in the portion of the franchise area where the
    new entrant has chosen to offer cable service at least 15 percent of
    the households subscribe to such service, the new entrant increase
    by 20 percent the households in the franchise area to which the new
    entrant offers cable service by the beginning of the next 3-year
    interval, until the new entrant is capable of providing cable
    service to all households in the franchise area.

[^558]: *Final Transcript,* Thomson StreetEvents, VZ-Verizon at UBS
    34^th^ Annual Global Media Conference, Dec. 6, 2006, at page 7,
    available at,
    http://investor.verizon.com/news/20061206/20061206_transcript.pdf.

[^559]: Statement of Commissioner Jonathan S. Adelstein, *Implementation
    of Section 621(a)(1) of the Cable Communications Policy Act of 1984,
    as amended by the Cable Television Consumer Protection and
    Competition Act of 1992*, MB Docket No. 05-311, Notice of Proposed
    Rulemaking, FCC 05-180 (rel. Nov. 18, 2005) ("*Local Franchising*
    *NPRM"*).

[^560]: *Kelley v. E.P.A*., 15 F.3d 1100, 1108 (DC. Cir. 1994). While
    the Commission contends that "\[d\]espite the parameters established
    by the Communications Act, ... operation of the franchising process
    has proven far more complex and time consuming than it *should be*,"
    (Order, ¶ 3), the proper inquiry is whether the franchising process
    is operating *as Congress intended*. Today's *Order* ignores this
    important question. In so doing, the Commission disregards the
    parameters established in the Cable Act and imposes its view of how
    the franchising process *should be*.

[^561]: President Ronald Reagan, *State of the Union Address*, January
    26, 1982, available at,
    <http://www.reagan.utexas.edu/archives/speeches/1982/12682c.htm>.

[^562]: George W. Bush, "What the Congress Can Do For America," [Wall
    St. J.]{.smallcaps}, January 3, 2007, at A13.

[^563]: *Cable Television Report and Order,* 36 F.C.C. 2d 143, 207 ¶177,
    *recon.,* 36 F.C.C. 2d 326 (1972).

[^564]: H.R. Rep. No. 934, 98^th^ Congress, 2d Sess. at 24.

[^565]: 47 U.S.C. § 521 (3).

[^566]: 47 U.S.C. § 521(2).

[^567]: One of the principal purposes of Title VI is to "establish
    franchise procedures and standards which encourage the growth and
    development of cable systems and which assure that cable systems are
    responsive to the needs and interests of the local community." 47
    U.S.C. § 521(2).

[^568]: 47 U.S.C. § 555.

[^569]: See Letter from David L. Smith, City Attorney, City of Tampa ,
    to Kevin Martin, Chairman, FCC, dated January 5, 2007 (stating
    "\[h\]ow disappointing it was to learn that ... the FCC would
    embrace as truth an allegation in a rulemaking that has such
    far-reaching implications to so many, without doing any follow-up
    with the jurisdiction named to confirm it accuracy.").

[^570]: *See* 47 U.S.C. § 541 (a)(2).

[^571]: See, e.g., In the Matter of Comcast Corporation's Request for
    Waiver of 47 C.F.R. § 76.120(a)(1), CSR-7017-Z, CS Docket No 97-80,
    DA-06-2543, CS Docket No 97-80, filed 4/19/06 (waiver proceeding
    placed on public notice 5/17/06 and decided 1/10/2007, well past the
    statutory "shot clock"); 47 U.S.C. § 549(c) ("the Commission shall
    grant any such waiver request within 90 days of any application
    filed under this subsection.").

[^572]: H.R. REP. No. 109-470, at 3 (2006).

[^573]: While the *Order* purportedly refrains from explicitly
    preempting "statewide franchising decisions" and only addresses
    "decisions made by \[instrumentalities of the state, such as\]
    county -- or municipal level franchising authorities," this dubious
    distinction has a questionable legal basis. Under Title 6, LFAs
    derive their power by virtue of state law, so such distinctions are
    not for the FCC to make. Moreover, the Commission's contention that
    it does not have sufficient information in the record to consider
    the effect of franchising by states (some of which have had laws in
    place for a decade), but has sufficient record evidence to preempt
    33,000 LFAs, is facially preposterous.

[^574]: Adelstein Statement, *Local Franchising* *NPRM*.

[^575]: Letter from Grant Seiffert, to Jonathan S. Adelstein,
    Commissioner, FCC, MB Docket No. 05-311 (dated December 11, 2006).

