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[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[S. 2989 Introduced in Senate (IS)]

109th CONGRESS
  2d Session
                                S. 2989

 To reform the franchise procedure relating to cable service and video 
                    service, and for other purposes.

_______________________________________________________________________

                   IN THE SENATE OF THE UNITED STATES

                              May 23, 2006

Mrs. Hutchison introduced the following bill; which was read twice and 
   referred to the Committee on Commerce, Science, and Transportation

_______________________________________________________________________

                                 A BILL

 
 To reform the franchise procedure relating to cable service and video 
                    service, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Franchise Reform Act of 2006''.

SEC. 2. STATE CABLE AND VIDEO FRANCHISING.

    Part III of title VI of the Communications Act of 1934 (47 U.S.C. 
541 et seq.) is amended by adding at the end the following new section:

``SEC. 630. FRANCHISING AUTHORITY.

    ``(a) State Commissions Designated as Franchising Authority.--The 
State Commission of each State shall be designated as the franchising 
authority for any state-issued franchise for the provision of cable 
service or video service in that State.
    ``(b) State Authorization to Provide Cable Service or Video 
Service.--
            ``(1) Application for franchise.--
                    ``(A) In general.--An entity or person seeking to 
                provide cable service or video service in a State shall 
                file an application for a state-issued certificate of 
                franchise authority with the State Commission.
                    ``(B) Existing franchises.--Except as provided in 
                subsection (c), an entity providing cable service or 
                video service under an existing franchise agreement 
                with a municipality shall not be subject to the 
                requirement under subparagraph (A) with respect to such 
                municipality until such franchise agreement expires.
            ``(2) Notice.--
                    ``(A) In general.--Not later than 15 business days 
                after an applicant for a state-issued certificate of 
                franchise authority submits an affidavit, a State 
                Commission shall notify such applicant whether such 
                affidavit is complete.
            ``(3) Affidavit.--For purposes of this subsection the term 
        `affidavit' means an application for a state-issued certificate 
        of franchise authority--
                    ``(A) submitted by an entity or person;
                    ``(B) signed by such person or the officer or 
                general partner of an entity; and
                    ``(C) that affirms--
                            ``(i) that such entity or person has filed, 
                        or will timely file with the Commission all 
                        forms required by the Commission;
                            ``(ii) that such entity or person agrees to 
                        comply with all applicable Federal and State 
                        statutes and regulations;
                            ``(iii) that such entity or person agrees 
                        to comply with all applicable municipal 
                        regulations regarding the use and occupation of 
                        public rights-of-way in the delivery of cable 
                        service or video service, including the police 
                        powers of the municipalities in which the 
                        service is delivered;
                            ``(iv) a description of the service area 
                        footprint to be served within the municipality, 
                        if such description is applicable, otherwise 
                        the municipality to be served by such service, 
                        including designations of unincorporated areas, 
                        which description shall--
                                    ``(I) be updated by such entity or 
                                person prior to the expansion of cable 
                                service or video service to a 
                                previously undesignated service area; 
                                and
                                    ``(II) upon such expansion, provide 
                                notice to the State Commission of the 
                                service area to be served by the 
                                applicant; and
                            ``(v) the location of the principal place 
                        of business of such entity or person and the 
                        names of the principal executive officers of 
                        such entity.
            ``(4) Issuance.--Not later than 17 business days after a 
        State Commission receives a completed affidavit from an 
        applicant, the State Commission shall issue a certificate of 
        franchise authority to such applicant.
            ``(5) Contents of certificate of franchise authority.--A 
        certificate of franchise authority issued by a State Commission 
        shall contain--
                    ``(A) a grant of authority to provide cable service 
                or video service as requested in the application;
                    ``(B) a grant of authority to use and occupy the 
                public rights-of-way in the delivery of that service, 
                subject to the laws of the State in which the State 
                Commission is located, including the police powers of 
                the municipalities in which the service is delivered; 
                and
                    ``(C) a statement that the grant of authority to 
                operate a franchise under this section shall be subject 
                to lawful operation of cable service or video service 
                by any applicant for such authority, or any successor 
                in interest to such applicant.
            ``(6) Transfer.--
                    ``(A) In general.--A certificate of franchise 
                authority issued by a State Commission under this 
                section shall be fully transferable to any successor in 
                interest to the applicant to which such certificate was 
                initially granted.
                    ``(B) Notice.--Not later than 14 business days 
                after the completion of any transfer under subparagraph 
                (A), a notice of transfer shall be filed with each 
                relevant--
                            ``(i) State Commission; and
                            ``(ii) municipality.
            ``(7) Termination.--A certificate of franchise authority 
        issued by a State Commission under this section may be 
        terminated by a cable service provider or video service 
        provider by submitting a notice of termination to such State 
        Commission.
