HomeMy WebLinkAbout2018-11-13 BOS Packet - Released
November 5, 2018
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PRESENT
ARTICLE POSITIONS
2018 SPECIAL TOWN MEETING -1
SPECIAL TOWN MEETING 2018-1Reports of Town Boards, Officers, CommitteesAmend Zoning Bylaw – Medical and Recreational MarijuanaAppropriate for Center Streetscape DesignTransfer of Property
to LexHAB - 18 RangewayAppropriate for Hosmer House Reuse StudyAmend FY2019 Operating, Enterprise and CPA BudgetsAppropriate for Prior Years’ Unpaid BillsEstablish and Appropriate To
and From Specified Stabilization Fundsa. Capital Stabilization Fundb. Transportation Demand Management/Public Transportation Stabilization Fundc. Transportation Management Overlay District
Stabilization Fundd. Ambullance Stabilization FundPetition for Change of Zoning District and Zoning Map 7 Hartwell Ave.Amend Zoning Bylaw – 55 & 56 Watertown Street (Owner Petition)
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ARTICLE
TOWN WARRANT
Town of Lexington
Special Town Meeting 2018-1
Commonwealth of MassachusettsMiddlesex, ss.
To any of the Constables of the Town of Lexington Greetings:
In the name of the Commonwealth of Massachusetts, you are hereby directed to notify the inhabitants of the Town of
Lexington qualified to vote in elections and in Town affairs to meet in the Margery Milne Battin Hall in Cary Memorial
Building, 1605 Massachusetts Avenue, in said Town on Tuesday, November 13, 2018 at 7:30 p.m., at which time and
place the following articles are to be acted upon and determined exclusively by the Town Meeting Members in
accordance withChapter 215 of the Acts of 1929, as amended, and subject to the referendum provided for by Section
eight of said Chapter, as amended.
ARTICLE 1REPORTS OF TOWN BOARDS, OFFICERS AND COMMITTEES
To receive the reports of any Board or Town Officer or of any Committee of the Town; or act in any
other manner in relation thereto.
(Inserted by the Board of Selectmen)
DESCRIPTION: This Article remains open throughout Town Meeting and reports may be presented at
any Town Meeting session by boards, officers, or committees.
ARTICLE 2AMEND ZONING BYLAW –MEDICAL AND RECREATIONAL
MARIJUANA
To see if the Town will vote to amend the Zoning Bylaws to repeal Section 135-3.1.7, “Marijuana
Establishment Temporary Moratorium,” and update the regulation of marijuana to reflect changes in
State law and the Town’s General Bylaw prohibiting marijuana establishments; or act in any other
manner in relation thereto.
(Inserted by the Board of Selectmen at the request of the Planning Board)
DESCRIPTION: This article would update the provisions of the zoning bylaw to be consistent with
current Massachusetts law and regulations and to reflect the Town’s prohibition of Recreational
Marijuana Facilities in the General Bylaw, §97-5.
ARTICLE 3APPROPRIATE FOR CENTER STREETSCAPE DESIGN
To see if the Town will vote to raise and appropriate a sum of money to pay costs of design,
engineering and architectural services for the Center Streetscape, and all other costs necessary or
incidental thereto; determine whether the money shall be provided by the tax levy, by transfer from
available funds, by borrowing or by any combination of these methods; or act in any other manner in
relation thereto.
(Inserted by the Board of Selectmen)
FUNDS REQUESTED: $650,000
These funds will complete the design work on the Center Streetscape design.
DESCRIPTION:
1
ARTICLE 4TRANSFER OF PROPERTY TO LEXHAB
To see if the Town will vote to authorize the Board of Selectmen to transfer the custody and control of
the land known as 18 Rangeway Rd, further shown as Lot 64 of Assessors Map 90 to the Lexington
Housing Assistance Board, Inc. (“LexHab”), and the improvements thereon, on such terms and
conditions that the Board may determine, or act in any other manner in relation thereto.
(Inserted by the Board of Selectmen)
DESCRIPTION: The property in this article is owned by the Town of Lexington. It was re-zoned from
RO to RD by Article 5 of the 2004 Annual Town Meeting to allow LexHab to develop a 2-family
dwelling which LexHab didconstruct, and which is now occupied. This article will authorize the
transfer of ownership of the land to LexHab.
ARTICLE 5APPROPRIATE FOR HOSMER HOUSE REUSE STUDY
To see if the Town will vote to raise and appropriatea sum of money to fundthe Hosmer House
Building Feasibility Study; determine whether the money shall be provided by the tax levy, by transfer
from available funds, by borrowing, or by any combination of these methods; or act in any other
manner in relation thereto.
(Inserted by the Board of Selectmen)
FUNDS REQUESTED: unknown at press time.
DESCRIPTION: In light of the police station design project being approved in 2017, the Hosmer
House will need to be relocated in order for construction of a new police station to move forward.This
study will best determine the location (current or off-site) for the Hosmer House, cost to move the
building and proposed use of the building.
ARTICLE 6AMEND FY2019 OPERATING, ENTERPRISE AND CPA BUDGETS
To see if the Town will vote to make supplementary appropriations, to be used in conjunction with
money appropriated under Articles 4, 5, and 10 of the warrant for the 2018 Annual Town Meeting, to
be used during the current fiscal year, or make any other adjustments to the current fiscal year budgets
and appropriations that may be necessary; to determine whether the money shall be provided by the tax
levy, transfer from available funds, including the Community Preservation Fund, or any combination
of these methods; or act in any other manner in relation thereto.
(Inserted by the Board of Selectmen)
FUNDS REQUESTED: unknown at press time
DESCRIPTION: This article allows for adjustments to the current fiscal year (FY2019) appropriations,
as approved at the 2018 Annual Town Meeting.
ARTICLE 7APPROPRIATE FOR PRIOR YEARS’ UNPAID BILLS
To see if the Town will vote to raise and appropriate money to pay any unpaid bills rendered to the
Town for prior years; to determine whether the money shall be provided bythe tax levy, by transfer
from available funds, or by any combination of these methods; or act in any other manner in relation
thereto.
2
(Inserted by the Board of Selectmen)
FUNDS REQUESTED: Unknown at press time
DESCRIPTION: This is an annual articleto request funds to pay bills after the close of the fiscal year
in which the goods were received or the services performed and for which no money was encumbered.
ARTICLE 8ESTABLISH AND APPROPRIATE TO AND FROM SPECIFIED STABILIZATION
FUNDS
To see if the Town will vote to create, amend, rename and/or appropriate sums of money to and from
Stabilization Funds in accordance with Section 5B of Chapter 40 of the Massachusetts General Laws
for the purposes of: (a) Section 135 Zoning By-Law, (b) Traffic Mitigation, (c) Transportation
Demand Management/Public Transportation, (d) Special Education, (e) Center Improvement District,
(f) Debt Service, (g) Transportation Management Overlay District, (h) Capital, (i) Payment in Lieu of
Parking, (j) Visitor Center Capital Stabilization Fund, (k) Affordable Housing Capital Stabilization
Fund, (l) Water System Capital Stabilization Fund, and (m) Ambulance Stabilization Fund; determine
whether the money shall be provided by the tax levy, by transfer from available funds,from fees,
charges or gifts, or by any combination of these methods; and further, to accept paragraph four of
Section 5B of Chapter 40 of the Massachusetts General Laws, dedicating certain fees, charges, gifts or
receipts to a stabilization fund; or act in any other manner in relation thereto.
