Federal Register / Vol. 72, No. 54 / Wednesday, March 21, 2007 / Rules and Regulations 13189 

List of Subjects in 43 CFR Part 10 

Administrative practice and 

procedure, Graves, Hawaiian Natives, 

Historic preservation, Indians—claims, 

Museums, Reporting and recordkeeping 

requirements, Repatriation. 

■ In consideration of the foregoing, 43 

CFR Subtitle A is amended as follows. 

PART 10—NATIVE AMERICAN 

GRAVES PROTECTION AND 

REPATRIATION REGULATIONS 

■ 1. The authority for part 10 continues 

to read as follows: 

Authority: 25 U.S.C. 3001 et seq. 

■ 2. Add § 10.13 to read as follows: 

§ 10.13 Future applicability. 

(a) General. This section sets forth the 

applicability of the Act to museums and 

Federal agencies after expiration of the 

statutory deadlines for completion of 

summaries and inventories. 

(b) New holdings or collections. 

(1) Any museum or Federal agency 

that, after completion of the summaries 

and inventories as required by §§ 10.8 

and 10.9, receives a new holding or 

collection or locates a previously 

unreported current holding or collection 

that may include human remains, 

funerary objects, sacred objects or 

objects of cultural patrimony, must: 

(i) Within 6 months of receiving a 

new holding or collection or locating a 

previously unreported current holding 

or collection, or within 6 months of the 

effective date of this rule, whichever is 

later, provide a summary of the holding 

or collection as required by § 10.8 to any 

Indian tribe or Native Hawaiian 

organization that is, or is likely to be, 

affiliated with the collection; and 

(ii) Within 2 years of receiving a new 

holding or collection or locating a 

previously unreported current holding 

or collection, or within 2 years of the 

effective date of this rule, whichever is 

later, prepare, in consultation with any 

affiliated Indian tribe or Native 

Hawaiian organization, an inventory as 

required by § 10.9 of these regulations. 

Any museum that has made a good faith 

effort to complete its inventory, but 

which will be unable to complete the 

process by this deadline, may request an 

extension of the time requirements 

under § 10.9(f). 

(2) Additional pieces or fragments of 

previously repatriated human remains, 

funerary objects, sacred objects and 

objects of cultural patrimony may be 

returned to the appropriate Indian tribe 

or Native Hawaiian organization 

without publication of a notice in the 

Federal Register, as otherwise required 

under §§ 10.8(f) and 10.9(e), if they do 

not change the number or cultural 

affiliation of the cultural items listed in 

the previous notice. 

(3) A museum or Federal agency that 

receives a new holding or collection for 

which a summary or inventory was 

previously prepared, as required by 

§§ 10.8 or 10.9, may rely upon the 

previously prepared documents. The 

receiving museum or Federal agency 

must provide a copy of the previously 

prepared summary or inventory to all 

affiliated Indian tribes or Native 

Hawaiian organizations, along with 

notification that the receiving museum 

or Federal agency has assumed 

possession and control of the holding or 

collection. 

(c) New Indian tribes. 

(1) Any museum or Federal agency 

that has possession or control of human 

remains, funerary objects, sacred 

objects, or objects of cultural patrimony 

that are, or are likely to be, culturally 

affiliated with a newly Federally 

recognized Native American tribe, must: 

(i) Within 6 months of the publication 

in the Federal Register of the Native 

American group’s placement on the list 

of Indian Entities Recognized and 

Eligible to Receive Services from the 

United States Bureau of Indian Affairs, 

or within 6 months of the effective date 

of this rule, whichever is later, provide 

a summary of the collection as required 

by § 10.8 to that Indian tribe; and 

(ii) Within 2 years of the publication 

in the Federal Register of the Native 

American group’s placement on the list 

of Indian Entities Recognized and 

Eligible to Receive Services from the 

United States Bureau of Indian Affairs, 

or within 2 years of the effective date of 

this rule, whichever is later, prepare, in 

consultation with the newly recognized 

culturally affiliated Indian tribe an 

inventory as required by § 10.9. Any 

museum that has made a good faith 

effort to complete its inventory, but 

which will be unable to complete the 

process by this deadline, may request an 

extension of the time requirements 

under § 10.9(f). 

(2) The list of Indian Entities 

Recognized and Eligible to Receive 

Services from the United States Bureau 

of Indian Affairs is published in the 

Federal Register as required by 

provisions of the Federally Recognized 

Indian Tribe List Act of 1994 [Pub. L. 

103–454, 108 Stat. 4791]. 

(d) New Federal funds. Any museum 

that has possession or control of human 

remains, funerary objects, sacred 

objects, or objects of cultural patrimony 

and receives Federal funds for the first 

time after expiration of the statutory 

deadlines for completion of summaries 

and inventories must: 

(1) Within 3 years of the date of 

receipt of Federal funds, or within 3 

years of the effective date of this rule, 

whichever is later, provide a summary 

of the collection as required by § 10.8 to 

any Indian tribe or Native Hawaiian 

organization that is, or is likely to be, 

culturally affiliated with the collections; 

and 

(2) Within 5 years of the date of 

receipt of Federal funds, or within 5 

years of the effective date of this rule, 

whichever is later, prepare, in 

consultation with any affiliated Indian 

tribe or Native Hawaiian organization, 

an inventory as required by § 10.9. 

(e) Amendment of previous decision. 

(1) Any museum or Federal agency 

that has previously published a notice 

in the Federal Register regarding the 

intent to repatriate unassociated 

funerary objects, sacred objects, and 

objects of cultural patrimony under 

§ 10.8(f), or the completion of an 

inventory of Native American human 

remains and associated funerary objects 

as required by § 10.9(e), must publish an 

amendment to that notice if, based on 

subsequent information, the museum or 

Federal agency revises its decision in a 

way that changes the number or cultural 

affiliation of the cultural items listed. 