    ``(c) Eligibility for Uniform State-Issued Franchise.--
            ``(1) Prior franchise agreement.--Subject to paragraphs (2) 
        and (3), a cable service provider or a video service provider 
        that currently has or had previously received a franchise to 
        provide cable service or video service with respect to a 
        municipality may not be eligible to seek a state-issued 
        certificate of franchise authority under this section as to 
        such municipality until the date of expiration of any existing 
        franchise agreement between such provider and such 
        municipality.
            ``(2) Small incumbent cable service providers.--
                    ``(A) In general.--A cable service provider or 
                video service provider that is not an incumbent cable 
                service provider and serves fewer than 40 percent of 
                the total cable customers in a particular local 
                franchise area may elect to terminate that local 
                franchise and seek a state-issued certificate of 
                franchise under subsection (b) by providing written 
                notice to the relevant State Commission and any 
                affected municipality not later than 120 days after the 
                date of enactment of the Franchise Reform Act of 2006.
                    ``(B) Termination date.--Any local franchise 
                terminated in accordance with subparagraph (A) shall 
                terminate on the date a State Commission issues a 
                state-issued certificate of franchise authority.
            ``(3) Remittance of unpaid franchise fees.--
                    ``(A) In general.--A cable service provider that 
                serves fewer than 40 percent of the total cable 
                customers in a local franchise area and that elects 
                under paragraph (2) to terminate an existing local 
                franchise shall be responsible for remitting to the 
                affected local franchise authority not later than the 
                91st day after the date the local franchise is 
                terminated any accrued but unpaid franchise fees due 
                under the terminated franchise.
                    ``(B) Credits.--If a cable service provider has 
                credit remaining from prepaid franchise fees, such 
                provider may deduct the amount of the remaining credit 
                from any future fees or taxes such provider is required 
                to pay to the municipality, either directly or through 
                an appropriate State agency.
            ``(4) Rule of construction.--For purposes of this section, 
        a cable service provider or video service provider shall be 
        deemed to have or have had a franchise to provide cable service 
        or video service in a specific municipality if any affiliates, 
        successor, or predecessor entity of such cable or video 
        provider has or had a franchise agreement granted by that 
        specific municipality.
            ``(5) Definition.--For purposes of this subsection the 
        terms `affiliates, successor, or predecessor entity' include 
        any entity receiving, obtaining, or operating under a municipal 
        cable or video franchise through merger, sale, assignment, 
        restructuring, or any other type of transaction.
    ``(d) Franchise Fee Paid to Municipalities.--
            ``(1) Fees.--
                    ``(A) In general.--A holder of any state-issued 
                certificate of franchise authority shall pay each 
                municipality in which such holder provides cable 
                service or video service a franchise fee of 5 percent 
                of the gross revenues of such holder.
                    ``(B) Unincorporated areas.--The fee established 
                under subparagraph (A) shall apply to any 
                unincorporated area that is annexed by a municipality 
                after the effective date of the state-issued 
                certificate of franchise authority.
            ``(2) Fee structure.--
                    ``(A) Timing.--A franchise fee payable under this 
                subsection shall be paid quarterly, not later than 45 
                days after the end of the quarter for the preceding 
                calendar quarter.
                    ``(B) Summary.--Each payment of a franchise fee 
                under this subsection shall be accompanied by a summary 
                explaining the basis for the calculation of such fee.
                    ``(C) Audit.--
                            ``(i) In general.--A municipality may 
                        review the business records of any cable 
                        service provider or video service provider to 
                        the extent necessary to ensure compensation in 
                        accordance with this subsection.
                            ``(ii) Cost.--Each party to a review under 
                        clause (i) shall bear the party's own costs of 
                        such examination.
                    ``(D) Civil action.--If a dispute concerning 
                compensation arises under this subsection, a 
                municipality may bring an action in any court of 
                competent jurisdiction.
            ``(3) Recovery of fee.--A holder of a state-issued 
        certificate of franchise authority may recover from the 
        customers of such holder any fee imposed by this subsection.
    ``(e) In-Kind Contributions to Municipality.--
            ``(1) Existing franchises.--
                    ``(A) In general.--Until the expiration of an 
                incumbent cable service provider's existing franchise 
                agreement with a municipality, a holder of a state-
                issued certificate of franchise authority shall pay 
                each municipality in which such holder is offering 
                cable service or video service the same cash payments 
                on a per subscriber basis as required by the existing 
                franchise agreement of such incumbent cable service 
                provider.
                    ``(B) Report requirement.--Each cable service 
                provider and each video service provider shall report 
                quarterly to a municipality the total number of 
                subscribers served by such provider within that 
                municipality.
