[Federal Register: December 14, 2005 (Volume 70, Number 239)]
[Proposed Rules]
[Page 73973-73980]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr14de05-28]
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 76
[MB Docket No. 05-311; FCC 05-189]
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: Proposed rule.
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SUMMARY: In this document, the Commission seeks comment on how to
implement section 621(a)(1) of the Communications Act. Because several
potential competitors seeking to enter the multichannel video
programming distributor (MVPD) marketplace have alleged that in many
areas the current operation of the local franchising process serves as
a barrier to entry, the Commission solicits comment on section
621(a)(1)'s directive that local franchising authorities (LFAs) not
unreasonably refuse to award competitive franchises, and whether the
franchising process unreasonably impedes the achievement of the
interrelated federal goals of enhanced cable competition and
accelerated broadband deployment and, if so, how the Commission should
act to address that problem.
DATES: Comments for this proceeding are due on or before February 13,
2006; reply comments are due on or before March 14, 2006.
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 detailed instructions for submitting comments and additional
information on the rulemaking process, see the SUPPLEMENTARY
INFORMATION section of this document.
FOR FURTHER INFORMATION CONTACT: For additional information on this
proceeding, contact John Norton, John.Norton@fcc.gov or Natalie
Roisman, Natalie.Roisman@fcc.gov of the Media Bureau, Policy Division,
(202) 418-2120.
SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Notice
of Proposed Rulemaking (NPRM), FCC 05-189, adopted on November 3, 2005,
and released on November 18, 2005. 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).
Initial Paperwork Reduction Act of 1995 Analysis
This NPRM does not contain proposed information collection(s)
subject to the Paperwork Reduction Act of 1995 (PRA), Public Law 104-
13. In addition, therefore, it does not contain any new or modified
``information collection burden for small business concerns with fewer
than 25 employees,'' pursuant to the Small Business Paperwork Relief
Act of 2002, Public Law 107-198, see 44 U.S.C. 3506(c)(4).
Summary of the Notice of Proposed Rulemaking
I. Introduction
1. In this Notice of Proposed Rulemaking (NPRM), the Commission
seeks comment on how to implement section 621(a)(1) of the
Communications Act of 1934, as amended (the Communications Act or the
Act). Section 621(a)(1) states in relevant part that ``a franchising
authority * * * may not unreasonably refuse to award an additional
competitive franchise.'' While the Commission has found that,
``[t]oday, almost all consumers have the choice between over-the-air
broadcast television, a cable service, and at least two DBS
providers,'' greater competition in the market for the delivery of
multichannel video programming is one of the primary goals of federal
communications policy. Increased competition can be expected to lead to
lower prices and more choices for consumers and, as marketplace
competition disciplines competitors' behavior, all competing cable
service providers could require less federal regulation. Moreover, for
all competitors in the marketplace, the abilities to offer video to
consumers and to deploy broadband networks rapidly are linked
intrinsically. Specifically, the construction of modern
telecommunications facilities requires substantial capital investment,
and such networks, once completed, are capable of providing not only
voice and data, but video as well. As a consequence, the ability to
offer video offers the promise of an additional revenue stream from
which deployment costs can be recovered. However, potential competitors
seeking to enter the MVPD marketplace have alleged that in many areas
the current operation of the local franchising process serves as a
barrier to entry. Accordingly, this NPRM is designed to solicit comment
on implementation of section 621(a)(1)'s directive that LFAs not
unreasonably refuse to award competitive franchises, and whether the
franchising process
[[Page 73974]]
unreasonably impedes the achievement of the interrelated federal goals
of enhanced cable competition and accelerated broadband deployment and,
if so, how the Commission should act to address that problem.
II. Background
2. The Communications Act provides new entrants four options for
entry into the MVPD market. They can provide video programming to
subscribers via radio communication, a cable system or an open video
system, or they can provide transmission of video programming on a
common carrier basis. Any new entrant opting to offer ``cable service''
as a ``cable operator'' becomes subject to the requirements of Title VI
of the Communications Act (See 47 U.S.C. 542(6); 47 U.S.C. 542(5)).