(2) Repatriation may not occur until at 

least 30 days after publication of the 

amended notice in the Federal Register. 

(f) All actions taken as required by 

this section must also comply with all 

other relevant sections of 43 CFR 10. 

Dated: March 6, 2007. 

David M. Verhey, 

Acting Assistant Secretary for Fish and 

Wildlife and Parks. 

[FR Doc. E7–5113 Filed 3–20–07; 8:45 am] 

BILLING CODE 4312–50–P 

FEDERAL COMMUNICATIONS 

COMMISSION 

47 CFR Part 76 

[MB Docket No. 05–311; FCC 06–180] 

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 

AGENCY: Federal Communications 

Commission. 

ACTION: Final rule. 

SUMMARY: In this document, the 

Commission adopts rules and provides 

guidance to implement section 621(a)(1) 

of the Communications Act. The 

Commission solicited and reviewed 

comments on this section and found 


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13190 Federal Register / Vol. 72, No. 54 / Wednesday, March 21, 2007 / Rules and Regulations 

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. The 

Commission adopts measures to address 

a variety of means by which local 

franchising authorities are unreasonably 

refusing to award competitive 

franchises. The rules and guidance will 

facilitate and expedite entry of new 

cable competitors into the market for the 

delivery of video programming, and 

accelerate broadband deployment. 

DATES: The rules in § 76.41 contains 

information collection requirements that 

have not been approved by OMB, 

subject to the Paperwork Reduction Act. 

The Federal Communications 

Commission will publish a document 

announcing the effective date upon 

OMB approval. 

ADDRESSES: You may submit comments, 

identified by MB Docket No. 05–311, by 

any of the following methods: 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

• Federal Communications 

Commission’s Web Site: http:// 

www.fcc.gov/cgb/ecfs/. Follow the 

instructions for submitting comments. 

• People with Disabilities: Contact the 

FCC to request reasonable 

accommodations (accessible format 

documents, sign language interpreters, 

CART, etc.) by e-mail: FCC504@fcc.gov 

or phone: 202–418–0530 or TTY: 202–

418–0432. 

For additional information on the 

rulemaking process, see the 

SUPPLEMENTARY INFORMATION section of 

this document. 

FOR FURTHER INFORMATION CONTACT: 

Holly Saurer, Holly.Saurer@fcc.gov or 

Brendan Murray, 

Brendan.Murray@fcc.gov of the Media 

Bureau, Policy Division, (202) 418–

2120. 

SUPPLEMENTARY INFORMATION: This is a 

summary of the Commission’s Report 

and Order (Order), FCC 06–180, 

adopted on December 20, 2006, and 

released on March 5, 2007. The full text 

of this document is available for public 

inspection and copying during regular 

business hours in the FCC Reference 

Center, Federal Communications 

Commission, 445 12th Street, SW., CY–

A257, Washington, DC 20554. These 

documents will also be available via 

ECFS (http://www.fcc.gov/cgb/ecfs/). 

(Documents will be available 

electronically in ASCII, Word 97, and/ 

or Adobe Acrobat.) The complete text 

may be purchased from the 

Commission’s copy contractor, 445 12th 

Street, SW., Room CY–B402, 

Washington, DC 20554. To request this 

document in accessible formats 

(computer diskettes, large print, audio 

recording, and Braille), send an e-mail 

to fcc504@fcc.gov or call the 

Commission’s Consumer and 

Governmental Affairs Bureau at (202) 

418–0530 (voice), (202) 418–0432 

(TTY). 

Paperwork Reduction Act of 1995 

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 will be invited to 

comment on the new information 

collection requirements contained in 

this proceeding. The Commission will 

publish a separate document in the 

Federal Register at a later date seeking 

these comments. 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 previously sought specific comment 

on how the Commission might ‘‘further 

reduce the information collection 

burden for small business concerns with 

fewer than 25 employees.’’

Summary of the Report and Order 

I. 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’’), 

47 U.S.C. 541(a)(1), which prohibits 

franchising authorities from 

unreasonably refusing to award 

competitive franchises for the provision 

of cable services. 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. 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, 

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. 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. 

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. 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. We 

further find that Commission action to 

address this problem is both authorized 

and necessary. Accordingly, we adopt 


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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, and accelerate broadband 

deployment consistent with our 

statutory responsibilities. References 

throughout this Order to ‘‘video 

programming’’ or ‘‘video services’’ are 

intended to mean cable services. 

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 facilitiesbased 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. 

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) of the 

Communications Act; (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-playingfield 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. 

II. Background 

6. Section 621. Any new entrant 

seeking to offer ‘‘cable service’’ as a 

‘‘cable operator’’ 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, and subsection (a)(1) 

grants to franchising authorities the 

power to award such franchises. 

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’’), was to delineate the 

role of LFAs in the franchising process. 

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.’’

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. 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.’’

8. In response, Congress revised 

Section 621(a)(1) through the Cable 

Television Consumer Protection and 

Competition Act of 1992 (the ‘‘1992 

Cable Act’’) 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.’’ 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, 


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13192 Federal Register / Vol. 72, No. 54 / Wednesday, March 21, 2007 / Rules and Regulations 

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. 

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. 

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.’’

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. 

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.’’ 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. 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 for potential new cable 

entrants into the MVPD market. 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. 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; and (c) 

ongoing franchise negotiations. 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; 

• Whether to establish a maximum 

time frame for an LFA to act on an 

application for a competitive franchise; 

• 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; 

• 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; 

• 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; and 

• Whether current procedures or 

requirements are appropriate for any 

cable operator, including incumbent 

cable operators. 

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. 

Accordingly, the Commission sought 

comment on how it could best remedy 

any problems with the current 

franchising process. 

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. 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.’’

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. 

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. 