                    ``(C) Amount to be paid.--The amount paid by a 
                holder of a state-issued certificate of franchise 
                authority shall be calculated quarterly by a 
                municipality by multiplying the amount of cash payments 
                under the incumbent cable service provider's franchise 
                agreement by a number derived by dividing the number of 
                subscribers served by a video service provider or cable 
                service provider by the total number of video or cable 
                service subscribers in the municipality.
                    ``(D) Timing of payments.--Any payments required 
                under this paragraph shall be paid quarterly by a 
                holder of a state-issued certificate of franchise 
                authority to a municipality not later than 45 days 
                after the end of the quarter for the preceding calendar 
                quarter.
            ``(2) Expiration of existing agreements.--
                    ``(A) In general.--On the expiration of an 
                incumbent cable service provider's existing franchise 
                agreement with a municipality, a holder of a state-
                issued certificate of franchise authority shall pay--
                            ``(i) each municipality in which such 
                        holder is offering cable service or video 
                        service 1 percent of the gross revenues of such 
                        holder; or
                            ``(ii) at the election of a municipality, 
                        the per subscriber fee that was paid to that 
                        municipality under the expired incumbent cable 
                        service provider's agreement, in lieu of in-
                        kind compensation and grants.
                    ``(B) Timing.--Any payment under this paragraph 
                shall be paid in the same manner as described in 
                paragraph (1)(D).
            ``(3) Rules of construction.--All fees paid to a 
        municipality under this subsection--
                    ``(A) shall be paid in accordance with sections 531 
                and 541(a)(4)(B);
                    ``(B) may be used by the municipality as allowed by 
                Federal law; and
                    ``(C) may not be chargeable as a credit against the 
                franchise fee payments authorized under this section.
            ``(4) Construction of service.--Upon the later of 2 years 
        after the date of enactment of the Franchise Reform Act of 
        2006, or the expiration of the term of any existing franchise 
        agreement between a municipality and a cable service provider 
        or video service provider, the following services shall 
        continue to be provided by such cable service provider or video 
        service provider:
                    ``(A) Institutional network capacity, however such 
                term is defined or referred to in the existing 
                franchise agreement but generally referring to a 
                private line data network capacity for use by the 
                municipality for noncommercial purposes, at the same 
                capacity as was provided to the municipality prior to 
                the date of the termination, only if the municipality 
                agrees to compensate the cable service provider or 
                video service provider for the actual incremental cost 
                of such capacity.
                    ``(B) Cable services to community public buildings, 
                such as municipal buildings and public schools, to the 
                same extent such services were provided immediately 
                prior to the date of the termination.
            ``(5) Future provisions of certain services.--Upon the 
        expiration of the period described in paragraph (4), any cable 
        service provider or video service provider that provides the 
        services described in subparagraphs (A) or (B) of paragraph (4) 
        may deduct from the franchise fee to be paid to a municipality 
        an amount equal to the actual incremental cost of such services 
        if the municipality requires such services after that date.
            ``(6) Definition of cable service.--For purposes of this 
        subsection, the term `cable service' generally refers to the 
        existing cable drop connections to public facilities and the 
        tier of cable service provided pursuant to the franchise 
        agreement at the time of the termination of such agreement.
    ``(f) No Mandatory Build-Out Provisions.--A holder of a state-
issued certificate of franchise authority shall not be required to 
comply with any mandatory build-out provisions.
    ``(g) Customer Service Standards.--A holder of a state-issued 
certificate of franchise authority shall comply with customer service 
requirements consistent with section 76.309(c) of title 47, Code of 
Federal Regulations, until there are 2 or more providers offering 
service in a municipality, excluding direct-to-home satellite service 
providers.
    ``(h) Public, Educational, and Governmental Access Channels.--
            ``(1) Provision of capacity.--Not later than 120 days after 
        a request by a municipality, a holder of a state-issued 
        certificate of franchise authority shall provide such 
        municipality with capacity in the communications network of 
        such holder to allow public, educational, and governmental 
        access channels for noncommercial programming.
            ``(2) Number of peg channels.--A holder of a state-issued 
        certificate of franchise authority shall provide no fewer than 
        the same number of public, educational, and governmental access 
        channels to a municipality than were provided to such 
        municipality under the incumbent cable service provider's 
        franchise agreement as of the date of enactment of the 
        Franchise Reform Act of 2006.
            ``(3) Minimum number peg channels.--If a municipality had 
        no public, educational, and governmental access channels as of 
        the date of enactment of the Franchise Reform Act of 2006, a 
        cable service provider or video service provider shall 
        furnish--
                    ``(A) up to 3 public, educational, and governmental 
                channels for a municipality with a population of at 
                least 50,000; and
                    ``(B) up to 2 public, educational, and governmental 
                channels for a municipality with a population of less 
                than 50,000.