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 LFAs
the authority to award such franchises. Other provisions of section 621
provide that, in awarding a franchise, an LFA ``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'' (47 U.S.C. 541(a)(3));
``shall allow [a] cable system a reasonable period of time to become
capable of providing cable service to all households in the franchise
area'' (47 U.S.C. 541(a)(4)(A)); and ``may require adequate assurance
that the cable operator will provide adequate public, educational and
governmental access channel capacity, facilities, or financial
support'' (47 U.S.C. 541(a)(4)(B)).
3. 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 both affirm and delineate the role of LFAs in
the franchising process (See, e.g., H.R. Rep. No. 98-934, at 59
(1984)). 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 (See generally Competition, Rate Deregulation and the
Commission's Policies Relating to the Provision of Cable Television
Service, 55 FR 32631, August 10, 1990) (Report). 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.''
4. 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.'' (47 U.S.C. 541(a)(1)). As
the legislative history makes plain, the purpose of this abridgement of
local government authority was 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.
Section 621(a)(1), as revised, established a clear, federal-level
limitation on the authority of LFAs in the franchising process. In that
regard, Congress provided 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 (47 U.S.C. 555).
5. As potential new entrants seek to enter the MVPD marketplace,
there have been indications that in many areas the current operation of
the local franchising process is serving as an unreasonable barrier to
entry. For example, Verizon recently filed comments in the Commission's
annual investigation into the state of video competition arguing that
``[t]he single biggest obstacle to widespread competition in the video
services market is the requirement that a provider obtain an
individually negotiated local franchise in each area where it intends
to provide service.'' In its comments, Verizon contends that the local
franchising process impedes cable competition in the following ways:
(1) It ``forces a new entrant to telegraph its deployment plans to the
incumbent video competitor,'' thereby ``allow[ing] the incumbent not
only to take steps to prolong the franchise process and delay the onset
of competition, but also to entrench its position in the market before
the new entrant has the opportunity to compete;'' (2) it ``simply takes
too long,'' as a result of ``factors such as inertia, arcane or lengthy
application procedures, bureaucracy or, in some cases, inattentiveness
or unresponsiveness at the LFA level;'' (3) it triggers so-called
``level playing field'' laws, ``which require the new entrant to build-
out and serve an entire franchise area on an expedited basis or to
match all of the concessions previously provided by the incumbent in
order for it to gain its original monopoly position in the local area,
despite the vastly different competitive situation facing the new
entrant;'' and (4) it involves ``outrageous demands by some LFAs,''
which ``are in no way related to video services or to the rationales
for requiring franchises.''
6. The efficient operation of the local franchising process is
especially significant with respect to potential new entrants with
existing facilities, for a number of reasons. First, because they seek
to provide video programming to large portions of the country, they
contend that the sheer number of franchises they first must obtain
serves as a competitive roadblock. Verizon, for example, has stated
that it would have to negotiate with more than 10,000 municipalities in
order to offer service throughout its current service area. Second,
because the existing service areas of potential new entrants with
existing facilities do not always coincide perfectly with those covered
by incumbent cable operators' franchises, they argue that build-out
requirements demanded by LFAs create disincentives for them to enter
the marketplace. SBC has told investors that Project Lightspeed, an
``initiative to expand its fiber-optics network deeper into
neighborhoods to deliver SBC U-verseSM TV, voice and high-speed
Internet access services,'' will be deployed to approximately ninety
percent of its ``high-value,'' seventy percent of its ``medium-value,''
and less than five percent of its ``low-value'' customers.