Some counties and municipalities have 

cable ordinances that govern the 

structure of negotiations, while others 

may proceed on an applicant-byapplicant basis. Where franchising 

negotiations are focused at the local 

level, some LFAs create formal or 

informal consortia to pool their 

resources and expedite competitive 

entry. 

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 timeconsuming and expensive process that 

has a chilling effect on competitors. 

Verizon estimates, for example, that it 

will need 2,500–3,000 franchises in 

order to provide video services 

throughout its service area. AT&T states 

that its Project Lightspeed deployment 


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Federal Register / Vol. 72, No. 54 / Wednesday, March 21, 2007 / Rules and Regulations 13193 

is projected to cover a geographic area 

that would encompass as many as 2,000 

local franchise areas. BellSouth 

estimates that there are approximately 

1,500 LFAs within its service area. 

Qwest’s in-region territory covers a 

potential 5,389 LFAs. While other 

companies are also considering 

competitive entry, 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. 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. 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. 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. 

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. 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. In 

Maine, a bill that would have replaced 

municipal franchises with State 

franchises was withdrawn. 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. 

III. 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. 

A. 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. 

Although LFAs adduced evidence that 

they have granted some competitive 

franchises, and competitors 

acknowledge that they have obtained 

some franchises, the record includes 

only a few hundred examples of 

competitive franchises, many of which 

were obtained after months of 

unnecessary delay. For example, 

Verizon has obtained franchises 

covering approximately 200 franchise 

areas. In the vast majority of 

communities, cable competition simply 

does not exist. 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 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. 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 

Miami-Dade has granted 11 franchises 

to six providers, and currently is 

considering the application of another 

potential entrant. New Jersey has 

granted five competitive franchises, but 

only two ultimately provided service to 

customers. 

20. The dearth of competition is due, 

at least in part, to the franchising 

process. 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. 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. 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 


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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 8–18 

months. 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. Verizon 

noted that delays are often caused by 

mandatory waiting periods. BellSouth 

explained that negotiations took an 

average of 10 months for each of its 20 

cable franchise agreements, and that in 

one case, the negotiations took nearly 

three years. AT&T claims that anticompetitive conditions, such as levelplaying-field constraints and LFA 

demands regarding build-out, not only 

delay entry but can prevent it altogether. 

BellSouth notes that absent such 

demands (in Georgia, for example), the 

company’s applications were granted 

quickly. Most of Ameritech’s franchise 

negotiations likewise took a number of 

years. New entrants other than the large 

incumbent local exchange carriers 

(‘‘LECs’’) 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. 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). 

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. We note that certain 

franchising authorities may have 

existing authority to regulate LECs 

through State and local rights-of-way 

statutes and ordinances. 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 rightsof-way management. Recognizing this 

distinction, some States have enacted or 

proposed streamlined franchising 

procedures specifically tailored to 

entities with existing access to public 

rights-of-way. 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, which would enable 

applicants to seek judicial review under 

Section 635. Rather, negotiations are 

often drawn out over an extended 

period of time. As a result, the record 

shows that numerous new entrants have 

accepted franchise terms they 

considered unreasonable in order to 

avoid further delay. Others have filed 

lawsuits seeking a court order 

compelling the LFA to act, which 

entails additional delay, legal 

uncertainty, and great expense. 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. 

Alternatively, some prospective entrants 

have walked away from unduly 

prolonged negotiations. 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. 

25. Despite this evidence, incumbent 

cable operators and LFAs nevertheless 

assert that new entrants can obtain and 

are obtaining franchises in a timely 

fashion, and that delays are largely due 

to unreasonable behavior on the part of 

franchise applicants, not LFAs. 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 

states that it is willing to negotiate and 

tailor the model franchise to each 

locality’s needs. For example, 

Minnesota LFAs claim that they can 

grant a franchise in as little as eight 

weeks. 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. 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. For example, a 

consolidated franchising authority in 

Oregon negotiated and approved 

competitive franchises within 90 days. 

An advisory committee in Minnesota 

granted two competitive franchises in 

six months, after a statutorily imposed 

eight-week notice and hearing period. 

While we laud the prompt disposition 

of franchise applications in these 

particular areas, the record shows that 

these examples are atypical. For 

example, the cities of Chicago and 

Indianapolis acknowledged that, as 

currently operated, their franchising 

processes take one to three years, 

respectively. 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. 


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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. 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. 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. 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. 

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 demonstrates 

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. 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. 

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. 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. 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. 

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. 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. 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 demonstrate that new 

entrants can and do obtain competitive 

franchises in a timely manner. 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. 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. 

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. 

Comcast argues that it faces competition 

from cable overbuilders in several 

markets. 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. 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. Large incumbent 

LECs, small and mid-sized incumbent 

LECs, competitive LECs 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. 

32. The record demonstrates that 

build-out requirements can substantially 

reduce competitive entry. Numerous 

commenters urge the Commission to 

prohibit LFAs from imposing any buildout requirements, and particularly 

universal build-out requirements. 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. 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. 

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 


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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. Furthermore, Qwest has 

withdrawn franchise applications in 

eight communities due to build-out 

requirements. In each case, Qwest 

determined that entering into a 

franchise agreement that mandates 

universal build-out would not be 

economically feasible. 

34. In many instances, level-playingfield provisions in local laws or 

franchise agreements compel LFAs to 

impose on competitors the same buildout requirements that apply to the 

incumbent cable operator. Cable 

operators use threatened or actual 

litigation against LFAs to enforce levelplaying-field requirements and have 

successfully delayed entry or driven 

would-be competitors out of town. 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. 

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. 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. For example, Verizon has 

expressed significant concerns about 

deploying service in areas heavily 

populated with MDUs already under 

exclusive contract with another MVPD. 

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. 

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. Non-profit research 

organizations the Mercatus Center and 

the Phoenix Center argue that build-out 

requirements reduce consumer welfare. 