(Inserted by the Board of Selectmen)
FUNDS REQUESTED: Unknown at press time.
DESCRIPTION: This Article proposes to establish, and/or fund Stabilization Funds for specific
purposes and to appropriate funds therefrom. Money in those funds may be invested and the interest
may then become a part of the particular fund. These funds may later be appropriated for the specific
designated purpose, by a two-thirds vote of an Annual or Special Town Meeting, for any lawful
purpose.
ARTICLE 9PETITION FOR CHANGE OF ZONING DISTRICT AND ZONINGMAP
To see if the Town will vote to amend the Zoning Bylaw andMap to convert the current CD-1District
to the CSX District, said District currently consisting of Town of Lexington Assessors’ Map 84, Lot 81
located at 7 Hartwell Avenue and as shown on a GIS plan obtained from the Town of Lexington real
property database on file with the Lexington Town Clerk.
(Inserted by 7 Hartwell, LLC)
DESCRIPTION: The article requests an amendment to the Zoning Bylaw and Map in order to allow
additional uses at the site. The location of the property is shown on a GIS plan obtained from the Town
of Lexington real property database, and on file with the Lexington Town Clerk and the Lexington
Planning office. The current CD-1 District was adopted with limited and narrow use provisions which
limits the opportunity of the property to integrate uses that are responsive to the current needs of the
community and marketplace and prohibits the Applicant’s principal use –a school not exempt by
statute.
ARTICLE 10AMEND ZONING BYLAW –55 & 56 Watertown Street (Owner Petition)
To see if the Town will vote to amend the Zoning Map and Bylaw of the Town to create Planned
Development District PD-3, based on the information provided in the applicant's Preliminary Site
3
Development and Use Plan (“PSDUP”) for the property commonly known as Town Assessors'
Map 3, Lot 2A and Map 1, Lot 2A, addressed as 55 and 56 Watertown Street; or to act in any
other manner relative thereto.
(Inserted by Ted Tye, authorized signatory of ND Acquisitions LLC with the consent of the
property owner, Belmont Country Club)
DESCRIPTIONThe article requests rezoning and approval of a Preliminary Site Development and
Use Plan for an approximately 17.70+/-acre property identified in the Article. The property is shown
on the plans entitled: “PROPOSED REZONING OF LAND TO THE PLANNED DEVELOPMENT
DISTRICT (PD-3)” dated September 28, 2018, prepared by Control Point Associates, Inc. and on a
plan entitled: “Locus Plan –Belmont Country Club” stamped on June 8, 2018 prepared by Control
Point Associates, which are both on file with the Town Clerkand the Planning Office.
And you are directed to serve this warrant not less than fourteen days at least before the time of said meeting, as provided
in the Bylaws of the Town.
Hereof fail not and make due return of this warrant, with your doings thereon, to the Town Clerk, on or before the time of
said meeting.
th
Given under our hands this 15day of October, 2018.
Suzanne E.Barry,ChairmanSelectmen
Joseph N. Pato
of
MichelleL.Ciccolo
Douglas M. LucenteLexington
A true copy, Attest:
Constable of Lexington
4
Federal Communications CommissionFCC 18-131
Before the
Federal Communications Commission
Washington, D.C. 20554
In the Matter of)
)
Implementation of Section 621(a)(1) of the Cable )MB Docket No. 05-311
Communications Policy Act of 1984 as Amended )
by the Cable Television Consumer Protection and )
Competition Act of 1992)
SECOND FURTHER NOTICE OF PROPOSED RULEMAKING
Adopted: September 24, 2018Released: September 25, 2018
Comment Date: (30 days after date of publication in the Federal Register)
Reply Comment Date: (60 days after date of publication in the Federal Register)
By the Commission: Commissioner O’Rielly issuing a statement.
I.INTRODUCTION
1.In this Second Further Notice of Proposed Rulemaking (Second FNPRM), we address
two issues raised by the remand from the United States Court of Appeals for the Sixth Circuit in
Montgomery County, Md. et al. v. FCC, which addressed challenges to rules and guidance adopted by the
Commission governing how local franchising authorities (LFAs) may regulate incumbent cable operators
1
and cable television services. Specifically, we tentatively conclude that we should treat cable-related,
“in-kind” contributions required by a franchising agreement as “franchise fees” subject to the statutory
five percent cap on franchise fees set forth in Section 622 of the Communications Act of 1934, as
2
amended (the Act), with limited exceptions. We also tentatively conclude that we should apply our prior
mixed-use network ruling to incumbent cable operators, thus prohibiting LFAs from using their video
franchising authority to regulate the provision of most non-cable services, such as broadband Internet
access service, offered over a cable system by an incumbent cable operator. We seek comment on these
tentative conclusions, which we believe faithfully interpret relevant statutory provisions and will promote
competition by fostering parity between incumbents and new entrants and helping to ensure that local
franchising requirements do not discourage cable operators from investing in new facilities and services.
We also seek comment on whether the proposals and tentative conclusions discussed in this Second
FNPRM, as well as prior Commission decisions in this proceeding addressing LFA regulation of cable
operators, should be applied to state-level franchising actions and state regulations that impose
requirements on local franchising.
1
Montgomery County, Md. et al. v. FCC, 863 F.3d 485 (6th Cir. 2017) (Montgomery County) (vacating and
remanding (1) the Commission’s decision to treat cable-related, in-kind contributions as “franchise fees” subject to
the statutory five percent cap on franchise fees set forth in 47 U.S.C. § 542, and (2) the Commission’s decision to
extend its “mixed-use” ruling—which prohibits LFAs from regulating the provision of services other than cable
services offered over cable systems used to provide both cable services and non-cable services—to incumbent cable
operators that are not common carriers). A “franchising authority” is defined as “any governmental entity
empowered by Federal, State, or local law to grant a franchise.” 47 U.S.C. § 522(10). References herein to “local
franchising authorities” or “LFAs” mean only the county or municipal governmental entities empowered to grant
franchises.
2
47 U.S.C. § 542. As discussed below, we propose to apply this treatment of cable-related, in-kind contributions to
both incumbent cable operators and new entrants. See infra para. 22.
Federal Communications CommissionFCC 18-131
II.BACKGROUND
2.Any entity seeking to offer “cable service” as a “cable operator” must comply with the
3
cable franchising provisions of Title VI of the Communications Act. Section 621(b)(1) of the Act
4
prohibits a cable operator from providing cable service without first obtaining a cable franchise. Section
5
621(a)(1) circumscribes the power of LFAs to award or deny such franchises. As originally enacted by
Congress as part of the 1984 Cable Act, Section 621(a)(1) simply stated that a\] franchising authority
6
may award, in accordance with the provisions of this title, 1 or more franchises within its jurisdiction.”