7. According to the National Association of Telecommunications
Officers and Advisors, the National League of Cities, the United States
Conference of Mayors, and the National Association of Counties, local
governments ``want and welcome real communications competition in
video, telephone and broadband services,'' and they ``support a
technology-neutral
[[Page 73975]]
approach that promotes broadband deployment and competitive service
offerings.'' While acknowledging that consumers ``demand real
competition to increase their options and improve the quality of
services,'' local governments argue that franchising ``need not be a
complex or time-consuming process.'' They argue that the current
framework ``[s]afeguards [a]gainst [a]buse and [p]rotects
[c]ompetition.'' Furthermore, local governments maintain that local
franchisors take their fiduciary responsibilities seriously and strive
to ``manage and facilitate in an orderly and timely fashion the use of
[local] property.''
8. Anecdotal evidence suggests that new entrants have been able to
obtain cable franchises. SNET and Ameritech both obtained cable
franchises before being acquired by SBC. BellSouth and Qwest have
obtained franchises, as have many cable overbuilders--RCN has acquired
over 100. Verizon has stated that it ``has obtained nine local cable
franchises for FiOS TV from various local franchising authorities
(LFAs) in California, Florida, Virginia, and Texas'' and ``is
negotiating franchises with more than 200 municipalities.'' According
to a survey of 161 National Telecommunications Cooperative Association
(NTCA) members, ``[f]orty-two percent of survey respondents offer video
service to their customers. Ninety-four percent of those offer video
under a cable franchise, while six percent offer video as an Open Video
System (OVS) * * *.''
9. In addition, there have been recent efforts at the state level
to facilitate entry by competitive cable providers. For example,
legislation was passed in Texas in September 2005 enabling new entrants
in the video programming distribution marketplace to provide service
pursuant to state-issued certificates of franchising authority. Upon
the submission of a completed affidavit by an applicant, Texas
regulators now are required to issue a certificate of franchising
authority within seventeen business days. Similar bills have been
introduced in Virginia and New Jersey although they are yet to be
enacted.
10. With this NPRM, the Commission seeks to determine whether, in
awarding franchises, LFAs are carrying out legitimate policy objectives
allowed by the Communications Act or are hindering the federal
communications policy objectives of increased competition in the
delivery of video programming and accelerated broadband deployment and,
if that is the case, whether and how to remedy the problem.
III. Discussion
11. Potential competitive cable providers have alleged that the
local franchising process serves as a barrier to entry, and that state
and local franchise requirements serve to unreasonably delay
competitive entry. Given the interrelated federal goals of enhanced
cable competition and rapid broadband deployment, below we seek comment
on a number of issues relating to the cable franchising process
generally, and, in particular, the process by which competitive cable
franchises are awarded.
A. Potential Competitors' Current Ability To Obtain Franchises
12. The Commission requests comment on the current environment in
which would-be new entrants attempt to obtain competitive cable
franchises. How many franchising authorities are there nationally? How
many franchises are needed to reach sixty or eighty percent of cable
subscribers? In how many of these franchise areas do new entrants
provide or intend to provide competitive video services? Are cable
systems generally equivalent to franchise areas? To what extent does
the regulatory process involved in obtaining franchises--particularly
multiple franchises covering broad territories, such as those today
served by facilities-based providers of telephone and/or broadband
services--impede the realization of the Commission's policy goals? Are
potential competitors obtaining from LFAs the authority needed to offer
video programming to consumers in a timely manner? What is the impact
of state-wide franchise authority on the ability of the competitive
provider to access the market? Is there evidence that such state-wide
franchises are causing delay? What impact has state-level legislative
or regulatory activity had on the franchising process? Are competitors
taking advantage of new opportunities provided by state legislatures
and regulators? How many competitive franchises have been awarded to
date? How many competitive franchises have potential new entrants
requested to date? How much time, on average, has elapsed between the
date of application and the date of grant, and during that time period,
how much time, on average, was spent in active negotiations? How many
applications have been denied?
13. How many negotiations currently are ongoing? Are the terms
being proffered consistent with the requirements of Title VI? How has
the cable marketplace changed since the passage of the 1992 Cable Act,
and what effect have those changes had on the process of obtaining a
competitive cable franchise? Are current procedures or requirements
appropriate for any cable operator, including existing cable operators?