            ``(4) Nonutilization of peg channels.--
                    ``(A) In general.--Any public, educational, and 
                governmental channel provided pursuant to this 
                subsection that is not utilized by a municipality for 
                at least 8 hours a day shall no longer be made 
                available to such municipality, but may be programmed 
                at the discretion of a cable service provider or video 
                service provider.
                    ``(B) Return of peg channel.--
                            ``(i) In general.--At such time as a 
                        municipality can certify to a cable service 
                        provider or video service provider that a 
                        schedule for at least 8 hours of daily 
                        programming exists, such cable service provider 
                        or video service provider shall restore any 
                        channel previously reprogrammed under 
                        subparagraph (A).
                            ``(ii) Limitation.--A cable service 
                        provider or video service provider shall be 
                        under no obligation to carry on a basic or 
                        analog tier any channel restored under clause 
                        (i).
            ``(5) Additional channel capacity.--In the event a 
        municipality has not utilized the minimum number of access 
        channels as permitted by paragraph (3), access to that 
        additional channel capacity shall be provided to a municipality 
        not later than 90 days after written notice from such 
        municipality, if the municipality meets the following 
        standards:
                    ``(A) If a municipality has 1 active public, 
                educational, and governmental channel and wishes to 
                activate an additional public, educational, and 
                governmental channel, such active channel must be 
                substantially utilized. A channel under this 
                subparagraph shall be considered to be substantially 
                utilized when 12 hours are programmed on that channel 
                each calendar day.
                    ``(B) At least 40 percent of the 12 hours of 
                programming required under subparagraph (A) for each 
                business day on average over each calendar quarter 
                shall be non repeat programming. Non repeat programming 
                shall include the first 3 video-castings of a program.
                    ``(C)(i) If a municipality is entitled to 3 public, 
                educational, and governmental channels under paragraph 
                (3) and has in service 2 active public, educational, 
                and governmental channels, each of the 2 active 
                channels must be substantially utilized.
                    ``(ii) A channel under this subparagraph shall be 
                considered to be substantially utilized when--
                            ``(I) 12 hours are programmed on each 
                        channel each calendar day; and
                            ``(II) at least 50 percent of the 12 hours 
                        of programming for each business day on average 
                        over each calendar quarter is non repeat 
                        programming for 3 consecutive calendar 
                        quarters.
            ``(6) Operational responsibility.--
                    ``(A) In general.--The operation of any public, 
                educational, and governmental access channel provided 
                pursuant to this subsection shall be the responsibility 
                of the municipality receiving the benefit of such 
                channel, and the holder of a state-issued certificate 
                of franchise authority bears only the responsibility 
                for the transmission of such channel.
                    ``(B) Connectivity.--A holder of a state-issued 
                certificate of franchise authority shall be responsible 
                for providing the connectivity to each public, 
                educational, and governmental access channel 
                distribution point up to the first 200 feet.
            ``(7) Additional responsibilities and municipality.--
                    ``(A) In general.--Each municipality shall ensure 
                that all transmissions, content, or programming to be 
                transmitted over a channel or facility by a holder of a 
                state-issued certificate of franchise authority is 
                provided or submitted to the cable service provider or 
                video service provider in a manner or form that is 
                capable of being accepted and transmitted by such 
                provider.
                    ``(B) Other requirements.--Any transmission, 
                content, or programming transmitted in accordance with 
                the requirements of subparagraph (A) shall be 
                transmitted--
                            ``(i) without requirement for additional 
                        alteration or change in the content by a cable 
                        service or video service provider over the 
                        particular network of such provider; and
                            ``(ii) in a manner compatible with the 
                        technology or protocol utilized by such 
                        provider to deliver services.
            ``(8) Interconnection.--
                    ``(A) In general.--To the maximum extent that is 
                technically feasible, a holder of a state-issued 
                certificate of franchise authority and an incumbent 
                cable service provider shall use reasonable efforts to 
                interconnect the cable or video systems of each for the 
                purpose of providing public, educational, and 
                governmental programming.
                    ``(B) Methods of connection.--Interconnection under 
                this paragraph may be accomplished by direct cable, 
                microwave link, satellite, or any other reasonable 
                method of connection.
                    ``(C) Requirement of good faith.--A holder of a 
                state-issued certificate of franchise authority and 
                incumbent cable service providers shall each negotiate 
                in good faith with the other and the incumbent cable 
                service provider may not withhold interconnection of 
                public, educational, and governmental channels.
            ``(9) Jurisdiction of courts.--A court of competent 
        jurisdiction shall have exclusive jurisdiction to enforce any 
        requirement under this subsection.
    ``(i) Nondiscrimination by Municipality.--
            ``(1) Public right-of-way.--
                    ``(A) In general.--A municipality shall--
                            ``(i) allow a holder of a state-issued 
                        certificate of franchise authority to install, 
                        construct, and maintain a communications 
                        network within a public right-of-way; and
                            ``(ii) provide such holder with open, 
                        comparable, nondiscriminatory, and 
                        competitively neutral access to the public 
                        right-of-way.