In a 1990 Report to Congress, however, 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
7
provide service.” In response to this Report, Congress revised Section 621(a)(1) in 1992 to provide that
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
8
not unreasonably refuseto award an additional competitive franchise.”
3.In 2007, finding that the existing operation of the local franchising process constituted an
9
unreasonable barrier to new entrants in the marketplace for cable services and to their deployment of
broadband, the Commission issued the First Report and Order, which adopted new rules and guidance to
10
implement Section 621(a)(1). The Commission concluded that Section 621(a)(1) prohibits not only the
ultimate unreasonable denial of a competitive franchise application, but also the establishment by LFAs
of procedures and other requirements that have the effect of unreasonably interfering with the ability of a
11
would-be competitor to obtain a competitive franchise. To eliminate unreasonable barriers to entry into
3
Id. §§ 521-573.
4
Id. § 541(b)(1).
5
Id. § 541(a)(1).
6
Cable Communications Policy Act of 1984, Pub. L.No. 98-549, 98 Stat. 2779, § 621 (1984).
7
Competition, Rate Deregulation and the Commission’s Policies Relating to the Provision of Cable Television
Service, Report, 5 FCC Rcd 4962, 4974 (1990); see also id. at 5012 (“This Commission is convinced that the most
effective method of promoting the interests of viewers or consumers is through the free play of competitive market
forces.”).
8
47 U.S.C. § 541(a)(1) (emphasis added). See Cable Television Consumer Protection and Competition Act of 1992,
Pub. L. No. 102-385, 106 Stat. 1460 (1992) (1992 Cable Act); see also S. R EP. N O. 102-92, at 47 (1991) (“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.”).
9
The term “new entrants” refers to entities that seek to obtain cable franchises 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. First Report and Order, 22 FCC Rcd at 5106 n.24.
10
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, Report and Order and Further Notice of Proposed
Rulemaking, 22 FCC Rcd 5101, 5102, para. 1 (2007) (First Report and Order), ’d sub nom. Alliance for
Community Media et al. v. FCC, 529 F.3d 763 (6th Cir. 2008) (Alliance), cert. denied, 557 U.S. 904 (2009). The
Commission concluded that it had broad authority to promulgate rules implementing Title VI of the Act, including
Section 621(a)(1), under Section 201(b) of the Act, which 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.” Id. at 5127-28, paras.
53-54. See 47 U.S.C. § 201(b).
11
First Report and Order, 22 FCC Rcd at 5133, para. 64. The Commission found that it did not have a sufficient
record to determine what constitutes an “unreasonable refusal to award an additional competitive franchise” under
Section 621(a) with respect to franchising decisions where a state is involved, either by issuing franchises at the state
2
Federal Communications CommissionFCC 18-131
the marketplace for cable services and to encourage investment by new video entrants in broadband
facilities, the Commission adopted rules and guidance construing the meaning of “unreasonable” for
purposes of Section 621(a)(1), including rules and guidance governing the treatment of certain costs and
fees charged to new entrants into the marketplace for cable services and the regulation of new entrants’
12
“mixed-use” networks (i.e., facilities used to provide both cable services and non-cable services).
4.With respect to costs and fees, the Commission determined that unless certain specified
costs, fees, and other compensation required by LFAs are counted toward the statutory five percent cap on
franchise fees, an ’s demand for such fees could result in an unreasonable refusal to award a
13
competitive franchise to a new entrant. Under Section 622(b) of the Act, the amount of franchise fees
that an LFA may collect from a cable operator for any twelve-month period is limited to five percent of
the cable operator’s gross revenues derived in such period from the operation of the cable system to
1415
provide cable services. Section 622(g)(2) sets forth certain exclusions from the term “franchise fee.”
In particular, Section 622(g)(2)(D) excludes “requirements or charges incidental to the awarding or
enforcing of the franchise, including payments for bonds, security funds, letters of credit, insurance,
16
indemnification, penalties, or liquidated damages.” Such “incidental” requirements or charges may be
17
assessed by an LFA without counting toward the five percent cap. The Commission concluded that,
with respect to franchise agreements for new entrants, non-incidental franchise-related costs required by
LFAs must count toward the five percent franchise fee cap and provided guidance as to what constitutes
18
such non-incidental franchise-related costs. The Commission found that non-incidental costs include
attorney fees and consultant fees, 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
19
payments.
5.The Commission further found that in the context of some franchise negotiations, LFAs
(Continued from previous page)
level or enacting laws governing specific aspects of the franchising process. Id. at 5102 n.2. It therefore expressly
limited the findings and regulations adopted in the First Report and Order to actions or inactions at the local level
where a state has not specifically circumscribed the ’s authority. Id.
12
Id. at 5103, para. 5. In addition to the rules governing franchise fees and mixed-use networks discussed herein,
the Commission adopted rules establishing reasonable time limits for LFAs to render a decision on a competitive
applicant’s franchise application; prohibiting LFAs from refusing to award a competitive franchise because the
applicant will not agree to unreasonable build-out requirements; and prohibiting LFAs from denying an application
based upon a new entrant’s refusal to undertake certain obligations relating to public, educational, and government
(PEG) channels and institutional networks (I-Nets). Id.
13
Id. at 5123, para. 45, 5144-45, para. 94.
14
47 U.S.C. § 542(b). Advertising revenue and home shopping commissions have been included in a cable
operator’s gross revenues for franchise fee calculation purposes. See Texas Coalition of Cities for Utility Issues v.
FCC, 354 F.3d 802, 806 (5th Cir. 2003) (“A cable operator’s gross revenue includes revenue from subscriptions and
revenue from other sources-e.g., advertising and commissions from home shopping networks.”).
15
47 U.S.C. § 542(g)(2).
16
Id. § 542(g)(2)(D). Section 622(g) also excludes from the term “franchise ” any tax, fee, or assessment of
general applicability; in the case of any franchise in effect on October 30, 1984, payments which are required by the
franchise to be made by the cable operator during the term of such franchise for, or in support of the use of PEG
access facilities; in the case of any franchise granted after October 30, 1984, capital costs which are required by the
franchise to be incurred by the cable operator for PEG access facilities; and any fee imposed under title 17 of the
U.S. Code. Id. § 542(g)(2)(A)-(C), (E).
17
First Report and Order, 22 FCC Rcd at 5147, para. 99.
18
Id. at 5149, para. 104.
19
Id.
3
Federal Communications CommissionFCC 18-131
have required from new entrants “in-kind” payments or contributions that are unrelated to the provision of
20
cable services. The Commission clarified that any requests for in-kind contributions made by LFAs
unrelated to the provision of cable services by a new competitive entrant are subject to the statutory five
21
percent franchise fee cap.
6.Additionally, the Commission clarified that a cable operator may not be required to pay
22
franchise fees on revenues from non-cable services. As noted above, 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
23
provide cable services.” The Commission noted that it had determined in the Cable Modem
Declaratory Ruling that an LFA 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
24
of gross revenues from which the franchise fee ceiling is determined.” Although that decision related
specifically to Internet access service revenues, the Commission concluded that the same would be true
25
for other “non-cable” service revenues.