What problems have cable incumbents encountered with LFAs? Should cable
service requirements vary greatly from jurisdiction to jurisdiction?
Are certain cable service requirements no longer needed in light of
competition in the MVPD marketplace? To what extent are LFAs demanding
concessions that are not relevant to providing cable services?
Commenters arguing that such abuses are occurring are asked to provide
specific examples of such demands. Parties should submit empirical data
on the extent to which LFAs unreasonably refuse to award competitive
franchises. The Commission seeks record evidence of both concrete
examples and broader information that demonstrate the extent to which
any problems exist.
14. The Commission also asks commenters to address the impact that
state laws have on the ability of new entrants to obtain competitive
franchises. Some parties state that so-called ``level-playing-field''
statutes, which typically impose upon new entrants terms and conditions
that are neither ``more favorable'' nor ``less burdensome'' that those
to which existing franchises are subject, create unreasonable
regulatory barriers to entry. Others state that they create
comparability among all providers. The Commission seeks comment on
these issues. The Commission also seeks comment on the impact of state
laws establishing a multi-step franchising process. Do such laws create
unreasonable delays in the franchising process?
B. The Commission's Authority To Adopt Rules Implementing Section
621(a)(1)
15. The Commission tentatively concludes that it has authority to
implement section 621(a)(1)'s directive that LFAs not unreasonably
refuse to award competitive franchises. As an initial matter, the
Commission is charged by Congress with the administration of Title VI,
which, as courts have held, necessarily includes the authority to
interpret and implement section 621. Moreover, the Commission believes
that the 1992 Cable Act's revisions to section 621(a)(1) indicate that
Congress considered the goal of greater cable competition to be
sufficiently important to justify the Commission's adoption of rules.
Under the Supremacy Clause, the enforcement
[[Page 73976]]
of a state law or regulation may be preempted by federal law when it
stands as an obstacle to the accomplishment and execution of the full
purposes and objectives of Congress. The Supreme Court has held that
federal regulations properly adopted in accordance with an agency's
statutory authorization have no less preemptive effect than federal
statutes and, applying this principle, the Court has approved the
preemptive authority that the Commission has asserted over the
regulation of cable television systems. In addition, section 636(c) of
the Act states 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 [the Communications] Act shall be deemed to be
preempted and superseded.'' Thus, the Commission tentatively concludes
that, pursuant to the authority granted under sections 621(a) and
636(c) of the Act, and under the Supremacy Clause, the Commission may
deem to be preempted and superceded any law or regulation of a State or
LFA that causes an unreasonable refusal to award a competitive
franchise in contravention of section 621(a). At the same time,
however, the Commission recognize that section 636(a) states that
``[n]othing in this title 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.''
Finally, the Commission notes that it is empowered by section 1 of the
Act ``to execute and enforce the provisions of this Act'' and by
section 4(i) ``to perform any and all acts, make such rules and
regulations, and issue such orders, not inconsistent with this Act, as
may be necessary in the execution of its functions.'' The Commission
seeks input from commenters on the tentative conclusion that the
Commission is authorized to implement section 621(a)(1) as amended. The
Commission also seeks comment on the manner in which the Commission
should proceed. Do the Commission have the authority to adopt rules or
is it limited to providing guidance?
16. The first sentence of section 621(a)(1) states that a
franchising authority may award ``1 or more franchises'' and may not
unreasonably refuse to award ``an additional competitive franchise.''
The Commission tentatively concludes that section 621(a)(1) empowers it
to ensure that the local franchising process does not unreasonably
interfere with the ability of any potential new entrant to provide
video programming to consumers. The Commission seeks comment on this
tentative conclusion.
