49–006 

109TH CONGRESS REPT. 109–470 " ! HOUSE OF REPRESENTATIVES 2d Session Part 2 

COMMUNICATIONS OPPORTUNITY, PROMOTION, AND 

ENHANCEMENT ACT OF 2006 

JUNE 6, 2006.—Ordered to be printed 

Mr. BARTON of Texas, from the Committee on Energy and 

Commerce, submitted the following 

SUPPLEMENTAL REPORT 

[To accompany H.R. 5252] 

[Including cost estimate of the Congressional Budget Office] 

This supplemental report shows the cost estimate of the Congressional Budget Office with respect to the bill (H.R. 5252), as reported, which was not included in part 1 of the report submitted 

by the Committee on Energy and Commerce on May 17, 2006 (H. 

Rept. 109–470, pt. 1). 

This supplemental report is submitted in accordance with clause 

3(a)(2) of rule XIII of the Rules of the House of Representatives. 

CONTENTS 

Page 

Committee Cost Estimate ....................................................................................... 1 

Congressional Budget Office Estimate ................................................................... 1 

Federal Mandates Statement ................................................................................. 7 

COMMITTEE COST ESTIMATE

The Committee adopts as its own the cost estimate prepared by 

the Director of the Congressional Budget Office pursuant to section 

402 of the Congressional Budget Act of 1974. 

CONGRESSIONAL BUDGET OFFICE ESTIMATE

Pursuant to clause 3(c)(3) of rule XIII of the Rules of the House 

of Representatives, the following is the cost estimate provided by 

the Congressional Budget Office pursuant to section 402 of the 

Congressional Budget Act of 1974: 

2 

H.R. 5252—Communications Opportunity, Promotion, and Enhancement Act of 2006 

Summary: H.R. 5252 would allow providers of cable service to 

apply to the Federal Communications Commission (FCC) for a national franchise. National franchises would be substitutes for separate, negotiated agreements with states and localities regarding the 

provision of cable service to a local area. The bill also would require 

providers of Internet-based telephone service known as Voice-overInternet-Protocol (VOIP) to provide access to emergency 911 telephone service. Finally, H.R. 5252 would require the FCC to conduct 

several studies related to telecommunications services. 

Assuming appropriation of the necessary amounts, CBO esti- mates that implementing H.R. 5252 would cost less than $500,000 

in 2006 and about $7 million over the 2006–2011 period. Enacting 

the bill would not have a significant effect on direct spending or 

revenues. 

H.R. 5252 contains several intergovernmental mandates, as defined in the Unfunded Mandates Reform Act (UMRA). In particular, it would prohibit intergovernmental entities—primarily 

municipal governments—from charging certain fees to providers of 

cable service. The bill also would impose a variety of requirements 

and limitations on public safety access points (PSAPs). Further, the 

bill would preempt state laws that prohibit municipal governments 

from providing Internet access services and, if area cable providers 

receive a national franchise, would preempt state and local laws 

that address consumer protection, cable franchises, and the use of 

municipal rights-of-way. CBO estimates that the net direct costs of 

these mandates on state and local governments would grow over 

time, and would likely fall between $100 million and $350 million 

by 2011. Such losses would exceed the threshold established in 

UMRA in at least one of the first five years the mandates are in 

effect (the threshold is $64 million in 2006 and is adjusted annually for inflation). 

Other impacts of the bill include potential losses to intergovernmental entities of in-kind support from cable franchisees. 

H.R. 5252 also would impose private-sector mandates as defined 

by UMRA on broadband service providers, and on private entities 

that own 911 components necessary to transmit VOIP emergency 

911 services over their networks. Based on information from government and industry sources CBO estimates that the costs of complying with those mandates would fall below the annual threshold 

established by UMRA for private-sector mandates ($128 million in 

2006, adjusted annually for inflation). 

Estimated cost to the Federal Government: The estimated budgetary impact of H.R. 5252 is shown in the following table. The costs 

of this legislation fall within budget function 370 (commerce and 

housing credit). 