                    ``(B) Limitation.--All use of a public right-of-way 
                by a holder of a state-issued certificate of franchise 
                authority is nonexclusive and subject to subsection 
                (j).
            ``(2) Nondiscrimination.--A municipality may not 
        discriminate against a holder of a state-issued certificate of 
        franchise authority regarding--
                    ``(A) the authorization or placement of a 
                communications network in a public right-of-way;
                    ``(B) access to a building; or
                    ``(C) the term of any municipal utility pole 
                attachment.
    ``(j) Municipal Police Power; Other Authority.--
            ``(1) Police powers.--
                    ``(A) In general.--A municipality may enforce 
                police power-based regulations in the management of any 
                public right-of-way that applies to a holder of a 
                state-issued certificate of franchise authority within 
                the municipality.
                    ``(B) Extent of public power.--A municipality may 
                enforce police power-based regulations in the 
                management of the activities of the holder of a state-
                issued certificate of franchise authority to the extent 
                that such regulations are reasonably necessary to 
                protect the health, safety, and welfare of the public.
                    ``(C) Competitively neutral enforcement.--Any 
                police power-based regulation of a holder of a state-
                issued certificate of franchise authority's use of the 
                public right-of-way--
                            ``(i) shall be competitively neutral; and
                            ``(ii) may not be unreasonable or 
                        discriminatory.
                    ``(D) Other limitations.--A municipality may not 
                require that a holder of a state-issued certificate of 
                franchise authority--
                            ``(i) locate a business office in the 
                        municipality;
                            ``(ii) file reports and documents with the 
                        municipality that are not required by Federal 
                        or State law and that are not related to the 
                        use of the public right-of-way, except that the 
                        municipality may request, and shall keep 
                        confidential, maps and records maintained by 
                        the holder in the ordinary course of business 
                        for purposes of locating the portions of the 
                        communications network of such holder that 
                        occupy public rights-of-way;
                            ``(iii) provide the municipality with any 
                        information concerning the capacity or 
                        technical configuration of the facilities of 
                        such holder;
                            ``(iv) provide for inspection the business 
                        records of such holder except to extent 
                        permitted under subsection (d)(2);
                            ``(v) seek approval of transfers of 
                        ownership or control of the business of such 
                        holder, except that a municipality may require 
                        that such holder maintain a current point of 
                        contact and provide notice of a transfer within 
                        a reasonable time;
                            ``(vi) that is self-insured under the 
                        provisions of State law, obtain insurance or 
                        bonding for any activities within the 
                        municipality, except that a self-insured holder 
                        shall provide substantially the same defense 
                        and claims processing as a non self-insured 
                        holder; and
                            ``(vii) possess a bond for any work 
                        consisting of aerial construction, except that 
                        a reasonable bond may be required of a holder 
                        that cannot demonstrate a record of at least 4 
                        years' performance of work in any municipal 
                        public right-of-way free of currently 
                        unsatisfied claims by the municipality for 
                        damage to the right-of-way.
            ``(2) Construction permits.--
                    ``(A) In general.--A municipality may require the 
                issuance of a construction permit, without cost, to a 
                holder of a state-issued certificate of franchise 
                authority that is locating facilities in or on a public 
                right-of-way in that municipality.
                    ``(B) Terms.--The terms of any permit required 
                under subparagraph (A) shall be consistent with other 
                construction permits issued by a municipality to other 
                persons excavating in a public right-of-way.
            ``(3) Processing of requests.--
                    ``(A) In general.--In the exercise of any lawful 
                regulatory authority possessed by a municipality, such 
                municipality shall promptly process all valid and 
                administratively complete applications submitted by a 
                holder of a state-issued certificate of franchise 
                authority for a permit, license, or consent to--
                            ``(i) excavate;
                            ``(ii) set poles;
                            ``(iii) locate lines;
                            ``(iv) construct facilities;
                            ``(v) make repairs;
                            ``(vi) affect traffic flow; or
                            ``(vii) obtain zoning or subdivision 
                        regulation approvals or other similar 
                        approvals.
                    ``(B) Reasonable effort required.--A municipality 
                shall make every reasonable effort not to delay or 
                unduly burden a holder of a state-issued certificate of 
                franchise authority in the timely conduct of the 
                business of such holder.
            ``(4) Emergency.--If there is an emergency necessitating 
        response work or repair, a holder of a state-issued certificate 
        of franchise authority may begin such repair or emergency 
        response work or take any other action required under the 
        circumstances without prior approval from the affected 
        municipality, if the holder of a state-issued certificate of 
        franchise authority--
                    ``(A) notifies the municipality as promptly as 
                possible after beginning the work; and
                    ``(B) later obtains any approval required by a 
                municipal ordinance applicable to emergency response 
                work.