17. Section 621(a)(1) states in relevant part 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 for failure to
comply with this subsection.'' Section 635, in turn, sets forth the
specific procedures for such judicial proceedings. Apart from those
remedies available to aggrieved cable operators under section 635, the
Commission tentatively concludes that section 621(a)(1) authorizes the
Commission to take actions, consistent with section 636(a), to ensure
that the local franchising process does not undermine the well-
established policy goal of increased MVPD competition and, in
particular, greater cable competition within a given franchise
territory. The Commission seeks comment on this tentative conclusion as
well. How might the Commission best assure that the local franchising
process is not inhibiting the ability of incumbent cable operators to
invest in broadband services?
18. Finally, the Commission seeks comment on possible sources of
Commission authority, other than section 621(a)(1), to address problems
caused by the local franchising process. For example, given the
relationship between the ability to offer video programming and the
willingness to invest in broadband facilities identified above, could
the Commission take action to address franchise-related concerns
pursuant to section 706?
C. Steps the Commission Should Take To Ensure That the Local
Franchising Process Does Not Unreasonably Interfere With Competitive
Cable Entry and Rapid Broadband Deployment
19. The Commission seeks comment on how to should define what
constitutes an unreasonable refusal to award an additional competitive
franchise under section 621(a)(1). While that section refers to the
``unreasonable refus[al] to award an additional competitive
franchise,'' the Commission tentatively concludes 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, either by (1) creating unreasonable delays in the process,
or (2) imposing unreasonable regulatory roadblocks, such that they
effectively constitute a de facto ``unreasonable refusal to award an
additional competitive franchise'' within the meaning of section
621(a)(1). The Commission tentatively finds that this interpretation is
consistent with the language in the statute and appropriate because it
captures more appropriately the range of behavior that would constitute
an ``unreasonable refusal to award an additional competitive
franchise.'' The Commission seeks comment on this tentative conclusion.
20. Further, the Commission tentatively concludes that it is not
unreasonable for an LFA, in awarding a franchise, to ``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;'' ``allow [a] cable system
a reasonable period of time to become capable of providing cable
service to all households in the franchise area;'' and ``require
adequate assurance that the cable operator will provide adequate
public, educational and governmental access channel capacity,
facilities, or financial support.'' These powers and limitations on
franchising authorities promote important public policy goals.
21. The Commission solicits comment on what, if any, specific
rules, guidance or best practices should be adopted to ensure that the
local cable franchising process does not unreasonably impede
competitive cable entry. What would the appropriate remedy or remedies
be for violations of such rules, guidance or best practices? Should the
Commission establish specific rules to which LFAs must adhere or
specific guidelines for LFAs? For example, should the Commission
address maximum timeframes for considering an application for a
competitive franchise? Are there certain practices that should be found
unreasonable through rules or guidelines? If so, what are these
practices?
22. In addition, it is not clear how the primary justification for
a cable franchise--i.e., the locality's need to regulate and receive
compensation for the use of public rights of way--applies to entities
that already have franchises that authorize their use of those rights
of way. Does section 621(a)(1) provide the Commission with the
authority to establish different--specifically, higher--standards for
``reasonableness'' with respect to such entities? In that context, the
Commission seeks comment on whether section 621(a)(1) permits the
imposition of greater restrictions on the
[[Page 73977]]
authority of LFAs with respect to those entities (e.g., facilities-
based providers of telephone and/or broadband services) that already
have permission to access public rights of way.
23. The Commission also seeks comment on whether build-out
requirements are creating unreasonable barriers to entry for
facilities-based providers of telephone and/or broadband services. The
areas served by such entities frequently do not coincide perfectly with
the areas under the jurisdiction of the relevant LFAs. Section
621(a)(4)(A) states that, ``[i]n awarding a franchise, the franchising
authority shall allow the applicant's cable system a reasonable period
of time to become capable of providing cable service to all households
in the franchise area.'' (For purposes of this discussion, there is a
distinction between (1) requirements that may function as barriers to
competitive entry for providers of telephone and/or broadband services
with existing facilities, and (2) prohibitions against discriminatory
deployment of cable services based upon economic considerations.) The
Commission seeks comment on the FCC's authority in this area. Given the
language of section 621(a)(4)(A), does the Commission have authority
under section 621(a)(1) to direct LFAs to allow such new entrants a
specific, minimum amount of time to expand their networks beyond their
current footprints? If so, and in light of the fact that a new entrant
generally faces competition from at least one incumbent cable operator
and two direct broadcast satellite (``DBS'') providers, what would
constitute a reasonable amount of time to do so?