Each conclude that build-out 

requirements imposed on competitive 

cable entrants only benefit an 

incumbent cable operator. 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. The Phoenix Center 

study contends that build-out 

requirements deter entry and conflict 

with Federal, State, and local 

government goals of rapid broadband 

deployment. 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. 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. In 

many instances, placing build-out 

conditions on competitive entrants 

harms consumers and competition 

because it increases the cost of cable 

service. 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. 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. 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. In many cases, build-out 

requirements may have precisely the 

opposite effects—they deter competition 

and deny consumers a choice. 

37. 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. In some cases, a 

potential new entrant’s service area 

comprises only a portion of the area 

under the LFA’s jurisdiction. 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. 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. For example, some wire 

center service areas may encompass a 

disproportionate level of business 

locations or multi-dwelling units 

(‘‘MDUs’’) with MVPD exclusive 

contracts. 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. New 

entrants argue that the imposition of 

build-out requirements in either 

circumstance creates a disincentive for 

them to enter the marketplace. 

38. Incumbent cable operators assert 

that new entrants’ claims are 

exaggerated, and that, in most cases, 

LEC facilities are coterminous with 

municipal boundaries. 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. The cable industry has 

adduced no contrary evidence. The fact 

that few LFAs argued that noncoterminous boundaries are a problem 

is not sufficient to contradict the 

incumbent LECs’ evidence. 

39. 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 


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build-out of an entire local franchising 

area immediately, 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. 

40. Besides thwarting potential new 

entrants’ deployment of video services 

and depriving consumers of reduced 

prices and increased choice, 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.’’ 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. 

41. 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. 

42. 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; the Wall Street 

Journal reported that Verizon also faced 

a request for a video hookup for 

Christmas celebrations and video 

cameras to record a math-tutoring 

program. In Maryland, some localities 

conditioned a franchise upon Verizon’s 

agreement to make its data services 

subject to local customer service 

regulation. 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. 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. 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. 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. 

43. 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. Fee issues 

include not only which franchiserelated costs imposed on providers 

should be included within the 5 percent 

statutory franchise fee cap established 

in Section 622(b), 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. 

Other LFAs have requested consultant 

and attorneys’ fees. Several 

Pennsylvania localities have requested 

franchise fees based on cable and noncable revenues. Some commenters assert 

that an obligation to provide anything of 

value, including PEG costs, should 

apply toward the franchise fee 

obligation. 

44. 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. 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. 

45. 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. 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. LFAs have demanded 

funding for PEG programming and 

facilities that exceeds their needs, and 

will not provide an accounting of where 

the money goes. 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. 

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. 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. 

46. 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. 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. Some 

LFAs impose level-playing-field 

requirements on new entrants even 

without a statutory, regulatory, or 

contractual obligation to do so. 

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. 

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. 

NATOA contends, however, that 


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although level-playing-field provisions 

sometimes can complicate the 

franchising process, they do not present 

unreasonable barriers to entry. 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. 

47. The record demonstrates that local 

level-playing-field mandates can impose 

unreasonable and unnecessary 

requirements on competitive applicants. 

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. Comcast 

asserts that MSOs have not threatened 

litigation to delay franchise approvals, 

but to insist that their legal and 

contractual rights are honored in the 

grant of a subsequent franchise. 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. In most cases, 

incumbent cable operators entered into 

their franchise agreements in exchange 

for a monopoly over the provision of 

cable service. 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-playingfield 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. 

48. 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,’’ 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. 

49. 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. 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. 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. 

50. We also conclude that broadband 

deployment and video entry are 

‘‘inextricably linked’’ 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. The 

record demonstrates that broadband 

deployment is not profitable without the 

ability to compete with the bundled 

services that cable companies provide. 

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.’’ DOJ’s 

comments underscore that additional 

video competition will likely speed 

deployment of advanced broadband 

services to consumers. 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. 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. 

51. In sum, the current operation of 

the franchising process deters entry and 

thereby denies consumers choices. 

Delays in the franchising process also 

hamper accelerated broadband 

deployment and investment in 

broadband facilities in direct 

contravention of the goals of Section 

706, the President’s competitive 

broadband objectives, and our 

established broadband goals. 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. 

We discuss below our authority to 

address these problems. 

B. The Commission Has Authority to 

Adopt Rules to Implement Section 

621(a)(1) 

52. In the Local Franchising NPRM, 

the Commission tentatively concluded 

that it has the authority to adopt rules 

implementing Title VI of the Act, 

including Section 621(a)(1). The 

Commission sought comment on 

whether it has the authority to adopt 

rules or whether it is limited to 

providing guidance. 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). 

53. 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.’ ’’ 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.’’ 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.’’

‘‘[T]he grant in section 201(b) means 

what it says: The FCC has rulemaking 

authority to carry out the ’provisions of 

this Act.’ ’’ 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. * * *’’ 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 


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necessary in the execution of its 

functions.’’

54. Section 2 of the Communications 

Act grants the Commission explicit 

jurisdiction over ‘‘cable services.’’

Moreover, as we explained in the Local 

Franchising NPRM, Congress 

specifically charged the Commission 

with the administration of the Cable 

Act, including Section 621. In addition, 

Federal courts have consistently upheld 

the Commission’s authority in this area. 

55. 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 

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. 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. 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. 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.’’ Other 

provisions in the Act demonstrate that 

when Congress intended to grant 

exclusive jurisdiction, it said so in the 

legislation. Here, however, neither 

Section 621(a)(1) nor Section 635 

includes an exclusivity provision, and 

we decline to read one into either 

provision. 

56. 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. 

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. 

57. 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. 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.’’ 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. 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). 

58. 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. 

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. 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. 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. 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. While the judicial 

review provisions in Sections 621(a)(1) 

and 635 refer to a ‘‘final decision’’ or 

‘‘final determination,’’ 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. 

