Commission Affirms Limits on Local Cable Franchise Regulation

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The FCC has re-affirmed its earlier decisions limiting the reach of local cable franchise regulation as applied to both incumbent and competitive cable systems.  In 2007, the FCC issued two orders to implement Section 621(a)(1) of the Communications Act which prohibits local franchising authorities (LFAs) from unreasonably refusing to award competitive franchises for the provision of cable services.  The first order prohibited LFAs from, among other things, conditioning the award of a competitive franchise on: the cable operator’s agreement to provide in-kind payments in excess of the statutory five percent franchise fee limit; the imposition of unreasonable buildout requirements; an agreement to undertake certain obligations to financially support public, governmental and educational (PEG) access programming; or requirements to provide non-cable services (such as Internet or VoIP phone services).  In the second order, the Commission determined that the prior findings involving franchise fees, PEG obligations, and non-cable related services and facilities relied on statutory provisions that did not distinguish between incumbents and new entrants, and therefore should be applicable to incumbent operators as well.   The Commission also determined that most favored nation (MFN) clauses, by design, would provide some incumbent franchisees the option and ability to adjust their existing obligations if and when a competing provider obtains more favorable franchise provisions.  In affirming these earlier decisions on reconsideration, the Commission did clarify that its earlier orders do not apply to state awarded franchises or to the actions of local franchising authorities acting in accordance with a clearly articulated state law or policy.

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