24. Finally, section 602 of the Act defines ``franchising
authority'' as ``any governmental entity empowered by Federal, State,
or local law to grant a franchise.'' In some cases it may be the state
itself, rather than the LFA, that has taken steps which unreasonably
interfere with new entrants' ability to obtain a competitive franchise.
Commenters should address whether it may be appropriate to preempt such
state-level legislation to the extent that the Commission finds it
serves as an unreasonable barrier to the grant of competitive
franchises.
IV. Procedural Matters
A. Initial Regulatory Flexibility Analysis
25. As required by the Regulatory Flexibility Act of 1980, as
amended (the RFA), the Commission has prepared this Initial Regulatory
Flexibility Analysis (IRFA) of the possible significant economic impact
of the policies and rules proposed in this NPRM on a substantial number
of small entities. Written public comments are requested on this IRFA.
Comments must be identified as responses to the IRFA and must be filed
by the deadlines for comments on the NPRM provided in paragraph 28 of
the item. The Commission will send a copy of the NPRM, including this
IRFA, to the Chief Counsel for Advocacy of the Small Business
Administration (SBA) (See 5 U.S.C. 603(a)).
a. Need for, and Objectives of, the Proposed Rules
26. The NPRM initiates a process to implement section 621(a)(1) of
the Communications Act in order to further the interrelated goals of
enhanced cable competition and accelerated broadband deployment.
Specifically, the NPRM solicits comment on how to best ensure that
LFAs, which are the governmental entities responsible for regulating
cable providers at the local level, do not ``unreasonably refuse to
award * * * additional competitive franchise[s].'' The NPRM also seeks
comment on the specific approach the Commission should take in order to
implement section 621(a)(1). Specifically, it asks whether the
Commission should establish (1) specific guidelines and/or model terms
for competitive cable franchises, or (2) general principles that are
designed to provide LFAs with the guidance necessary to ensure that
competitive franchises are awarded in a timely fashion.
b. Legal Basis
27. The NPRM tentatively concludes that the Commission has
authority to implement section 621(a)(1)'s mandate that LFAs do not
``unreasonably refuse to award * * * additional competitive
franchises.'' The item notes that the Commission is empowered by
section 1 of the Communications Act ``to execute and enforce [its]
provisions'' and by section 4(i) ``to perform any and all acts, make
such rules and regulations, and issue such orders, not inconsistent
with this Act, as may be necessary in the execution of its functions.''
Finally, the NPRM finds that section 636(c) makes plain 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 superceded.'' The NPRM is adopted pursuant
to sections 1, 4(i), 621(a)(1), and 636(c) of the Communications Act of
1934, as amended.
c. Description and Estimate of the Number of Small Entities to Which
the Proposed Rules Will Apply
28. The RFA directs agencies to provide a description of, and where
feasible, an estimate of the number of small entities that may be
affected by the proposed rules, if adopted. The RFA generally defines
the term ``small entity'' as having the same meaning as the terms
``small business,'' ``small organization,'' and ``small governmental
jurisdiction.'' In addition, the term ``small business'' has 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).
29. Small Businesses. Nationwide, there are a total of
approximately 22.4 million small businesses, according to SBA data.
30. Small Organizations. Nationwide, there are approximately 1.6
million small organizations.