7.Regarding mixed-use networks (i.e., networks that provide broadband, voice services,
and other non-cable services in addition to video programming services), the Commission clarified that
LFAs’ jurisdiction applies only to the provision of video programming services over new entrants’ cable
26
systems. To the extent that a new entrant provides non-cable services and/or operates facilities that do
not qualify as a cable system, the Commission concluded that it is unreasonable for an LFA to refuse to
27
award a franchise based on issues related to such services or facilities. The Commission further
clarified that an LFA may not use its video franchising authority to attempt to regulate a new entrant’s
28
entire network beyond the provision of cable services. The Commission found 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
20
Id. at 5149, para. 105. The Commission cited the following as examples of in-kind contributions unrelated to the
provision of cable services: traffic light control systems; a requirement to prepay $1 million in franchise fees and to
fund a $50,000 scholarship; 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. Id. at 5149-50, paras. 106-7. In-kind contributions unrelated to the provision of cable services would
also include, for example, requests by the LFA for free or discounted broadband Internet access service.
21
Id. at 5150, para. 108.
22
Id. at 5146, para. 98.
23
47 U.S.C. § 542(b) (emphasis added). 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.” Id. § 522(6).
24
First Report and Order, 22 FCC Rcd at 5146, para. 98 (citing Inquiry Concerning High Speed Access to the
Internet Over Cable and Other Facilities, Declaratory Ruling and Notice of Proposed Rulemaking, 17 FCC Rcd
4798, 4851 (2002) (Cable Modem Declaratory Ruling), rev'd, Brand X Internet Services v. FCC, 345 F.3d 1120 (9th
Cir. 2003), rev'd, NCTA v. Brand X, 545 U.S. 967 (2005)).
25
First Report and Order, 22 FCC Rcd at 5146-47, para. 98.
26
Id. at 5153, para. 121.
27
Id. For example, the Commission found that it would be unreasonable for an LFA to refuse to grant a cable
franchise to an applicant for resisting an ’s demands for regulatory control over non-cable services or facilities;
to insist on an entity obtaining a separate cable franchise in order to upgrade non-cable facilities; to require a LEC to
obtain a franchise solely for the purpose of upgrading its network; or to require a LEC to obtain a cable franchise if
the LEC deploys fiber optic cable that can be used for cable and non-cable services. Id.
28
Id. at 5155, para. 122.
4
Federal Communications CommissionFCC 18-131
29
services.” The Commission based its decision on the common carrier exception to the definition of
“cable system” in Section 602(7)(C) of the Act, which explicitly states that a common carrier facility
subject to Title II is considered a cable system only “to the extent such facility is used in the transmission
30
of video programming ....” The Commission preempted local regulations that attempt to regulate any
non-cable services offered by new entrants, finding that such regulations are beyond the scope of LFAs’
31
authority and inconsistent with Section 602(7)(C).
8.The rules adopted in the First Report and Order applied only to new entrants applying
32
for cable franchises. Concurrently with its adoption of those rules, the Commission issued a Further
Notice of Proposed Rulemaking seeking comment on whether to apply the findings in the First Report
and Order to incumbent cable operators as they negotiate renewal of their existing franchiseagreements,
33
noting that many of these findings also appeared germane to existing franchisees.
9.In the Second Report and Order, the Commission extended a number of the rules adopted
34
in the First Report and Order to incumbent cable operators. The Commission concluded that the
findings in the First Report and Order interpreting Section 622 should apply equally to incumbents and
new entrants because Section 622 “does not distinguish between incumbent providers and new entrants.”
35
Thus, the Commission found that in-kind contributions are not to be regarded as “incidental” and
36
therefore must count toward the five percent franchise fee cap for incumbent cable operators. The
Commission further found that the clarification that a cable operator is not required to pay franchise fees
37
on revenues from non-cable services applies to incumbent cable operators. The Commission also
determined that its findings on mixed-use networks provided in the First Report and Order should apply
equally to incumbents and new entrants, noting that these findings relied on its statutory interpretation of
“cable system” in Section 602(7)(C), which “does not distinguish between incumbent providers and new
38
entrants.” The Commission thus clarified that LFAs’ jurisdiction over incumbent cable operators
applies only to the provision of cable services over cable systems and that an LFA may not use its
39
franchising authority to regulate non-cable services offered by incumbent cable operators.
10.The Sixth Circuit Court of Appeals subsequently issued a decision rejecting LFA
40
challenges to the First Report and Order. With respect to franchise fees charged to new entrants, the
court upheld the Commission’s listing of the non-incidental charges that fall within the purview of the
29
Id.
30
Id.; 47 U.S.C. § 522(7)(C).
31
First Report and Order, 22 FCC Rcd at 5155, para. 122.
32
Id. at 5164, para. 139.
33
Id. at 5165, para. 140. The term “incumbent cable operator” refers to a cable operator that provided service before
any other cable operator entered the market.
34
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, para.
1 (2007) (Second Report and Order).
35
Id. at 19637, para. 11.
36
Id. at 19638, para. 11.
37
Id.
38
Id. at 19640-41, para. 17.
39
Id.
40
Alliance, 529 F.3d at 766. The court in Alliance affirmed the Commission’s authority to adopt rules interpreting
Section 621(a)(1) of the Act. Id. at 774 (“conclud\[ing\] that, pursuant to section 201(b), the FCC possesses clear
jurisdictional authority to formulate rules and regulations interpreting the contours of section 621(a)(1).”).
5
Federal Communications CommissionFCC 18-131
41
statutory five percent franchise fee cap, which includes in-kind payments. The court found that the
Commission’s interpretation of the phrase “incidental to” in Section 622(g)(2)(D) of the Act was
42
reasonable and therefore was entitled to deference under Chevron.
11.In 2015, the Commission issued an order responding to several LFA petitions for
43
reconsideration of the Second Report and Order. LFAs challenged the inclusion of in-kind payments in
calculating the franchise fee cap for incumbent cable operators, arguing that the Commission’s findings in
the Second Report and Order give an overly expansive scope to Section 622(g)(2)(D) and expanded the
44
definition of in-kind payments set forth in the First Report and Order. The Commission disagreed,
finding that the Second Report and Order merely extended the First Report and Order’s conclusions
45
regarding application of the term “incidental” in Section 622(g)(2)(D) to incumbent cable operators.
The Commission also rejected ’ arguments that the First Report and Order included in the franchise
fee cap only in-kind payments that are unrelated to cable service, not in-kind payments that are related to
46
cable service. The Commission observed that in a section entitled “Charges incidental to the awarding
or enforcing of a franchise,” the First Report and Order identified “free or discounted services provided
47
to an ” as one type of “non-incidental” cost that counted toward the franchise fee cap. The
Commission explained that in that context, the First Report and Order was referring to free or discounted
48
cable services. The Commission further found that consistent with the First Report and Order, the
Second Report and Order noted that non-incidental in-kind payments must count toward the five percent
franchise fee cap for incumbent cable operators and did not expressly limit this requirement to in-kind
49
payments that are unrelated to cable service.