            ``(5) No review of police powers.--No State Commission, 
        State agency, or Federal agency shall have jurisdiction to 
        review any police power-based regulation or ordinance adopted 
        by a municipality to manage the public rights-of-way in such 
        municipality.
    ``(k) Municipal Authority.--
            ``(1) Limitation.--In addition to any authority exercised, 
        permitted, or established under subsection (j) with respect to 
        public rights-of-way located in a municipality, the authority 
        of a municipality to regulate a holder of a state-issued 
        certificate of franchise authority is limited to--
                    ``(A) requiring that any holder who is providing 
                cable service or video service within the municipality 
                register with the municipality and maintain a point of 
                contact;
                    ``(B) establishing reasonable guidelines regarding 
                the use of public, educational, and governmental access 
                channels; and
                    ``(C) requiring a holder to submit reports to the 
                Commission on the customer service standards referred 
                to in subsection (g), if such holder--
                            ``(i) is subject to such standards; and
                            ``(ii) has continued and unresolved 
                        customer service complaints indicating a clear 
                        failure on the part of such holder to comply 
                        with such standards.
    ``(l) Discrimination Prohibited.--
            ``(1) Purpose.--The purpose of this subsection is to 
        prevent discrimination among potential residential subscribers 
        by holders of a state-issued certificate of franchise 
        authority.
            ``(2) Income not a factor.--A cable service provider or 
        video service provider that is a holder of a state-issued 
        certificate of franchise authority may not deny access to cable 
        or video service to any group of potential residential 
        subscribers because of the income of the residents in the local 
        area in which such group resides.
            ``(3) Enforcement.--
                    ``(A) Proceedings.--Any person affected by this 
                subsection may seek enforcement of the requirements 
                described in paragraph (2) by initiating a proceeding 
                with the State Commission in which such person is 
                located.
                    ``(B) Rule of construction.--A municipality may be 
                considered an affected person for purposes of this 
                subsection.
            ``(4) Safe harbor.--A holder of a state-issued certificate 
        of franchise authority--
                    ``(A) shall be provided a reasonable period of time 
                to become capable of providing cable service or video 
                service to all households within a designated franchise 
                area; and
                    ``(B) may satisfy the requirements of this 
                subsection through the use of an alternative technology 
                that provides comparable content, service, and 
                functionality.
            ``(5) Limitations.--Notwithstanding any provision of this 
        subsection, a State Commission has the authority--
                    ``(A) to make the determination regarding the 
                comparability of the technology and the service 
                provided under paragraph (4); and
                    ``(B) to monitor the deployment of cable services, 
                video services, or alternate technology.
    ``(m) Compliance.--
            ``(1) Court order.--
                    ``(A) In general.--If a holder of a state-issued 
                certificate of franchise authority is found by a court 
                of competent jurisdiction to be in noncompliance with 
                any requirement of this section, the court shall order 
                such holder, within a specified reasonable period of 
                time, to cure such noncompliance.
                    ``(B) Failure to comply.--If a holder of a state-
                issued certificate of franchise authority fails to 
                comply with any court order issued under subparagraph 
                (A) such holder shall be subject to such penalties as 
                the court shall reasonably impose, including revocation 
                of the state-issued certificate of franchise authority 
                granted under this section.
            ``(2) Parties.--A municipality within which a holder of a 
        state-issued certificate of franchise authority offers cable 
        service or video service shall be an appropriate party in any 
        civil action brought under this section.
    ``(n) Rules of Construction.--Nothing in this section shall be 
interpreted or construed--
            ``(1) to prevent a voice provider, cable service provider, 
        video service provider, or municipality from--
                    ``(A) seeking clarification of any right or 
                obligation that such voice provider, cable service 
                provider, video service provider, or municipality may 
                be entitled to under any other Federal law; or
                    ``(B) exercising any right or authority under any 
                other Federal or State law; or
            ``(2) to limit the ability of a municipality under existing 
        law to receive compensation for use of the public rights-of-way 
        from any entity determined not to be subject to all or part of 
        this section, including any provider of Internet protocol cable 
        or video services, unless such payments are expressly 
        prohibited by other Federal law.
    ``(o) Commission to Act if State Will Not.--If a State Commission 
fails to carry out any of its responsibilities under this section, the 
Commission shall--
            ``(1) issue an order preempting the authority of the State 
        Commission to carry out such responsibilities; and
            ``(2) assume exclusive authority to carry out such 
        responsibilities.
    ``(p) Definitions.--In this section, the following definitions 
shall apply:
            ``(1) Actual incremental cost.--The term `actual 
        incremental cost' means only current out-of-pocket expenses for 
        labor, equipment repair, equipment replacement, and tax 
        expenses directly associated with the labor or the equipment of 
        a cable or video service provider that is necessarily and 
        directly used to provide what were, under a superseded 
        franchise, in-kind services, exclusive of any profit or 
        overhead such as depreciation, amortization, or administrative 
        expense.