31. The Commission has determined that the group of small entities
possibly directly affected by the proposed rules herein, if adopted,
consists of small governmental entities (which, in some cases, may be
represented in the local franchising process by not-for-profit
enterprises). A description of these entities is provided below. In
addition the Commission voluntarily provides descriptions of a number
of entities that may be merely indirectly affected by any rules that
result from the NPRM.
1. Small Governmental Jurisdictions
32. The term ``small governmental jurisdiction'' is defined as
``governments of cities, towns, townships, villages, school districts,
or special districts, with a population of less than fifty thousand.''
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.
2. Miscellaneous Entities
33. The entities described in this section are affected merely
indirectly by the NPRM, and therefore are not formally a part of this
RFA analysis. They are included, however, to broaden
[[Page 73978]]
the record in this proceeding and to alert them to the Commission's
tentative conclusions.
aa. Cable Operators
34. The ``Cable and Other Program Distribution'' census category
includes cable systems operators, closed circuit television services,
direct broadcast satellite services, multipoint distribution systems,
satellite master antenna systems, and subscription television services.
The SBA has developed small business size standard for this census
category, which includes all such companies generating $12.5 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.
35. Cable System Operators (Rate Regulation Standard). The
Commission has developed its own small-business-size standard for cable
system operators, for purposes of rate regulation. Under the
Commission's rules, a ``small cable company'' is one serving fewer than
400,000 subscribers nationwide. 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.
36. 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.
37. 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 $12.5 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.
bb. Telecommunications Service Entities
38. 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.
39. 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 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.
40. 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.
d. Description of Projected Reporting, Recordkeeping and Other
Compliance Requirements
41. The Commission anticipates that any rules implementing section
621(a)(1) that result from this action would have at most a de minimis
impact
[[Page 73979]]
on small governmental jurisdictions (e.g., one-time proceedings to
amend existing procedures regarding the method of granting competitive
franchises). LFAs today must review and decide upon competitive cable
franchise applications, and will continue to perform that role upon the
conclusion of this proceeding; any rules that might be adopted pursuant
to this NPRM likely would require at most only modifications to that
process.
e. Steps Taken To Minimize Significant Economic Impact on Small
Entities and Significant Alternatives Considered
42. The RFA requires an agency to describe any significant,
specifically small business, alternatives that it has considered in
reaching its proposed approach, which may include the following four
alternatives (among others): ``(1) The establishment of differing
compliance or reporting requirements or timetables that take into
account the resources available to small entities; (2) the
clarification, consolidation, or simplification of compliance and
reporting requirements under the rule for such small entities; (3) the
use of performance rather than design standards; and (4) an exemption
from coverage of the rule, or any part thereof, for such small
entities.''
43. As discussed in the NPRM, section 621(a)(1) states that LFAs
must not unreasonably refuse to award competitive franchises. Should
the Commission conclude ultimately that the procedures by which LFAs
currently award competitive franchises conflict with the mandate of
section 621(a)(1), it may adopt rules designed to ensure that the local
franchising process does not create unreasonable barriers to
competitive entry. Such rules may consist of specific guidelines (e.g.,
maximum timeframes for considering a competitive franchise application)
or general principles designed to provide LFAs with the guidance
necessary to conform their behavior to the directive of section
621(a)(1). As noted above, these rules likely would have at most a de
minimis impact on small governmental jurisdictions. Even if that were
not the case, however, the interrelated, high-priority federal
communications policy goals of enhanced cable competition and
accelerated broadband deployment would necessitate the establishment of
specific guidelines and/or general principles for LFAs with respect to
the process by which they grant competitive cable franchises. The
alternative (i.e., continuing to allow LFAs to follow procedures that
do not ensure that competitive cable franchises are not unreasonably
refused) would be unacceptable, as it would be flatly inconsistent with
section 621(a)(1). The Commission seeks comment on the impact that such
rules might have on small entities, and on what effect alternative
rules would have on those entities. The Commission also invites comment
on ways in which the Commission might implement section 621(a)(1) while
at the same time impose lesser burdens on small entities.
f. Federal Rules That May Duplicate, Overlap, or Conflict With the
Proposed Rules
44. None.
B. Initial Paperwork Reduction Act of 1995 Analysis
45. This document does not contain proposed information
collection(s) subject to the Paperwork Reduction Act of 1995 (PRA),
Public Law 104-13. In addition, therefore, it does not contain any new
or modified ``information collection burden for small business concerns
with fewer than 25 employees,'' pursuant to the Small Business
Paperwork Relief Act of 2002, Public Law 107-198, see 44 U.S.C.