12.The Order on Reconsideration also declined to modify the conclusions in the Second
50
Report and Order regarding mixed-use networks. The Commission observed that the Second Report
and Order extended the Commission’s findings on mixed-use networks to incumbent cable operators,
clarifying that LFAs’ jurisdiction over incumbent cable operators is limited to the provision of cable
services over cable systems and that LFAs may not use their franchising authority to regulate non-cable
51
services provided by incumbent cable operators. The Commission rejected the LFAs’ argument that the
legislative history of the 1984 Cable Act indicates that they have authority over cable systems in their
provision of non-cable services, explaining that while the legislative history discusses what constitutes a
41
Id. at 782-83.
42
Id. at 783. See Chevron USA v. Natural Resources Defense Council, 467 U.S. 837 (1984). The court also upheld
the Commission’s rules establishing time limits for LFAs to award a cable franchise to a new entrant; placing limits
on the use of build-out requirements as a franchise term for new entrants; and interpreting the “capital costs” that
LFAs may require new entrants to incur for PEG access facilities. Alliance, 529 F.3d at 778-86.
43
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, Order on Reconsideration, 30 FCC Rcd 810, 810,
para. 1 (2015) (Order on Reconsideration).
44
Order on Reconsideration, 30 FCC Rcd at 814-15, para. 11.
45
Id. at 815, para. 12.
46
Id. at 815, para. 13.
47
Id.
48
Id. The Commission stated that the First Report and Order discussed in-kind payments for non-cable services in
a separate section entitled “In-kind payments unrelated to provision of cable service.” Id.
49
Id.
50
Id. at 816, para. 14.
51
Id. at 816-17, para. 15
6
Federal Communications CommissionFCC 18-131
cable service, it does not address whether localities may regulate non-cable services provided over cable
52
systems.
13.In Montgomery County, the Sixth Circuit Court of Appeals addressed challenges by
53
LFAs to the Second Report and Order and the Order on Reconsideration. The court rejected LFA
arguments that non-cash exactions are not “franchise fees” as defined by Section 622(g)(1), noting that
Section 622(g)(1) defines “franchise ” to include “any tax, fee, or assessment of any kind” and that the
54
terms “tax” and “assessment” can include nonmonetary exactions. The court found, however, that the
fact that the term “franchise ” can include in-kind contributions “does not mean that it necessarily does
55
include every one of them.” The court concluded that the Commission failed to offer any explanation in
the Second Report and Order or in the Order on Reconsideration as to why Section 622(g)(1) allows it to
56
treat cable-related, “in-kind” exactions as franchise fees. LFAs had claimed that the Commission’s
interpretation would limit their ability to enforce statutory requirements for PEG channel capacity and for
build-out obligations in low-income areas, and the court noted that the Commission’s orders did not
57
reflect any consideration of this LFA concern. The court also stated that the FCC failed to define what
58
“in-kind” means. The court therefore vacated as arbitrary and capricious the Second Report and Order
and the Order on Reconsideration to the extent that they treat cable-related, “in-kind” exactions as
59
“franchise fees” under Section 622(g)(1). The court directed the Commission to determine and explain
60
on remand to what extent cable-related, in-kind contributions are “franchise fees” under the Act.
14.The court in Montgomery County also agreed with LFAs that neither the Second Report
and Order nor the Order on Reconsideration offer a valid statutory basis for the application of the mixed-
use ruling to bar LFAs from regulating the provision of non-telecommunications services by incumbent
61
cable operators. The court stated that the Commission’s decision in the First Report and Order to apply
52
Id. at 817, para. 15 & n.65. The Order on Reconsideration also clarified that the Commission’s findings in the
Second Report and Order regarding franchise fees and mixed-use networks were intended to apply only to the local
franchising process and not to franchising laws or decisions at the state level. Id. at 812-13, para. 7. The
Commission stated that if any interested parties believe that the Commission should revisit this issue in the future,
they could present the Commission with evidence that the findings in the First Report and Order and/or the Second
Report and Order are of practical relevance to the franchising process at the state-level. Id.
53
Montgomery County, 863 F.3d at 487.
54
Id. at 490-91.
55
Id. at 491.
56
Id. The court found that the Order on Reconsideration incorrectly asserted that the First Report and Order had
already treated ‘‘in-kind’’ cable-related exactions as franchise fees and that the Sixth Circuit had approved such
treatment in Alliance. Id. at 490. The court stated that the Sixth Circuit’s decision in Alliance analyzed and
approved only the ’s interpretation of the term “incidental” asused in Section 622(g)(2)(D) and did not address
the idea that every non-incidental cost or expense that a cable operator bears in complying with the terms of its
franchise is a “franchise ” under Section 622(g)(1). Id. The court also found that the First Report and Order did
not make clear that cable-related exactions are “franchise fees” under Section 622(g)(1). Id. In this regard, the court
pointed out that the Commission specifically told the Sixth Circuit in Alliance that the First Report and Order ’s
“analysis of in-kind payments was expressly limited to payments that do not involve the provision of cable service.”
Id.
57
Id. at 491.
58
Id.
59
Id. at 491-92.
60
Id. at 492.
61
Id. at 493. The court noted that the LFAs’ primary concern with the mixed-use ruling is that it would prevent
them from regulating “institutional networks” or “I-Nets”—communication networks which are constructed or
operated by the cable operator and which are generally available only to subscribers who are not residential
customers—even though the Act makes clear that LFAs may regulate I-Nets. Id. at 492; see 47 U.S.C. §§ 531(b)
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the mixed-use ruling to new entrants had been defensible because Section 602(7)(C) of the Act expressly
states that LFAs may regulate Title II carriers only to the extent that they provide cable services and the
62
Commission found that new entrants generally are Title II carriers. The court observed that in extending
the mixed-use ruling to incumbent cable operators in the Second Report and Order, the Commission
merely relied on the First Report and Order ’s interpretation of Section 602(7)(C), noting that Section
63
602(7)(C) “does not distinguish between incumbent providers and new entrants.” The court found,
however, that this reasoning is not an affirmative basis for the Commission’s decision in the Second
Report and Order to apply the mixed-use ruling to incumbent cable operators because Section 602(7)(C)
by its terms applies only to Title II carriers and “many incumbent cable operators are not Title II carriers.”
64
The court further found that the Order on Reconsideration did not offer any statutory explanation for
65
the Commission’s decision to extend the mixed-use ruling to incumbent cable operators. Accordingly,
the court concluded that the Commission’s extension of the mixed-use ruling to incumbent cable
66
operators that are not common carriers was arbitrary and capricious. The court vacated the mixed-use
ruling as applied to those incumbent cable operators and remanded for the Commission “to set forth a
67
valid statutory basis, if there is one, for the rule as so applied.”