            ``(2) Cable service.--Except as otherwise provided in this 
        section, the term `cable service' has the same meaning as in 
        section 602.
            ``(3) Cable service provider.--The term `cable service 
        provider' means any person who provides cable service.
            ``(4) Communications network.--The term `communications 
        network' means a component or facility that is--
                    ``(A) wholly or partly, physically located within a 
                public right-of-way; and
                    ``(B) used to provide video programming, cable, 
                voice, or data services.
            ``(5) Franchise.--The term `franchise' means an initial 
        authorization, or renewal of an authorization, issued by a 
        franchising authority, regardless of whether such authorization 
        is designated as a franchise, permit, license, resolution, 
        contract, certificate, agreement, or otherwise, that authorizes 
        the construction and operation of a cable or video services 
        network in the public rights-of-way.
            ``(6) Gross revenues.--
                    ``(A) In general.--The term `gross revenues'--
                            ``(i) means all consideration of any kind 
                        or nature including cash, credits, property, 
                        and in-kind contributions (services or goods) 
                        derived by a holder of a state-issued 
                        certificate of franchise authority from the 
                        operation by such holder of the network of such 
                        holder to provide cable service or video 
                        service within a municipality; and
                            ``(ii) includes all consideration paid to a 
                        holder of a state-issued certificate of 
                        franchise authority and the affiliates of such 
                        holder (to the extent either is acting as a 
                        provider of a cable service or video service as 
                        authorized by this section), including--
                                    ``(I) all fees charged to 
                                subscribers for any and all cable 
                                service or video service provided by 
                                the holder of a state-issued 
                                certificate of franchise authority;
                                    ``(II) any fee imposed on the 
                                holder of a state-issued certificate of 
                                franchise authority by this section 
                                that is passed through and paid by 
                                subscribers (including the franchise 
                                fee set forth in this section); and
                                    ``(III) compensation received by 
                                the holder of a state-issued 
                                certificate of franchise authority or 
                                the affiliates of such holder that is 
                                derived from the operation of the 
                                holder of a state-issued certificate of 
                                franchise authority's network to 
                                provide cable service or video service 
                                with respect to commissions that are 
                                paid to the holder of a state-issued 
                                certificate of franchise authority as 
                                compensation for promotion or 
                                exhibition of any products or services 
                                on the holder of a state-issued 
                                certificate of franchise authority's 
                                network, such as a home shopping or a 
                                similar channel, subject to 
                                subparagraph (E)(v);
                    ``(B) Compensation arrangements.--
                            ``(i) In general.--The term `gross revenue' 
                        also includes a pro rata portion of all revenue 
                        derived by a holder of a state-issued 
                        certificate of franchise authority or the 
                        affiliates of such holder pursuant to 
                        compensation arrangements for advertising 
                        derived from the operation of the holder of a 
                        state-issued certificate of franchise 
                        authority's network to provide cable service or 
                        the video service within a municipality, 
                        subject to subparagraph (E)(iii).
                            ``(ii) Allocation.--Any allocation made 
                        under clause (i) shall be based on the number 
                        of subscribers in a municipality divided by the 
                        total number of subscribers in relation to the 
                        relevant regional or national compensation 
                        arrangement.
                    ``(C) Advertising commissions.--For purposes of 
                this paragraph, advertising commissions paid to third 
                parties shall not be netted against advertising revenue 
                included in gross revenue.
                    ``(D) Revenue from an affiliate.--
                            ``(i) In general.--Revenue of an affiliate 
                        of a holder of a state-issued certificate of 
                        franchise authority derived from the 
                        affiliate's provision of cable service or video 
                        service shall be gross revenue to the extent 
                        the treatment of such revenue as revenue of the 
                        affiliate and not of a holder of a state-issued 
                        certificate of franchise authority has the 
                        effect (whether intentional or unintentional) 
                        of evading the payment of fees which would 
                        otherwise be paid to a municipality.
                            ``(ii) Limitation.--In no event shall 
                        revenue of an affiliate be gross revenue to a 
                        holder of a state-issued certificate of 
                        franchise authority if such revenue is 
                        otherwise subject to fees to be paid to a 
                        municipality.