59. 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. Commenters 

point to the Conference Committee 

Report on the 1992 Amendments, which 

adopted the Senate version of Section 

621, rather than the House version, 

which ‘‘contained five examples of 

circumstances under which it is 

reasonable for a franchising authority to 

deny a franchise.’’ 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. 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, to have the authority to do so. 

There is nothing in the statute or the 

legislative history to suggest that 


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Congress intended to displace the 

Commission’s explicit authority to 

interpret and enforce provisions in Title 

VI, including Section 621(a)(1). 

60. 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.’’ 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.’’ In response, 

Congress revised Section 621(a)(1) to 

prohibit a franchising authority from 

unreasonably refusing to award an 

additional competitive franchise. The 

regulations set forth herein give force to 

that restriction and vindicate the 

national policy goal of promoting 

competition in the video marketplace. 

61. 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.’’ 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. 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. 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. 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. 

62. 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. 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.’’ 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, we received comments from both 

groups that agree that Commission 

guidance concerning factors that are 

‘‘reasonable’’ will help to expedite the 

franchising process. 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. 

63. 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. 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 wouldbe 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). 

C. Steps To Ensure That the Local 

Franchising Process Does Not 

Unreasonably Interfere With 

Competitive Cable Entry and Rapid 

Broadband Deployment 

64. 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. 

1. Maximum Time Frame for Franchise 

Negotiations 

65. As explained above, 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, 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. 

66. 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. 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 


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franchise, consistent with the guidance 

and rulings in this Order. 

a. Time Limit 

67. 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. Other 

commenters propose time limits ranging 

from 30 days to six months. While 

NATOA in its comments opposes any 

time limit, in February 2006 a NATOA 

representative told the Commission that 

the six-month time limit that California 

law imposes is reasonable. Some 

commenters have suggested that a 

franchise applicant that holds an 

existing authorization to access rightsof-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. 

68. 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. 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. 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. 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. 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. 

69. As a preliminary matter, we find 

that a franchise applicant that holds an 

existing authorization to access rightsof-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. 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. Recognizing 

this distinction, some States have 

created streamlined franchising 

procedures specifically tailored to 

entities with existing access to public 

rights-of-way. 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. 

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-ofway. 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. 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. 

70. 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. 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. 

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. 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, 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 rightsof-way within the franchise area. 

71. 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. We are 

persuaded by the record that a sixmonth 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. 

72. 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, a franchising authority and a 


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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, provided that a final 

decision is made within the time period 

established under this Order. 

b. Commencement of the Time Period 

for Negotiations 

73. 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. 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 or a proposed agreement. 

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. Specifically, the 

company advocates starting the clock 

when the applicant initiates 

negotiations with the LFA, which could 

be documented informally between the 

applicant and the LFA or with a formal 

Commission filing for evidentiary 

purposes. 

74. 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. 

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. 

c. Remedy for Failure To Negotiate a 

Franchise Within the Time Limit 

75. 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. 

76. 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. 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 levelplaying-field requirements are 

preempted. 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. 

77. 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. 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.’ ’’

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.’’ ‘‘[T]he grant in 

section 201(b) means what it says: The 

FCC has rulemaking authority to carry 

out the ‘provisions of this Act.’ ’’ Section 

2 of the Communications Act grants the 

Commission explicit jurisdiction over 

‘‘cable services.’’ Moreover, Congress 


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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. 

78. 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.’’ 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. 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.’’ And the Commission granted 

interim franchises for cable services in 

areas where there was no other 

franchising authority. 

79. 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. 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). 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.’’

80. 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. 

2. Build-Out 

81. As discussed above, build-out 

requirements in many cases may 

constitute unreasonable barriers to entry 

into the MVPD market for facilitiesbased competitors. Accordingly, we 

limit LFAs’ ability to impose certain 

build-out requirements pursuant to 

Section 621(a)(1). 

a. Authority 

82. 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. 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. 

83. 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.’’ 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. 

84. Our interpretation of Section 

621(a)(4)(A) is consistent with relevant 

jurisprudence and the legislative 

history. The DC 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. 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.’’ By declining to adopt this 

language, Congress made clear that it 

did not intend to impose uniform buildout requirements on all franchise 

applicants. 

85. 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.’’ 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.’’) 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.’’ The U.S. Court of 

Appeals for the District of Columbia 


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Circuit (the ‘‘DC 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 [buildout]. * * * [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. 

b. Discussion 

86. 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. 

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. 

87. 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. 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. 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. Given the entrydeterring effect of build-out conditions, 

our construction of Section 621(a)(1) 

best serves the Act’s purposes of 

promoting competition and broadband 

deployment. 

88. 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. 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. 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. 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. 

89. 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. 

90. 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. 

c. Redlining 

91. 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.’’ 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). 

92. 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. 

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). 

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. 

We note these suggestions but do not 

require them. 

3. Franchise Fees 

93. In response to questions in the 

Local Franchising NPRM concerning 

existing practices that may impede cable 

entry, 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. 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), but also the calculation of 

franchise fees (i.e., the revenue base 

from which the 5 percent is calculated). 


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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. 

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 

an 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. 

94. 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. 

95. 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.’’ 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.’’ 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.’’ 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.’’ It has been 

established that certain types of ‘‘inkind’’ 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.’’

96. 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. 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. 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, 

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. 

97. We clarify that a cable operator is 

not required to pay franchise fees on 

revenues from non-cable services. 

Advertising revenue and home 

shopping commissions have been 

included in an operator’s gross revenues 

for franchise fee calculation purposes. 

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.’’

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.’’ 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.’’ Although this 

decision related specifically to Internet 

access service revenues, the same would 

be true for other ‘‘non-cable’’ service 

revenues. Thus, Internet access services, 

including broadband data services, and 

any other non-cable services are not 

subject to ‘‘cable services’’ fees. 