By fiscal year, in millions of dollars— 

2006 2007 2008 2009 2010 2011 

CHANGES IN SPENDING SUBJECT TO APPROPRIATION 1

Estimated authorization level .......................................... * 2 2 1 1 1 

Estimated outlays ............................................................. * 2 2 1 1 1 

1 Enacting H.R. 5252 also would have small effects on direct spending and revenues, but CBO estimates that those effects would be less than $500,000 a year. NOTE: * = less than $500,000. 

3 

Basis of Estimate 

CBO estimates that implementing H.R. 5252 would cost less than $500,000 in 2006 and about $7 million over the 2006–2011 period to issue regulations, write reports and studies, and enforce the 

bill’s provisions regarding new cable franchises and VOIP. For this 

estimate, CBO assumes that the bill will be enacted before the end 

of 2006, that the estimated amounts will be appropriated for each 

year, and that outlays will follow historical spending patterns for 

similar activities. Enacting the legislation would not have a significant effect on direct spending or revenues. 

Spending subject to appropriation 

H.R. 5252 would allow providers of cable service to apply to the 

FCC for a national franchise in lieu of negotiating separate franchise agreements with states and localities for providing cable service to a local area. The bill also would require VOIP providers to 

connect users to emergency 911 telephone service. Under the bill, 

the FCC would certify the new national franchises, conduct annual 

audits of the new franchises, and create regulations regarding the 

new franchising structure and VOIP emergency services. Finally, 

H.R. 5252 would require the FCC to conduct several studies regarding telecommunications services, including VOIP, municipal 

provision of telecommunications services, and broadband Internet 

service. 

Based on the level of effort required for previous major rulemaking efforts by other agencies, CBO estimates that implementing H.R. 5252 would cost less than $500,000 in 2006 and 

about $7 million over the 2006–2011 period for the FCC to develop 

and issue regulations, write reports, and enforce the bill’s provisions related to cable franchises and VOIP. Those costs would be 

subject to the availability of appropriated funds. 

Revenues and direct spending 

Enacting H.R. 5252 would affect revenues and direct spending 

because enacting the bill would affect civil penalties and copyright 

royalties. CBO estimates that any such effects would not be significant. 

Civil Penalties. Enacting H.R. 5252 could increase federal revenues by increasing collections of additional civil penalties assessed 

for violations of laws related to providing telecommunications services. Collections of civil penalties are recorded in the budget as revenues. CBO estimates, however, that any additional revenues that 

would result from enacting the bill would not be significant because 

of the relatively small number of cases likely to be involved. 

Enacting the bill could increase direct spending because section 

101 would require the FCC to distribute certain penalties collected 

from cable companies to state or local franchising authorities. CBO 

estimates that any distributions of penalties to state or local franchising authorities would not be significant because of the relatively small number of cases likely to be involved. 

Copyright Royalties. Under current law, the users of certain 

copyrighted material must pay royalties and abide by certain conditions when using the material. The Copyright Office collects royalties from users of certain copyrighted material and then distributes 

the royalties to owners of copyrighted works. The receipt of royalVerDate Aug 31 2005 06:55 Jun 10, 2006 Jkt 049006 PO 00000 Frm 00003 Fmt 6659 Sfmt 6602 E:\HR\OC\HR470P2.XXX HR470P2
4 

ties from users of copyrighted material are recorded in the budget 

as federal revenues, and the distributions to copyright owners are 

recorded as federal spending. Under current law, cable operators 

pay royalties to transmit distant broadcast signals to cable viewers, 

and satellite carriers pay royalties to retransmit distant network 

and superstation signals by satellite. 

The national franchising provisions included in H.R. 5252 would 

allow new entrants into the market for providing cable service to 

connect to households faster than would otherwise be expected. 

CBO expects that enacting the bill could affect the collection and 

distribution of copyright royalties. Total copyright royalties paid for 

services provided to existing subscribers could increase or decrease 

as subscribers switch from existing satellite or cable service to 

cable service provided by new entrants. Copyright royalties would 

increase as subscribers who currently do not subscribe to either 

satellite or cable service opt to subscribe to cable services provided 

by new entrants. Based on information provided by the Copyright 

Office and cable and telecommunication firms, CBO estimates that 

the net effect of enacting this legislation on copyright royalties in 

any year over the 2006–2016 period would not be significant. 