                    ``(E) Exceptions.--The term `gross revenues' does 
                not include--
                            ``(i) any revenue not actually received, 
                        even if billed, such as bad debt;
                            ``(ii) non cable services or non video 
                        services revenues received by any affiliate or 
                        any other person in exchange for supplying 
                        goods or services used by a holder of a state-
                        issued certificate of franchise authority to 
                        provide cable service or video service;
                            ``(iii) refunds, rebates, or discounts made 
                        to subscribers, leased access providers, 
                        advertisers, or a municipality;
                            ``(iv) any revenues from services 
                        classified as non cable service or non video 
                        service under any other Federal law, 
                        including--
                                    ``(I) revenue received from 
                                telecommunications services;
                                    ``(II) revenue received from 
                                information services (but not excluding 
                                cable services or video services); and
                                    ``(III) any other revenues 
                                attributed by a holder of a state-
                                issued certificate of franchise 
                                authority to non cable service or non 
                                video service in accordance with any 
                                rules, regulations, standards, or 
                                orders of the Commission;
                            ``(v) any revenue paid by subscribers to 
                        home shopping programmers directly from the 
                        sale of merchandise through any home shopping 
                        channel offered as part of the cable services 
                        or video services, but not excluding any 
                        commissions that are paid to a holder of a 
                        state-issued certificate of franchise authority 
                        as compensation for promotion or exhibition of 
                        any products or services on the holder of a 
                        state-issued certificate of franchise 
                        authority's network, such as a home shopping or 
                        a similar channel;
                            ``(vi) the sale of cable services or video 
                        services for resale in which the purchaser is 
                        required to collect fees under this section 
                        from the purchase customer;
                            ``(vii) the provision of cable services or 
                        video services to customers at no charge, as 
                        required or allowed by this section, including 
                        the provision of cable services or video 
                        services to--
                                    ``(I) public institutions;
                                    ``(II) public schools; or
                                    ``(III) other governmental 
                                entities;
                            ``(viii) any tax of general applicability--
                                    ``(I) imposed upon a holder of a 
                                state-issued certificate of franchise 
                                authority or upon subscribers by a 
                                city, State, Federal, or any other 
                                governmental entity; and
                                    ``(II) required to be collected by 
                                a holder of a state-issued certificate 
                                of franchise authority and remitted to 
                                the taxing entity (including sales and 
                                use tax, gross receipts tax, excise 
                                tax, utility users tax, public service 
                                tax, communication taxes, and fees not 
                                imposed by this section);
                            ``(ix) any forgone revenue from a holder of 
                        a state-issued certificate of franchise 
                        authority's provision of free or reduced cost 
                        cable services or video services to any person 
                        including employees of the holder of a state-
                        issued certificate of franchise authority, to 
                        the municipality, public institutions, or other 
                        institutions as allowed in this section, if, 
                        however, the holder of a state-issued 
                        certificate of franchise authority chooses not 
                        to receive such foregone revenue in exchange 
                        for trades, barters, services, or other items 
                        of value such foregone revenue shall be 
                        included in gross revenue;
                            ``(x) sales of capital assets or sales of 
                        surplus equipment that is not used by a 
                        purchaser to receive cable services or video 
                        services from a holder of a state-issued 
                        certificate of franchise authority;
                            ``(xi) directory or Internet advertising 
                        revenue, including revenue derived from--
                                    ``(I) yellow pages;
                                    ``(II) white pages;
                                    ``(III) banner advertisement; and
                                    ``(IV) electronic publishing; and
                            ``(xii) reimbursement by programmers of 
                        marketing costs incurred by a holder of a 
                        state-issued franchise for the introduction of 
                        new programming that exceeds the actual costs 
                        of such programming.
                    ``(F) Rule of construction.--For purposes of this 
                paragraph, a provider's network consists solely of the 
                optical spectrum wavelengths, bandwidth, or other 
                current or future technological capacity used for the 
                transmission of video programming over wireline 
                directly to subscribers within the geographic area 
                within a municipality as designated by the provider in 
                its franchise.
            ``(7) Incumbent cable service provider.--The term 
        `incumbent cable service provider' means the cable service 
        provider serving the largest number of cable subscribers in a 
        particular local franchise area on the date of enactment of the 
        Franchise Reform Act of 2006.
            ``(8) Public right-of-way.--The term `public right-of-way' 
        means the area on, below, or above a public roadway, highway, 
        street, public sidewalk, alley, waterway, or utility easement 
        in which a municipality has an interest.
            ``(9) Video programming.--The term `video programming' 
        means programming provided by, or generally considered 
        comparable to programming provided by, a television broadcast 
        station, as set forth in section 602.
            ``(10) Video service.--The term `video service'--
                    ``(A) means video programming services provided 
                through wireline facilities located at least in part in 
                the public right-of-way without regard to delivery 
                technology, including Internet protocol technology; and
                    ``(B) does not include any video service provided 
                by a commercial mobile service provider.
            ``(11) Video service provider.--The term `video service 
        provider'--
                    ``(A) means a video programming distributor that 
                distributes video programming services through wireline 
                facilities located at least in part in the public 
                right-of-way without regard to delivery technology; and
                    ``(B) does not include a cable service provider.''.
                                 <all>
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