15.As we address the court’s remand in this proceeding, we view the proposals discussed
below as part of the Commission’s larger, ongoing effort to reduce regulatory barriers to infrastructure
investment. For example, the Commission’s open wireline and wireless infrastructure proceedings have
advanced a number of regulatory reforms to spur wireline and wireless service deployment, and
additional reforms remain under consideration for future Commission action. In the wireline proceeding,
the Commission has already enacted numerous reforms to our rules and procedures regarding pole
attachments, copper retirement, and discontinuances of legacy services that will better enable providers to
68
invest in next-generation networks. In the wireless proceeding, to enable and to speed the deployment
of advanced wireless services throughout the United States, we revised the rules and procedures for
(Continued from previous page)
(authorizing franchising authorities to require as part of a franchise or franchise renewal that channel capacity on
institutional networks be designated for educational or governmental use), 541(b)(3)(D) (“Except as otherwise
permitted by sections 611 and 612, a franchising authority may not require a cable operator to provide any
telecommunications service or facilities, other than institutional networks, as a condition of the initial grant of a
franchise, a franchise renewal, or a transfer of a franchise”); see also id. § 531(f) (defining “institutional networks”).
The court observed, however, that the Commission acknowledged that its mixed-use ruling was not meant to prevent
LFAs from regulating I-Nets. Montgomery County, 863 F.3d at 492.
62
Id. at 492-93.
63
Id. at 493.
64
Id.
65
Id.
66
Id.
67
Id.
68
See generally Accelerating Wireline Broadband Deployment by Removing Barriers to Infrastructure Investment
and Accelerating Wireless Broadband Deployment by Removing Barriers to Infrastructure Investment, WC Docket
No. 17-84, WT Docket No. 17-79, Third Report and Order and Declaratory Ruling, FCC 18-111 (rel. Aug. 3, 2018)
(Wireline Infrastructure Third Report and Order); Accelerating Wireline Broadband Deployment by Removing
Barriers to Infrastructure Investment, Report and Order, Declaratory Ruling, and Further Notice of Proposed
Rulemaking, 32 FCC Rcd 11128 (2017). In addition, the Broadband Deployment Advisory Committee (BDAC),
chartered in March 2017, has adopted several recommendations relating to state and local regulatory barriers, and
federal siting, as well as a model municipal code and portions of a model state code. See FCC, Broadband
Deployment Advisory Committee, Approved Recommendations, https://www.fcc.gov/broadband-deployment-
advisory-committee. The BDAC is working to develop a complete model state code and recommendations
regarding disaster response and recovery. See id. The BDAC’s recommendations will inform the Commission’s
policymaking going forward.
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69
deployments subject to the National Historic Preservation Act and National Environmental Policy Act.
70
We also made changes to the historic preservation review requirement for replacement utility poles, and
have sought comment on a proposal that would make existing infrastructure available for additional
71
wireless deployments on towers that previously have been unavailable. Similarly, with this item, we
seek to faithfully interpret the statutory provisions at issue in a way that preserves incentives for all cable
operators to deploy infrastructure that can be used to provide numerous services, including video, voice,
and broadband Internet access service, to consumers.
III.DISCUSSION
A.Cable-Related, In-Kind Contributions
16.We tentatively conclude that we should treat cable-related, in-kind contributions required
by LFAs from cable operators as a condition or requirement of a franchise agreement as “franchise fees”
subject to the statutory five percent franchise fee cap set forth in Section 622 of the Act, with limited
72
exceptions as described below. We tentatively conclude that this interpretation is most consistent with
the statutory language and legislative history and seek comment on our analysis.
17.Section 622(b) directs that “the franchise fees paid by a cable operator” for any 12-month
73
period “shall not exceed 5 percent of such cable operator’s gross revenues.” Section 622(g)(1) defines
“franchise ” broadly to include “any tax, fee, or assessment of any kind imposed by a franchising
74
authority or other governmental entity on a cable operator … solely because of their status as such.”
The court in Montgomery County acknowledged that the term “franchise ” can include in-kind
contributions, but stated that further explanation was necessary in order for the Commission to conclude
75
that cable-related, in-kind contributions are covered within the definition. We note that the broad
definition of “franchise ” in the statute covers “any kind” of tax, fee, or assessment, without
76
distinguishing between whether it is related or unrelated to the provision of cable service. The
legislative history, in discussing the definition of “franchise fee,” likewise suggests no such distinction
77
was intended by Congress The court’s decision in Montgomery County did not disturb the
Commission’s treatment of in-kind contributions unrelated to the provision of cable services as franchise
78
fees subject to the statutory five percent cap. We see no basis in the statute or legislative history for
distinguishing between in-kind contributions unrelated to the provision of cable services and cable-
related, in-kind contributions for purposes of the five percent franchise fee cap. If in-kind contributions
69
See generally Accelerating Wireless Broadband Deployment by Removing Barriers to Infrastructure Investment,
Second Report and Order, FCC 18-30 (Mar. 30, 2018) (concluding that that small wireless facilities are not
“undertakings” or “major federal actions,” clarifying the process for Tribal participation in reviews of large wireless
facilities, removing the requirement that applicants prepare an Environmental Assessment (EA) when a proposed
project would be located in a floodplain, and committing to specific timelines for Commission review of EAs).
70
See generally Accelerating Wireless Broadband Deployment by Removing Barriers to Infrastructure Investment,
Report and Order, 32 FCC Rcd 9760 (2017).
71
See generally Accelerating Wireless Broadband Deployment by Removing Barriers to Infrastructure Investment,
Public Notice, 32 FCC Rcd 10715 (2017).
72
See infra para 19.
73
47 U.S.C. § 542(b).
74
Id. § 542(g)(1) (emphasis added).
75
Montgomery County, 863 F.3d at 490-91.
76
47 U.S.C. § 542(g)(1).
77thnd
H.R. Rep. No. 934, 98 Cong., 2 Sess. 1984 at 64, reprinted in 1984 U.S.C.C.A.N. 4655, 4701 (H.R. Rep. 98-
934) (“Franchise fee is defined by subsection 622(g) to include any tax, fee, or assessment imposed on a cable
operator or subscribers solely because of their status as such”).
78
Montgomery County, 863 F.3d at 490-491. See also First Report and Order, 22 FCC Rcd at 5149, para. 105.
9
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unrelated to the provision of cable services were not treated as franchise fees, LFAs could easily evade
the five percent cap by requiring any manner of in-kind contributions, rather than a monetary fee.
Likewise, if cable-related, in-kind contributions are not counted as franchise fees, LFAs could circumvent
the five percent cap by requiring, for example, unlimited free or discounted cable services and facilities
for LFAs, in addition to a five percent franchise fee. We believe this result would be contrary to
Congress’s intent as reflected in the broad definition of “franchise ” in the statute. We seek comment
on this analysis.