Estimated impact on state, local, and tribal governments 

Intergovernmental mandates contained in the bill 

H.R. 5252 contains several intergovernmental mandates as defined in the Unfunded Mandates Reform Act. Specifically, the bill 

would: 

• Eliminate the authority, in certain circumstances, of local 

entities to issue franchises for cable providers; 

• Prohibit intergovernmental entities—primarily municipal 

governments—from imposing certain fees on providers of cable 

services; 

• Require public safety access points to make their systems 

accessible to the providers of a type of telephone service known 

as Voice-over-Internet-Protocol and to make certain information available to the FCC; 

• Limit the fees that local governments can charge VOIP providers for access to emergency 911 services; 

• Preempt state and local consumer protection laws; 

• Preempt local government authority over municipal rights 

of way; and 

• Preempt state laws prohibiting local governments from offering certain services to provide Internet access. 

The bill would require there to be competition for video services 

other than satellite in any franchise area before providers of such 

services could apply for a national franchise. Such competition 

would likely come from those companies that have traditionally 

provided telephone service. While the speed with which new providers would offer such service is uncertain, industry sources suggest that these companies would offer cable services under the bill 

in at least 10 percent to 20 percent of franchise areas by 2011. 

Based on this information and the large number of franchises nationwide (about 30,000), CBO estimates that the net costs of complying with the intergovernmental mandates in the bill would, in 

aggregate, exceed the threshold established in UMRA in at least 

5 

one of the first five years that the mandates are in effect (the 

threshold is $64 million in 2006 and is adjusted annually for inflation). 

CBO estimates that prohibiting intergovernmental entities—primarily municipal governments—from raising certain revenues from 

providers of cable services that have a national franchise would impose the most significant costs resulting from the mandates. By increasing competition in some markets, enacting the bill would likely lead to more people subscribing to cable services that are subject 

to local franchise fees. Thus, local governments would gain new 

revenues that partially offset those costs. 

CBO further estimates that the requirements on PSAPs, the limitations on the ability of state and local governments to charge fees 

to VOIP providers, and the other preemptions in the bill would 

probably not impose significant costs on intergovernmental entities. 

Estimated direct cost of mandates to state and local governments 

Under current law, Local Franchise Authorities (LFAs) in most 

states negotiate compensation with cable providers seeking to serve 

their franchise area. (In at least three states, the law provides for 

a statewide franchise). Each agreement is different, and the 

amount of forgone revenue from the bill’s prohibition would depend 

on the specifics of each franchise agreement preempted by a national franchise. Current federal law caps fees for the franchise at 

5 percent of gross revenues—a fee maintained in H.R. 5252. However, local governments also negotiate fees for public, educational, 

and governmental (PEG) programming—some in cash and some inkind—totaling, on average, between 1 percent and 3 percent of the 

gross revenues of the provider. In general, urban and suburban 

areas have a higher percentage of PEG contributions than do nonurban areas. The bill would limit charges by LFAs to 1 percent of 

gross revenues of cable providers. 

By prohibiting intergovernmental entities from charging certain 

cable providers more than 1 percent of gross revenues to provide 

PEG programing, enacting the bill would lead to a loss in state and 

local revenues. CBO estimates that the gross costs of this prohibition—that is, the amount of the revenues that state and local governments would no longer be able to collect—would grow to between $150 million and $450 million by 2011. 

UMRA includes in its definition of the direct costs of a mandate 

the amounts that state and local governments would be prohibited 

from raising in revenues to comply with the mandate. Thus, CBO 

counts as direct costs the cash portion of what state and local governments would be prohibited from charging under the bill. 

At the same time, however, the bill would likely increase competition for cable service, decreasing the average price for such 

service. As a result, more people would likely subscribe to cable 

services, and they would pay additional franchise fees to local governments that would offset some of the state and local government 

losses described above. CBO estimates that these new revenues 

would total about 25 percent of aggregate losses. On balance, we 

estimate that the net costs of this mandate would likely fall between $100 million and $350 million by 2011. 

