The Future of Franchising:
Federal Challenges to Local
Authority
IMLA 2008 Annual Conference
Las Vegas, Nevada
September 14, 2008
by Joseph Van Eaton
Partner, Miller & Van Eaton P.L.L.C.
1155 Connecticut Ave NW Ste 1000
Washington, D.C. 20036
Miller & Van Eaton P.L.L.C
Washington, D.C. • San Francisco, CA.
Summary of Presentation
 How FCC has asserted authority over
cable franchising
 Impact in states with state franchise laws
 Impact in states with local franchising
 How FCC action is leading to challenges
to local zoning authority
 CTIA petition to limit local authority over cell
towers
 How uncertainties in federal law create
new franchising challenges
September 14, 2008 Page 2
Miller & Van Eaton P.L.L.C
The Status of Local Franchising
September 14, 2008 Page 3
Miller & Van Eaton P.L.L.C
FCC Proceedings
 FIRST FRANCHISING ORDER In re
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, First
Report and Order and Further Notice of
Proposed Rulemaking 22 FCC Rcd. 5101 (2007)
 Applies to new entrants and to local (not state)
franchising
 STATUS: Aff’d by 6th Cir, 529 F.3d 763 (2008) –
petition for rehearing/rehearing en banc pending
September 14, 2008 Page 4
Miller & Van Eaton P.L.L.C
FCC Proceedings
 SECOND FRANCHISING ORDER In the Matter
of 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, Second
Report and Order 22 FCC Rcd 19633 (2007)
 Extends some aspects of First Order to
incumbents; may affect state franchising laws
 STATUS: Petition for reconsideration pending at
FCC; appeal pending at 6th Circuit
September 14, 2008 Page 5
Miller & Van Eaton P.L.L.C
What Led To FCC Orders
 New entrants claimed local franchising
authorities were delaying competitive entry
 Asked FCC to interpret and apply Section
621(a)(1) of Cable Act, 47 USC 541(a)(1):
“a franchising authority may not...unreasonably
refuse to award an additional competitive
franchise. Any applicant whose application…
has been denied by a final decision of the
franchising authority may appeal such final
decision” to the courts.
September 14, 2008 Page 6
Miller & Van Eaton P.L.L.C
Major issues in rulemaking/appeal
 Did FCC have the authority to issue rules
governing how the franchising process
was conducted?
 If so, how far could it go in directing
localities to issue franchises?
 Were proposed rules arbitrary and
capricious, or justified by record?
September 14, 2008 Page 7
Miller & Van Eaton P.L.L.C
First FCC Order
 FCC found localities were delaying
competitive entry
 FCC found it was a “super franchising
authority” and could define what were
unreasonable grounds for denying a
franchise application
 FCC found it could devise remedies to
force local action
September 14, 2008 Page 8
Miller & Van Eaton P.L.L.C
First Order: Specific Rules
 Federal Deadlines: localities must take final
action on a complete franchise application:
 within 90 days for entity in rights of way (e.g., a
telephone company)
 within 180 days for others
 Franchise DEEMED GRANTED on TERMS
PROPOSED BY APPLICANT if deadline missed,
until locality acts
 All local charter and ordinance requirements
preempted if those prevent locality from meeting
deadline.
September 14, 2008 Page 9
Miller & Van Eaton P.L.L.C
Specific Rulings, Cont’d
 BUILD-OUT
 Cannot establish “unreasonable” build-out
mandates.
 Generally build-out based on standards that
applied to incumbent.
 Some build-out requirements are reasonable
including requirements that take into account
penetration or economic success.
 Does not directly prevent universal build-out
as long as entrant is provided enough time.
September 14, 2008 Page 10
Miller & Van Eaton P.L.L.C
Specific Rulings, Cont’d
 FRANCHISE FEES [5% Limit]
 Cable Act franchise fee base limited to cable service
related revenues; but there can be fees on other
services as permitted under state law
 Franchising/transfer legal and consultant costs
recovered from franchisee count against 5% limit.
 In-kind payments unrelated to cable service count
against 5% limit.
 Generally, operating support for PEG access counts
against limit – but order unclear as to what PEG
payments are not counted against the fee.
September 14, 2008 Page 11
Miller & Van Eaton P.L.L.C
Specific Rulings, Cont’d
 FRANCHISE FEES - PEG
 Cable Act says localities may require cable operators
to pay capital costs for PEG facilities in addition to
franchise fee; and defines PEG facilities to include
channels, equipment and facilities.
 FCC Order says costs associated with construction of
“facilities” do not count against franchise fee.
 Localities claimed FCC erred in excluding equipment;
on brief FCC said equipment costs did not necessarily
count against franchise fee.
 Court of Appeals assumed FCC clarification
eliminated dispute.