[^576]: *Local Franchising* *NPRM*, ¶1 ("potential competitors seeking
    to enter the multichannel video programming distributor ("MVPD")
    marketplace have alleged that in many areas the current operation of
    the local franchising process serves as a barrier to entry.
    Accordingly, this *Notice* is designed to solicit comment on
    implementation of Section 621(a)(1)'s directive that LFAs not
    unreasonably refuse to award competitive franchises.")

[^577]: During the Commission's Agenda Meeting in Keller, Texas, on
    February 10, 2006, one Verizon official identified Montgomery
    County, Maryland, as an obstinate LFA that was insisting upon
    unreasonable illegal demand and delaying negotiations. Since that
    meeting, Verizon has in fact obtained a franchise in Montgomery
    County. *See* Press Release, Montgomery Country, Md., County
    Negotiates Cable Franchise Agreement with Verizon; Agreement
    Resolves Litigation, Provides Increased Competition for Cable
    Service (Sept. 13, 2006) (available at
    http://www.montgomerycountymd.gov/apps/News/press/PR_details.asp?PrID=2582).
    In fact, this *Order* blatantly ignores public statements that
    significantly undermine representations some proponents of this
    decision have made to the Commission. For example, AT&T has publicly
    stated that Project Lightspeed will be available to 90% of its
    "high-value" customers, but to less than 5% of its "low value"
    neighborhoods, but today the Commission undermines a locality's
    ability to ensure all residents are served. Leslie Cauley*, Cable,
    Phone Companies Duke it out for Customers*, USA Today, May 22, 2005,
    available at:
    http://www.usatoday.com/money/media/2005-05-22-telco-tv-cover-usat_x.htm?csp=34
    (last viewed 12/20/06). As Verizon's CEO of one major new entrant
    recently noted, "Any place it's come to a vote, we win." Dionne
    Searcey, *As Verizon Enters Cable Business, It Faces Local Static
    Telecom Giant Gets Demands As It Negotiates TV Deals*, Wall St. J.,
    Oct. 28, 2005, at A1. Yet in today's *Order*, the Commission somehow
    determines that there is widespread bad faith only on the part of
    the LFAs, not the new entrants, in order to justify this sweeping
    federal preemption.

[^578]: 47 U.S.C. §541(a)(1).

[^579]: Admittedly, however, read together, sections 621(a)(1) and
    635(a), clearly vest the courts, not the FCC, with exclusive
    jurisdiction over the determination of what constitutes
    "unreasonably refuse." In light of the fact that these two
    provisions were amended simultaneously in 1992, this is the only
    rational interpretation. As NATOA pointed out in its Comments,
    "\[i\]t is ludicrous to suggest that Congress, having provided that
    only "final" decisions of the "denial" of a franchise application
    may be appealed, somehow intended, *sub silentio*, to have its own
    language gutted by allowing parties to bypass the last sentence of §
    621(a)(1) entirely and go directly to the FCC." NATOA Comments at
    28.

[^580]: The Senate Report of the 1992 Cable Act concluded that,
    "\[b\]ased on the evidence in the record taken as a whole, it is
    clear that there are benefits from competition between two cable
    systems. Thus, the Committee believes that local franchising
    authorities should be *encouraged \[not required\]* to award second
    franchises. Accordingly, \[the 1992 Cable Act,\] as reported,
    prohibits local franchising authorities from unreasonably refusing
    to grant second franchises." S. Rep. No. 102-92, at 47
    (1991)(emphasis supplied). Thus, an LFA's decision to not grant a
    franchise need only not be unreasonable.

    As one federal district court observed:

    > The House version contained a specific list of "reasonable"
    > grounds for denial. H. R. Conf. Rep. No. 102-862, at 168-69
    > (1992). The Senate version, on the other hand, listed "technically
    > infeasible" and left other reasonable grounds undefined. By
    > choosing not to adopt a federally mandated list of reasonable
    > grounds for denial in favor of an open-ended definition, *Congress
    > intended to leave states with the power to determine the bases for
    > granting or denying franchises, with the only caveat being that a
    > denial must be "reasonable.*"

    *Knology, Inc. v. Insight Communications Co., L.P*., 2001 WL 1750839
    at \* 2 (W.D. Ky. March 20, 2001) (citation omitted) (emphasis
    supplied).

[^581]: 47 U.S.C. §541(a)(1) (emphasis added).

[^582]: *Id.* (emphasis added).

[^583]: Congressional intent to qualify the nature of an LFA's refusal,
    [not]{.underline} the timing of the refusal, is clear when you
    consider another provision of Section 621(a). Section 621(a)(4)(A)
    provides that "franchising authority shall allow the applicant's
    cable system *a reasonable period of time* to become capable of
    providing cable service to all households in the franchise area." In
    that case, Congress explicitly qualified timing, not the scope of
    buildout. As demonstrated in the Order, the Commission's attempt to
    super-inflate the meaning of "unreasonably refuse" in 621(a)(1), and
    diminish the significance of "unreasonable period of time" in
    section 621(a)(4)(A) is transparently inconsistent and blatantly
    self-serving.