3506(c)(4).
C. Ex Parte Rules
46. Permit-But-Disclose. This proceeding will be treated as a
``permit-but-disclose'' proceeding subject to the ``permit-but-
disclose'' requirements under Sec. 1.1206(b) of the Commission's
rules. Ex parte presentations are permissible if disclosed in
accordance with Commission rules, except during the Sunshine Agenda
period when presentations, ex parte or otherwise, are generally
prohibited. Persons making oral ex parte presentations are reminded
that a memorandum summarizing a presentation must contain a summary of
the substance of the presentation and not merely a listing of the
subjects discussed. More than a one-or two-sentence description of the
views and arguments presented is generally required. Additional rules
pertaining to oral and written presentations are set forth in Sec.
1.1206(b).
D. Filing Requirements
47. Comments and Replies. Pursuant to Sec. Sec. 1.415 and 1.419 of
the Commission's rules, interested parties may file comments on or
before the dates indicated on the first page of this document. Comments
may be filed using: (1) The Commission's Electronic Comment Filing
System (ECFS), (2) the Federal Government's eRulemaking Portal, or (3)
by filing paper copies.
48. Electronic Filers: Comments may be filed electronically using
the Internet by accessing the ECFS: http://www.fcc.gov/cgb/ecfs/ or the Federal eRulemaking Portal: http://www.regulations.gov. Filers should
follow the instructions provided on the Web site for submitting
comments. For ECFS filers, if multiple docket or rulemaking numbers
appear in the caption of this proceeding, filers must transmit one
electronic copy of the comments for each docket or rulemaking number
referenced in the caption. In completing the transmittal screen, filers
should include their full name, U.S. Postal Service mailing address,
and the applicable docket or rulemaking number. Parties may also submit
an electronic comment by Internet e-mail. To get filing instructions,
filers should send an e-mail to ecfs@fcc.gov, and include the following
words in the body of the message, ``get form.'' A sample form and
directions will be sent in response.
49. Paper Filers: Parties who choose to file by paper must file an
original and four copies of each filing. If more than one docket or
rulemaking number appears in the caption of this proceeding, filers
must submit two additional copies for each additional docket or
rulemaking number. Filings can be sent by hand or messenger delivery,
by commercial overnight courier, or by first-class or overnight U.S.
Postal Service mail (although we continue to experience delays in
receiving U.S. Postal Service mail). All filings must be addressed to
the Commission's Secretary, Office of the Secretary, Federal
Communications Commission.
The Commission's contractor will receive hand-delivered or
messenger-delivered paper filings for the Commission's Secretary at 236
Massachusetts Avenue, NE., Suite 110, Washington, DC 20002. The filing
hours at this location are 8 a.m. to 7 p.m. All hand deliveries must be
held together with rubber bands or fasteners. Any envelopes must be
disposed of before entering the building.
Commercial overnight mail (other than U.S. Postal Service
Express Mail and Priority Mail) must be sent to 9300 East Hampton
Drive, Capitol Heights, MD 20743.
U.S. Postal Service first-class, Express, and Priority
mail should be addressed to 445 12th Street, SW., Washington, DC 20554.
[[Page 73980]]
Federal Communications Commission.
Marlene H. Dortch,
Secretary.
[FR Doc. 05-24029 Filed 12-13-05; 8:45 am]
BILLING CODE 6712-01-P