 Likely to lead to confusion
September 14, 2008 Page 12
Miller & Van Eaton P.L.L.C
Specific Rulings, Cont’d
 PEG and INET Obligations
 Can require “adequate” support
 No more burdensome requirements than are
imposed on incumbent; pro rata cost sharing
is reasonable, but not required.
 No unnecessary duplicative facilities
 FCC expects localities to require new entrant
to increase support if incumbent requirements
increase
September 14, 2008 Page 13
Miller & Van Eaton P.L.L.C
Specific Rulings, Cont’d
 Regulation of Mixed Use Networks
 Cannot use authority over cable to regulate other
services on networks that provide multiple services.
Unclear: what does this mean for regulation of
network itself?
 Level Playing Field Clauses Preempted: “refusal
to award [franchise]…unless…competitive
applicant meets substantially all the
terms…imposed on the incumbent cable
operator may be unreasonable”
September 14, 2008 Page 14
Miller & Van Eaton P.L.L.C
Second Report and Order
 FCC considered whether First Report and
Order should be extended to incumbents
 The following were not applied:
 Deadlines for action
 Build-out requirements (can demand more of
incumbent)
 PEG and INET provisions (except franchisefee related findings)
September 14, 2008 Page 15
Miller & Van Eaton P.L.L.C
Second Report and Order
 The following First Order rulings were
applied to incumbents:
 Franchise fees
 Mixed use networks
 Incumbent may not unilaterally apply rules
to existing franchises [but some are]
 Incumbent may be able to enforce level
playing field provisions against locality
September 14, 2008 Page 16
Miller & Van Eaton P.L.L.C
Second Report and Order
 Open question: does second order apply
to state franchising schemes
 Several state laws allow PEG funds to be
used for operating support unless federal law
prohibits it;
 Some state laws were based on the
assumption that such support was lawful
 Issue before FCC on recon. petitions
September 14, 2008 Page 17
Miller & Van Eaton P.L.L.C
Impact of FCC Orders
 IMMEDIATE IMPACTS
 complicates local franchising
 may undercut basic structure of state schemes
 LONG TERM IMPACTS
 Represents a significant assertion of FCC authority
over local procedures and local governing bodies
 Broadly finds FCC authority to control local property –
although Cable Act intended to protect local authority
September 14, 2008 Page 18
Miller & Van Eaton P.L.L.C
First Shoe Dropping: Tower Siting
 47 USC 332(c)(7) specifically designed to
protect local zoning authority
 Provides standards for decisions, and makes
zoning decisions subject to court review
 Wireless trade association (CTIA) has asked
FCC to set national zoning deadlines/standards f
 Based on Sixth Circuit decision affirming First
Franchising Order
September 14, 2008 Page 19
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The CTIA Petition
 Asserts localities are unreasonably
delaying deployment of wireless towers
 Asks FCC to establish national deadlines
for action on zoning applications
 45 days for collocation
 75 days for any other application
 Deadlines do not depend on size, location
(residential v. industrial) number of towers,
or complexity of safety/siting issues
September 14, 2008 Page 20
Miller & Van Eaton P.L.L.C
The CTIA Petition
 If deadlines missed, FCC should deem
application for tower granted.
 Asks FCC to rule that locality violates the
law if its actions would prohibit an
individual provider from offering service to
any location (translation: an application
would have to be granted if necessary to
reach one room in one building, regardless
of availability of alternative services)
September 14, 2008 Page 21
Miller & Van Eaton P.L.L.C
The CTIA Petition
 Asks FCC to preempt all local ordinances
and regulations that effectively require a
variance in most circumstances.
Examples:
 an ordinance that limits heights to levels that
would require more antennas
 significant setback requirements that
practically limit the ability to construct
antennas
September 14, 2008 Page 22
Miller & Van Eaton P.L.L.C
The CTIA Petition
 STATUS: now underway, WT Docket No.
08-165
 Initial comments due September 29, 2008
 Reply comments due October 14, 2008
 This is a very serious petition and will
require filings plus efforts at Congress and
FCC to protect local authority
September 14, 2008 Page 23
Miller & Van Eaton P.L.L.C
Franchising Future – Basic Local
Rights At Issue
 Franchising was first and foremost a
means of protecting local authority over
property
 Federal and State actions are chipping away
at that authority
 Effect is to limit ability to secure basic
protections for citizens
September 14, 2008 Page 24
Miller & Van Eaton P.L.L.C
…New Challenges Are Coming
 “Infrastructure providers” are
 entering into contracts with developers to obtain
easements over property that will become RoW
 contracts are designed to prevent local governments
from exercising franchising authority or obtaining
franchise fees
 contracts are intended to require homeowners to buy
services from providers selected by owner of
infrastructure
 What Should A Locality Do?
September 14, 2008 Page 25
Miller & Van Eaton P.L.L.C