79
18.Section 622(g)(2) sets forth five exclusions from the term “franchise fee.” To begin
80
with, Section 622(g)(2)(A) excludes “any tax, fee, or assessment of general applicability.” The
legislative history explains that a tax, fee, or assessment of general applicability includes “such payments
as a general sales tax, an entertainment tax imposed on other entertainment businesses as well as the cable
81
operator, and utility taxes or utility user taxes.” By definition, a tax, fee, or assessment of general
applicability does not cover cable-related, in-kind contributions. Thus, we tentatively conclude the
exclusion set forth in subsection (A) is not applicable here. Additionally, Section 622(g)(2)(E) excludes
82
fees imposed under the Copyright Act under title 17, United States Code, and thus does not appear to
apply to cable-related, in-kind contributions. Furthermore, Section 622(g)(2)(D) excludes “requirements
or charges incidental to the awarding or enforcing of the franchise, including payments for bonds, security
83
funds, letters of credit, insurance, indemnification, penalties, or liquidated damages.” Although the
84
statute does not define the term “incidental,” based on the interpretive canon of noscitur a sociis, the
exemplary list delineated within the text of the provision—i.e., “bonds,” “security funds,” “letters of
85
credit, “insurance,” “indemnification,” “penalties,” and “liquidated damages”—suggests that the term
refers to costs or requirements related to assuring that a cable operator is financially and legally qualified
to operate a cable system, not to cable-related, in-kind contributions. The legislative history similarly
explains that a “franchise fee is defined so as not to include any bonds, security funds, or other incidental
86
requirements for costs necessary to the enforcement of the franchise.” The court in Alliance upheld the
Commission’s determination that under Section 622(g)(2)(D), the term “incidental” is “limited to the list
87
of incidentals in the statutory provision, as well as other minor expenses.” The Commission has
determined that non-incidental costs required by LFAs must count toward the five percent franchise fee
88
cap. The First Report and Order listed various examples of non-incidental costs, including in-kind
79
47 U.S.C. § 542(g)(2)(A)-(E).
80
Id. § 542(g)(2)(A) (excluding from the definition of “franchise ” “any tax, fee, or assessment of general
applicability (including any such tax, fee, or assessment imposed on both utilities and cable operators or their
services, but not including a tax, fee, or assessment which is unduly discriminatory against cable operators or cable
subscribers”) (emphasis added).
81
H.R. Rep. No. 98-934, 1984 U.S.C.C.A.N. at 4701.
82
47 U.S.C. § 542(g)(2)(E) (excluding from the definition of “franchise ” “any fee imposed under title 17, United
States Code”). See also H.R. Rep. No. 98-934, 1984 U.S.C.C.A.N. at 4701 (“any fee imposed under the Copyright
Act would not be considered a franchise ”).
83
47 U.S.C. § 542(g)(2)(D).
84
See Gustafson v. Alloyd Co., 513 U.S. 561, 575 (1995) (the principle of noscitur a sociis – “a word is known by
the company it keeps”— “avoid\[s\] ascribing to one word a meaning so broad that it is inconsistent with its
accompanying words, thus giving unintended breadth to Acts of Congress”).
85
47 U.S.C. § 542(g)(2)(D).
86
H.R. Rep. No. 98-934, 1984 U.S.C.C.A.N. at 4701.
87
Alliance, 529 F.3d at 782-83; see also First Report and Order, 22 FCC Rcd at 5148, para. 103.
88
First Report and Order, 22 FCC Rcd at 5149, para. 104.
10
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89
payments unrelated to provision of cable service. For the reasons stated above, we tentatively conclude
90
that cable-related, in-kind contributions, such as free or discounted cable services demanded by an LFA,
likewise do not qualify as “incidental” charges under the exclusion in subsection (D). We seek comment
on this analysis.
91
19.Additionally, Section 622(g)(2)(B)contains an exclusion for PEG support payments, but
92
only with respect to franchises granted prior to 1984. To the extent that any such franchises are still in
effect, we tentatively conclude that under Section 622(g)(2)(B), PEG support payments made pursuant to
such franchises are cable-related, in-kind contributions excluded from the five percent franchise fee cap.
We seek comment on this tentative conclusion. Finally, for any franchise granted after 1984, Section
622(g)(2)(C)contains a narrow exclusion covering PEG “capital costs which are required by the
93
franchise.” The legislative history explains that with “regard\[\] \[to\] PEG access in new franchises,
payments for capital costs required by the franchise to be made by the cable operator are not defined as
94
fees under this provision.” The court in Alliance affirmed the Commission’s interpretation of the
exemption in Section 622(g)(2)(C) as being limited to “those costs incurred in or associated with the
95
construction of PEG access facilities.” Accordingly, under the statute, for purposes of franchises
granted after 1984, we tentatively conclude that PEG capital costs required by the franchise are in-kind,
cable-related contributions excluded from the five percent cap. We seek comment on the above analysis.
20.We tentatively conclude that treating cable-related, in-kind contributions as “franchise
fees” would not undermine provisions in the Act that authorize or require LFAs to impose cable-related
obligations on franchisees. We note, in this regard, that the Act authorizes LFAs to require that channel
capacity be designated for PEG use and that channel capacity on I-Nets be designated for educational and
89
Id.
90
See infra para. 24 (seeking comment on a proposed definition of “cable-related, in-kind contribution”).
91
Section 611 of the Act authorizes LFAs to establish PEG requirements in a franchise with respect to the
designation or use of channel capacity for public, educational, or governmental use. 47 U.S.C. § 531. The
legislative history explains that PEG channels provide third-party access to cable systems through channels
dedicated for use by the public and certain program providers, such as local governments, schools and non-profit
and community groups. H.R. Rep. No. 98-934, 1984 U.S.C.C.A.N. at 4667.
92
47 U.S.C. § 542(g)(2)(B) (excluding from the term “franchise ” “in the case of any franchise in effect on the
date of the enactment of this title, payments which are required by the franchise to be made by the cable operator
during the term of such franchise for, or in support of the use of, public, educational, or governmental access
facilities”) (emphasis added). Section 622 was enacted as part of the 1984 Cable Act. See First Report and Order,
22 FCC Rcd at 5151, para. 109 (“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”).
93
47 U.S.C. § 542(g)(2)(C) (excluding from the term “franchise ” “in the case of any franchise granted after such
date of enactment, capital costs which are required by the franchise to be incurred by the cable operator for public,
educational, or governmental access facilities”) (emphasis added). Section 611 of the Act authorizes a franchising
authority to require a cable operator, as part of a franchise, to designate channel capacity for public, educational, or
governmental \[PEG\] use. Id. § 531.
94
H.R. Rep. No. 98-934, 1984 U.S.C.C.A.N. at 4702.
95
Alliance, 529 F.3d at 784 (finding “the ’s limitation of ‘capital costs’ to those ‘incurred in or associated with
the construction of PEG access facilities’ represents an eminently reasonable construction of section 622(g)(2)(C)”).
See also id. (observing that the Commission’s “central test for determining whether an expense is a capital cost is
whether it is ‘incurred in or associated with the construction of PEG access facilities” and that t\]his definition
could potentially encompass the cost of purchasing equipment, as long as that equipment relates to the construction
of actual facilities”). We understand that costs for studio equipment are treated as capital costs for purposes of
section 622(g)(2)(C) by both cable operators and LFAs given that most PEG facilities are already constructed. We
seek comment on this practice.
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Federal Communications CommissionFCC 18-131
96
governmental use. The fact that the Act authorizes LFAs to impose such obligations does not, however,
mean that the value of these obligations should be excluded from the five percent cap on franchise fees.