[^584]: The *Order* imposes a time limit of 90 days on LFAs to decide
    franchise applications from entities that already have access to
    public rights-of-way and a time limit of six months for applicants
    that are not already authorized to occupy the rights-of-way. Such a
    distinction does not exist in Title 6, notwithstanding the fact that
    Congress specifically contemplated phone companies -- entities that
    already have access to public rights-of-way -- obtaining franchises
    to provide video service.

[^585]: 47 U.S.C. § 537 (providing LFAs 120 days to act upon request for
    approval of sale or transfer on cable systems); 47 U.S.C. § 545
    (providing LFAs 120 days to modify franchise obligations); and 47
    U.S.C. § 546 (providing LFAs a "4-month period" to "renew the
    franchise or, issue a preliminary assessment that the franchise
    should not be renewed").

[^586]: *See, e.g.*, 47 U.S.C. § 543 (authorizing the Commission to
    "ensure that the rates for the basic service tier are reasonable"
    and requiring the Commission to develop regulations in 180 days).

[^587]: 47 U.S.C. § 541(a)(1). Today's *Order* specifically adopts rules
    that prohibit franchising authorities from "*unreasonably* refusing"
    to award competitive franchises. *Order* at ¶ 1.

[^588]: As the July 11, 2006, filing of the Greater Metro
    Telecommunications Consortium, the Rainer Communications Commission
    and the City of Tacoma, Washington explained: "\[I\]t is an
    oversimplification to believe that competitive entry into video
    programming can be facilitated by requiring a local government to
    act on a franchise application within a specific period of time.
    What the Commission may consider a delay is often a reasonable time
    for consideration, and indeed, the internal bureaucracies within
    many large companies often times dwarf the internal processes within
    local government, so that any rule the Commission might deem
    appropriate to apply regarding time to respond, must also be imposed
    upon the other party to negotiations."

[^589]: The Commission purposefully stops short of creating reciprocal
    good faith obligations because that would authorize the parties to
    file a complaint with the Commission when negotiations fall apart.
    Such a complaint process would effectively serve as an enforcement
    mechanism, which would only increase this *Order*'s litigation
    exposure as quasi-legislative document. Nevertheless, today's
    *Order* cannot be reasonably viewed as mere guidance to LFAs or a
    clarification of the term "unreasonably refuse" in section
    621(a)(1). There is a real, punitive consequence if the LFA does not
    follow the Commission's dictates -- a "deemed granted" franchise,
    which incurably alters the dynamics of franchise negotiations.

[^590]: *Order* at ¶ 76.

[^591]: The Commission's reliance on ancillary authority it exercised in
    the early 1970s, well before congressional enactments in 1984, 1992
    and 1996, is unavailing. In fact, such reliance reveals the
    Commission's need to make too large a reach to justify it actions.
    *See* Letter from James L. Casserly, Counsel for Comcast
    Corporation, to Marlene Dortch, Federal Communications Commission ,
    MB Docket No. 05-311 (filed December 13, 2006).

[^592]: *See generally*, *[Charter Communications v. County of Santa
    Cruz]{.underline}*, 304 F.3d 927 (9^th^ Cir. 2002) (holding that
    deference is accorded to legislative action of local government),
    especially in light of fact that the Commission does not have clear
    congressionally delegated authority in this case; and local
    regulations, in this case, are likely explicitly sanctioned by the
    Cable Act and consistent with the express provisions of the Act,
    *see* 47 U.S.C. § 556(a).

[^593]: *See* 47 U.S.C. § 521 (2)(stating that the one of the central
    purposes of Title 6 is to "assure that cable systems are responsive
    to the needs and interests of the local community.") *See also* 47
    U.S.C. § 521(3)(stating that another central purpose of Title 6 is
    to establish clear federal, state and local roles).

[^594]: The legislative history of 1984 Cable Act provides "in general,
    \[section 622(g)(2)(C)\] defines as a franchise fee only monetary
    payments made by the cable operator, and does not include as a 'fee'
    any franchise requirement for the provision of services, facilities
    or equipment. As regards PEG access in new franchises, payments for
    capital costs required by the franchise to be made by the franchise
    to be made by the cable operator are not defined as fees under this
    provision." H.R. REP. No. 98-934, at 65 reprinted in 1984
    U.S.C.C.A.N. 4702.