98. 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.’’ 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. 

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 franchiserelated 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. 

99. 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. BellSouth asserts that 

LFAs often seek fees beyond the 5 

percent franchise fee allowed by the 


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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. OPASTCO asserts that 

higher fees discourage investment and 

often will need to be passed on to 

consumers. Verizon also requests that 

we clarify that fees that exceed the cap 

are unreasonable. 

100. AT&T argues that we should find 

unreasonable any fees or contribution 

requirements that are not credited 

toward the franchise fee obligation. 

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. 

101. 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. 

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. 

102. 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.’’

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. 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. 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.’’

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. 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.’’

103. 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. 

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. For future guidance, LFAs 

and video service providers may look to 

judicial cases to determine other costs 

that should be considered ‘‘incidental.’’

104. 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, few parties 

provided specific details surrounding 

the in-kind payment demands of LFAs. 

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. 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. 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. 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. 

105. The Broadband Service Providers 

Association states that an example of a 

municipal capital requirement can 

include traffic light control systems. 

FTTH Council states that non-video 

requirements raise the cost of entry for 

new entrants and should be prohibited. 

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. 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. NTCA states that any 


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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. 

106. 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. 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. 

107. 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.’’ Accordingly, any 

such requests for municipal projects 

will count towards the 5 percent cap. 

108. 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. 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.’’ 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. 

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. 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. Thus, for any franchise 

granted after 1984, this exemption from 

franchise fees no longer applies. 

4. PEG/Institutional Networks 

109. 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’’

because this promotes important 

statutory and public policy goals. 

However, pursuant to Section 621(a)(1), 

we conclude that LFAs may not make 

unreasonable demands of competitive 

applicants for PEG and I–Net and that 

conditioning the award of a competitive 

franchise on applicants agreeing to such 

unreasonable demands constitutes an 

unreasonable refusal to award a 

franchise. 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). 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. 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. 

110. As an initial matter, we conclude 

that we have the authority to address 

issues relating to PEG and I–Net 

support. Some commenters argue that 

Congress explicitly granted the 

responsibility for PEG and I–Net 

regulation to State and local 

governments. For example, NATOA 

contends that we cannot limit the inkind 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. 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. 

Verizon also asserts that the record 

confirms that LFAs often demand PEG 

support that exceeds statutory limits. 

111. 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.’’ 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. 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.’’ 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. We therefore conclude that 

‘‘adequate’’ should be given its plain 

meaning: the term does not mean 

significant but rather ‘‘satisfactory or 

sufficient.’’ 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). 

112. AT&T asserts that we should 

shorten the period for franchise 

negotiations by adopting standard terms 

for PEG channels. We reject this 

suggestion and clarify that LFAs are free 

to establish their own requirements for 


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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. 

113. 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. 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. 

114. 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. 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. 

115. 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. 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. 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. 

116. FTTH Council, Verizon, and 

AT&T asked 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. AT&T and Verizon argue 

that Section 621(a)(4)(B) requires 

adequate facilities, not duplicative 

facilities. 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. 

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. 

117. 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. 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. 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. 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. 

NATOA counters that AT&T’s 

complaint regarding space 

mischaracterizes PEG studio 

requirements that exist in some 

franchises. 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. 

118. We agree with AT&T, FTTH 

Council, Verizon, and others that 

completely duplicative PEG and I–Net 

requirements imposed by LFAs would 

be unreasonable. 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. 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. 

119. 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. 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 


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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. 

5. Regulation of Mixed-Use Networks 

120. We clarify that LFAs’ jurisdiction 

applies only to the provision of cable 

services over cable systems. To the 

extent a cable operator provides noncable 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. 

Similarly, an LFA has no authority to 

insist on an entity obtaining a separate 

cable franchise in order to upgrade noncable facilities. For example, assuming 

an entity (e.g., a LEC) already possesses 

authority to access the public rights-ofway, an LFA may not require the LEC 

to obtain a franchise solely for the 

purpose of upgrading its network. 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. 

121. 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.’’ 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. 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). 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 * * * .’’ As discussed 

above, revenues from non-cable services 

are not included in the base for 

calculation of franchise fees. 

122. In response to requests that we 

address LFA authority to regulate 

‘‘interactive on-demand services,’’ 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. ‘‘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.’’ We do not 

address at this time what particular 

services may fall within the definition. 

123. 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.’’

D. Preemption of Local Laws, 

Regulations and Requirements 

124. 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. 

125. 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. 

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, 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. 

126. 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.’’ 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, 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. 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). 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. 

127. The doctrine of Federal 

preemption arises from the Supremacy 

Clause, which provides that Federal law 

is the ‘‘supreme Law of the Land.’’

Preemption analysis requires a statutespecific 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. 

When a Federal statute contains an 

express preemption provision, the 

preemption analysis consists of 


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identifying the scope of the subject 

matter expressly preempted and 

determining if a State’s law falls within 

its scope. Second, preemption can be 

implied and can occur where Federal 

law conflicts with State law. 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.’’

128. 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. 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. It is the 

Commission’s job, in the first instance, 

to determine the scope of the subject 

matter expressly preempted by Section 

636. 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. 

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). 

129. 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. 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.’’ 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. The national policy 

of promoting a competitive 

multichannel video marketplace has 

been repeatedly reemphasized by 

Congress, the Commission, and the 

courts. 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. 

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, 

limits on LFA’s ability to impose buildout requirements, and limits on LFA 

collection of franchise fees, 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. 

130. 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. 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, the 

Commission can only preempt where it 

is given express statutory authority to 

do so. 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.’’ Moreover, 

Section 621 expressly limits the 

authority of franchising authorities by 

prohibiting exclusive franchises and 

unreasonable refusals to award 

additional competitive franchises. 