6 

Under H.R. 5252, it is likely that competitors would increase the 

speed with which they enter the cable market because costly barriers to entry would be removed. Under current law, there is competition in fewer than 5 percent of local franchise areas. Under the 

provisions of the bill, new entrants would likely increase the areas 

to which they provide cable service, reaching into at least 10 percent to 20 percent of franchise areas by 2011. As competition increases, more cable providers would likely apply for national franchises, and as national franchises increase, forgone revenues to 

state and local governments also would increase. While losses 

would depend on the specifics of the franchise agreements in the 

areas with new entrants and industry business plans, average PEG 

rates in such areas suggest that forgone revenues would likely total 

at least 1 percent to 2 percent of the gross revenues for cable providers in areas with a national franchise. 

Other impacts on state and local governments 

The bill also would impose a significant impact on state and local 

governments not covered under direct costs or direct savings in 

UMRA. Specifically, such entities would incur some in-kind losses 

from enactment of the bill. 

In franchise agreements, cable providers often agree to complete 

and maintain a variety of in-kind contributions to public entities 

including schools, police and fire stations, libraries, and other municipal buildings. These are called institutional networks (INETs). 

Providers often will also supply studios and equipment for public 

access television stations to support PEG programming. Depending 

on the interpretation of the bill’s provision concerning maintenance 

of INETs, anecdotal information from several local governments 

suggest they could lose in-kind contributions totaling several million dollars. Most communities in areas where cable providers receive a national franchise would forgo some in-kind benefits for 

PEG programming. 

Estimated impact on the private sector 

H.R. 5252 would impose mandates as defined by UMRA on 

broadband service providers, and on private entities that own 911 

components necessary to transmit VOIP emergency 911 services 

over their networks. Based on information from government and 

industry sources CBO estimates that the costs of complying with 

those mandates would fall below the annual threshold established 

by UMRA for private-sector mandates ($128 million in 2006, adjusted annually for inflation). 

The bill would impose mandates by: 

• Prohibiting broadband service providers from requiring subscribers to purchase other services as a bundle; and 

• Requiring certain entities that own 911 components to allow 

VOIP providers access to their infrastructure. 

Unbundling of broadband services 

Section 501 would prohibit any provider of broadband services 

from requiring a subscriber to purchase other services offered by 

the provider (including cable service, telecommunications service, 

or VOIP) as a condition of purchasing broadband service. 

7 

The costs of the mandate would be the expenditures necessary 

for converting systems to offer stand-alone service and the ongoing 

loss of net income from the direct lost sales. According to industry 

sources most of the industry already offers stand-alone broadband 

services. The cost of compliance for the remaining providers of converting their systems would be small. 

Broadband service providers also could lose income as some consumers chose to subscribe only to the broadband service, forgoing 

any bundled services. Assuming the providers of broadband service 

who currently provide stand-alone service continue to do so independent of the mandate, the net loss of income should be small relative to the threshold. 

Making 911 components accessible to VOIP providers 

Section 301 would clarify FCC regulations relating to VOIP access to 911 and E911 infrastructure. The language in section 301 

would impose a new mandate on all private entities that own 911 

components necessary to transmit VOIP emergency 911 services 

over their networks. Section 301 would require such entities to 

allow VOIP providers to have full access to the necessary 911 components. Owners of 911 components would be able to charge VOIP 

providers a fee for using their network components, but would be 

mandated to enter into such agreements with those providers. 

Large private entities that own 911 components have most of the 

infrastructure in place to comply with the mandate. Some smaller 

owners of 911 components may not have such capacity and would 

incur costs to comply with the mandate. Based on information provided by industry and government sources, CBO expects that the 

direct costs of complying with this mandate would be minimal. 

Estimate prepared by: Federal costs: Melissa Z. Petersen; impact 

on state, local, and tribal governments: Sarah Puro; impact on the 

private sector: Philip Webre and Fatimot Ladipo 

Estimate approved by: Peter H. Fontaine, Deputy Assistant Director for Budget Analysis. 

FEDERAL MANDATES STATEMENT

The Committee adopts as its own the estimate of Federal mandates prepared by the Director of the Congressional Budget Office 

pursuant to section 423 of the Unfunded Mandates Reform Act. 

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