Congress could not have stated its intent 

to limit local franchising authority more 

clearly. These provisions therefore 

satisfy any express preemption 

requirement. 

131. 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. 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. 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. Consequently, our rules 

preempt any contrary local regulations. 

132. 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. 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.’’ 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). 

133. 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. The 

‘‘takings’’ clause of the Fifth 

Amendment provides: ‘‘[N]or shall 

private property be taken for public use, 

without just compensation.’’ We 

conclude that our actions here do not 

run afoul of the Fifth Amendment for 

several reasons. To begin with, our 


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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, but 

rather hold the public streets and 

sidewalks in trust for the public. As one 

court explained, ‘‘municipalities 

generally possess no rights to profit 

from their streets unless specifically 

authorized by the State.’’ 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. 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. 

Because all municipal power is derived 

from the State, courts have held that ‘‘a 

State can take public rights-of-way 

without compensating the municipality 

within which they are located.’’ 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-ofway beyond that already permitted by 

the States. 

134. Moreover, even if there was a 

taking, Congress provided for ‘‘just 

compensation’’ to the local franchising 

authorities. 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. Congress enacted 

the cable franchise fee as the 

consideration given in exchange for the 

right to use the public ways. 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.’’

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. 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-ofway 

135. Finally, LFAs maintain that the 

Commission’s preemption of local 

governmental powers offends the Tenth 

Amendment of the U.S. Constitution. 

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.’’ 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. Contrary to the 

local franchising authorities’ claim, 

however, they have failed to 

demonstrate any violation of the Tenth 

Amendment. ‘‘If a power is delegated to 

Congress in the Constitution, the Tenth 

Amendment expressly disclaims any 

reservation of that power to the States.’’

Thus, when Congress acts within the 

scope of its authority under the 

Commerce Clause, no Tenth 

Amendment issue arises. Regulation of 

cable services is well within Congress’

authority under the Commerce Clause. 

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. 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. 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.’’ 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. 

136. 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; 

(2) allow an LFA to impose 

unreasonable build-out requirements on 

competitive franchise applicants; or (3) 

authorize or require a local franchising 

authority to collect franchise fees in 

excess of the fees authorized by law. 

137. 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. 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. 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. 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.’’ Commenters explain that 

‘‘unlike the incumbents who were able 

to pay for any of the concessions that 

they grant an LFA out of the supracompetitive revenue from their on-going 

operations,’’ ‘‘new entrants have no 

assured market position.’’ 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 


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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 locallymandated level-playing-field 

requirement is inconsistent with the 

rules, guidance, and findings adopted in 

this Order, such requirement is deemed 

preempted. 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. 

IV. Procedural Matters 

138. 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 will be invited to 

comment on the new information 

collection requirements contained in 

this proceeding. The Commission will 

publish a separate document in the 

Federal Register at a later date seeking 

these comments. 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.’’

139. 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. 

140. Final Regulatory Flexibility 

Analysis. As required by the Regulatory 

Flexibility Act, the Commission has 

prepared a Final Regulatory Flexibility 

Analysis (‘‘FRFA’’) relating to this 

Report and Order. 

141. Congressional Review Act. The 

Commission will send a copy of this 

Report and Order 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). 

142. Additional Information. For 

additional information concerning the 

PRA proposed information collection 

requirements contained in this Report 

and Order, contact Cathy Williams at 

202–418–2918, or via the Internet to 

Cathy.Williams@fcc.gov. 

Final Regulatory Flexibility Act 

Analysis 

143. As required by the Regulatory 

Flexibility Act of 1980, as amended 

(‘‘RFA’’) an Initial Regulatory Flexibility 

Analysis (‘‘IRFA’’) was incorporated in 

the Notice of Proposed Rulemaking 

(‘‘NPRM’’) to this proceeding. 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. 

Need for, and Objectives of, the Report 

and Order 

144. 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’’). 

Section 621 of the Communications Act 

prohibits franchising authorities from 

unreasonably refusing to award 

competitive franchises for the provision 

of cable services. 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 Rule Changes. 

Summary of Significant Issues Raised 

by Public Comments in Response to the 

IRFA 

145. 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. 

146. 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 

147. 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. The RFA generally 

defines the term ‘‘small entity’’ as 

having the same meaning as the terms 

‘‘small business,’’ ‘‘small organization,’’

and ‘‘small government jurisdiction.’’ In 

addition, the term ‘‘small business’’ has 


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the same meaning as the term ‘‘small 

business concern’’ under the Small 

Business Act. 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). 

148. 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. 

149. 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.’’

As of 1997, there were approximately 

87,453 governmental jurisdictions in the 

United States. 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 

150. 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 

151. 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 a small business size 

standard for this census category, which 

includes all such companies generating 

$13.0 million or less in revenue 

annually. 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. 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. 

152. Cable System Operators (Rate 

Regulation Standard). The Commission 

has developed its own small-businesssize 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. The 

most recent estimates indicate that there 

were 1,439 cable operators who 

qualified as small cable system 

operators at the end of 1995. 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. 

153. 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.’’ The 

Commission has determined that there 

are 67,700,000 subscribers in the United 

States. 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. Based on available data, the 

Commission estimates that the number 

of cable operators serving 677,000 

subscribers or fewer, totals 1,450. The 

Commission neither requests nor 

collects information on whether cable 

system operators are affiliated with 

entities whose gross annual revenues 

exceed $250 million, 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. 

154. Open Video Services. Open 

Video Service (‘‘OVS’’) systems provide 

subscription services. As noted above, 

the SBA has created a small business 

size standard for Cable and Other 

Program Distribution. 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. Affiliates of 

Residential Communications Network, 

Inc. (RCN) received approval to operate 

OVS systems in New York City, Boston, 

Washington, DC, 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 

155. 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.’’ 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. 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. 

156. 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. According to 

Commission data, 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 


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13214 Federal Register / Vol. 72, No. 54 / Wednesday, March 21, 2007 / Rules and Regulations 

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. 

157. 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. According to 

Commission data, 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. 

Description of Projected Reporting, 

Recordkeeping and Other Compliance 

Requirements 

158. The rule and guidance adopted 

in the Order will require de minimus 

additional reporting, recordkeeping, 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 

159. 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. 

160. 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. 

161. 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 buildout 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 

162. 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. 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. 

V. Ordering Clauses 

163. 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 is adopted. 

164. It is further ordered that pursuant 

to the authority contained in 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 the rule 

changes. 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. 

165. It is further ordered that the rules 

in § 76.41 contains information 

collection requirements that have not 

been approved by OMB, subject to the 

Paperwork Reduction Act. The Federal 

Communications Commission will 

publish a document announcing the 

effective date upon OMB approval. 

List of Subjects in 47 CFR Part 76 

Cable television, Television. 

Federal Communications Commission. 

Marlene H. Dortch, 

Secretary. 

Rule Changes 

■ For the reasons discussed in the 

preamble, the Federal Communications 

Commission amends 47 CFR part 76 as 

follows: 


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Federal Register / Vol. 72, No. 54 / Wednesday, March 21, 2007 / Rules and Regulations 13215 

PART 76—MULTICHANNEL VIDEO 

AND CABLE TELEVISION SERVICE 

■ 1. The authority citation for part 76 

continues to read as follows: 

Authority: 47 U.S.C. 151, 152, 153, 154, 

301, 302, 302a, 303, 303a, 307, 308, 309, 312, 

315, 317, 325, 338, 339, 340, 503, 521, 522, 

531, 532, 533, 534, 535, 536, 537, 543, 544, 

544a, 545, 548, 549, 552, 554, 556, 558, 560, 

561, 571, 572 and 573. 

■ 2. Add Subpart C to part 76 to read 

as follows: 

Subpart C—Cable Franchise 

Applications 

§ 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 paragraph (b)(5) of this section; 

(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 paragraph (d) of 

this section, 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 paragraph 

(b) of this section. 

(f) If after expiration of the time limit 

specified in paragraph (d) of this section 

a franchising authority denies an 

application, the competitive franchise 

applicant must discontinue operating 

under the interim franchise specified in 

paragraph (e) of this section 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 paragraph (d) of this section 

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. 

[FR Doc. E7–5119 Filed 3–20–07; 8:45 am] 

BILLING CODE 6712–01–P 

DEPARTMENT OF COMMERCE 

National Oceanic and Atmospheric 

Administration 

50 CFR Part 679 

[Docket No. 070213033–7033–01; I.D. 

031507D] 

Fisheries of the Exclusive Economic 

Zone Off Alaska; Pacific Cod by 

Catcher Processor Vessels Using 

Trawl Gear in the Bering Sea and 

Aleutian Islands Management Area 

AGENCY: National Marine Fisheries 

Service (NMFS), National Oceanic and 

Atmospheric Administration (NOAA), 

Commerce. 

ACTION: Temporary rule; closure. 

SUMMARY: NMFS is prohibiting directed 

fishing for Pacific cod by catcher 

processor vessels using trawl gear in the 

Bering Sea and Aleutian Islands 

management area (BSAI). This action is 

necessary to prevent exceeding the 2007 

first seasonal allowance of the Pacific 

cod total allowable catch (TAC) 

specified for catcher processor vessels 

using trawl gear in the BSAI. 

DATES: Effective 1200 hrs, Alaska local 

time (A.l.t.), March 17, 2007, through 

1200 hrs, A.l.t., April 1, 2007. 

FOR FURTHER INFORMATION CONTACT: 

Jennifer Hogan, 907–586–7228. 

SUPPLEMENTARY INFORMATION: NMFS 

manages the groundfish fishery in the 

BSAI exclusive economic zone 

according to the Fishery Management 

Plan for Groundfish of the Bering Sea 

and Aleutian Islands Management Area 

(FMP) prepared by the North Pacific 

Fishery Management Council under 

authority of the Magnuson-Stevens 

Fishery Conservation and Management 

Act. Regulations governing fishing by 

U.S. vessels in accordance with the FMP 

appear at subpart H of 50 CFR part 600 

and 50 CFR part 679. 

The 2007 first seasonal allowance of 

the Pacific cod TAC specified for 

catcher processor vessels using trawl 

gear in the BSAI is 18,555 metric tons 

(mt) as established by the 2007 and 2008 

final harvest specifications for 

groundfish in the BSAI (72 FR 9451, 

March 2, 2007), for the period 1200 hrs, 

A.l.t., January 20, 2007, through 1200 

hrs, A.l.t., April 1, 2007. See 

§ 679.20(c)(3)(iii), § 679.20(c)(5), and 

§ 679.20(a)(7)(i)(B). 

In accordance with § 679.20(d)(1)(i), 

the Administrator, Alaska Region, 

NMFS, has determined that the 2007 

first seasonal allowance of the Pacific 

cod TAC specified for catcher processor 

vessels using trawl gear in the BSAI will 

soon be reached. Therefore, the Regional 

Administrator is establishing a directed 

fishing allowance of 17,705 mt, and is 

setting aside the remaining 850 mt as 

bycatch to support other anticipated 

groundfish fisheries. In accordance with 

§ 679.20(d)(1)(iii), the Regional 

Administrator finds that this directed 

fishing allowance has been reached. 

Consequently, NMFS is prohibiting 

directed fishing for Pacific cod by 

catcher processor vessels using trawl 

gear in the BSAI. 

After the effective date of this closure 

the maximum retainable amounts at 

§ 679.20(e) and (f) apply at any time 

during a trip. 


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