Indeed, the statute suggests otherwise. Section 622(g)(2) carves out only limited exclusions for PEG-
related costs—i.e., PEG support payments required by any franchise granted prior to 1984 and PEG
97
capital costs required by any franchise granted after 1984. Section 622(g)(2) makes no mention of an I-
Net-related exclusion, nor does it contain a general exclusion for all PEG related costs. Since Congress
9899
enacted the PEG and I-Net provisions at the same time it added the franchise fee provisions, it could
have explicitly excluded those costs in addressing the scope of the PEG-related costs in that subsection if
it had intended they not count toward the cap. Based on this, we tentatively find that treating all cable-
related, in-kind contributions as “franchise fees,” unless expressly excluded by the statute, would best
100
effectuate the statutory purpose. To the extent that an LFA wishes to impose such obligations, the LFA
can count the value of the services or facilities towards the cable operator’s franchise fee payment, if the
services or facilities are not exempt from the franchise fee cap in Section 622(g)(2). In our view, an LFA
should not be permitted to make an end run around the statutory cap by requiring a cable operator to pay
franchise fees equal to five percent of its gross revenues for cable services and also assume the costs of
cable-related, in-kind contributions. We seek comment on this view.
21.LFAs have previously suggested that our proposed interpretation would treat as franchise
101
fees all costs related to franchise requirements, even those allowed under the Cable Act. We disagree.
For example, the Act directs LFAs “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,” a mandate which may cause LFAs to impose build-out obligations on cable
102
operators. Although these obligations are not free for cable operators, we do not propose to interpret
build-out obligations as contributions to the LFA. Because build-out obligations (unlike I-Net facilities)
involve the construction of facilities that are not specifically for the use or benefit of the LFA or any other
entity designated by the LFA, but rather are part of the provision of cable service in the franchise area and
the facilities ultimately may result in profit to the cable operator, we do not think they should be
considered contributions to an LFA. Under this approach, the cost that these obligations impose on cable
operators would not count toward the five-percent franchise fee cap. We seek comment on this proposed
interpretation. We also seek comment on whether there are other requirements besides build-out
obligations that are not specifically for the use or benefit of the LFA or an entity designated the LFA and
therefore should not be considered contributions to an LFA.
22.Additionally, we tentatively conclude that this treatment of cable-related, in-kind
contributions should be applied to both new entrants and incumbent cable operators. As discussed above,
in adopting rules and guidance implementing Section 621(a)(1), including rules governing the treatment
of certain costs and fees charged by LFAs, the Commission found that the existing operation of the local
96
47 U.S.C. §§ 531(b), 541(b)(3)(D).
97
Id. §§ 542(g)(2)(B), (C).
98
See id. § 531.
99
See id. § 542.
100
H.R. Rep. No. 98-934, 1984 U.S.C.C.A.N. at 4656-57 (describing the purposes of the legislation to include
“defining and limiting the authority that a franchising authority may exercise through the franchise process,”
establish\[ing\] franchise procedures and standards to encourage the growth and development of cable systems,” and
“establish\[ing\] a national framework and federal standards for cable franchising … \[to\] provide\[\] the cable industry
with the stability and certainty that are essential to its growth and development…\[endeavoring\] to create an
environment in which cable will flourish, providing all Americans access to a technology that will become an
increasingly important part of our national communications network”).
101
Reply to Oppositions to Petition for Reconsideration of City of Albuquerque et al., MB Docket No. 05-311, at 3
(filed Feb. 26, 2008), https://ecfsapi.fcc.gov/file/6519843516.pdf.
102
47 U.S.C. § 541(a)(3).
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Federal Communications CommissionFCC 18-131
franchising process constituted an unreasonable barrier to new entrants in the marketplace for cable
103
services and to their deployment of broadband. Specifically, the Commission found that the local
franchising process unreasonably delays new entrants from upgrading their networks to provide video
services, which discourages investment in the fiber-based infrastructure necessary for the provision of
broadband services by depriving new entrants of revenues needed to offset the costs of such deployment.
104
We acknowledge that this distinguishes new entrants from incumbent cable operators, who have
already deployed their infrastructure for both video and broadband. Nevertheless, we believe that
applying the same treatmentof cable-related, in-kind contributions to both new entrants and incumbent
cable operators would ensure a more level playing field and that the Commission should not place its
thumb on the scale to give a regulatory advantage to any competitor. Moreover, as the Commission has
previously observed, Section 622 “does not distinguish between incumbent providers and new
105
entrants.” We seek comment on this proposal.
23.We seek comment on the effect, if any, that our statutory interpretation would have on
LFAs’ ability to impose cable-related, in-kind obligations on new entrants and incumbents consistent with
the statutory provisions described above. To the extent that commenters assert that it would unreasonably
hamper LFAs’ ability to impose such obligations, we request that they provide specific cost data or other
information to support their position. Conversely, what effect, if any, would excluding cable-related, in-
kind contributions from “franchise fees” (i.e., allowing LFAs to seek unlimited cable-related, in-kind
contributions on top of the five percent franchise fee permitted by Section 622) have on new entrants and
incumbents? Would such exclusion likely delay or deter infrastructure investment by new competitors?
Would it affect incumbent cable operators’ ability to invest in new facilities and services, including
improving broadband services? We also seek comment on the costs and benefits to consumers of our
proposed treatment of cable-related, in-kind contributions.
24.We propose to define “cable-related, in-kind contributions” to include “any non-
monetary contributions related to the provision of cable services provided by cable operators as a
condition or requirement of a local franchise agreement, including but not limited to free or discounted
cable services and the use of cable facilities or equipment. It does not include the cost of build-out
requirements.” Under this proposed definition, cable-related, in-kind contributions would not have to be
provided directly to the LFA to be subject to the statutory five percent cap; rather, any cable-related, in-
106
kind contributions provided to the LFA or any other entity designated by the LFA as a condition or
requirement of a franchise agreement would be subject to the cap, if not expressly exempt under Section
622(g)(2). We seek comment on this proposed definition. We request commenters to provide examples
of the types of cable-related, “in-kind” contributions that have been or are being required by LFAs. We
further propose that cable-related, in-kind contributions be valued for purposes of the franchise fee cap at
their fair market value. We seek comment on this proposal, and how such a market valuation should be
performed. Alternatively, we seek comment on whether cable-related, in-kind contributions should be
valued at the cost to the cable operator.
B.Mixed-Use Networks
25.We tentatively conclude that the mixed-use network ruling should be applied to
incumbent cable operators to the extent that they offer or begin offering non-cable services. Thus, we
propose to prohibit LFAs from using their video franchising authority to regulate most non-cable services
103
First Report and Order, 22 FCC Rcd at 5102, para. 1.
104
Id. at 5103, para. 3.
105
Second Report and Order, 22 FCC Rcd at 19637, para. 11.
106
An entity designated by the LFA could include, for example, a school, a library, or a non-profit group that
administers a public access channel.
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107
offered over cable systems by incumbent cable operators. Non-cable services offered by incumbent
cable operators include telecommunications services and non-telecommunications services.
Telecommunications services offered by incumbent cable operators may include, for example, some
108
business data services. Non-telecommunications services offered by incumbent cable operators may
109
include information services, such as broadband Internet access services, and private carrier services,
110
such as certain types of business data services. Incumbent cable operators may also offer facilities-
111
based interconnected Voice over Internet Protocol (VoIP) service, which has not been classified by the
112
Commission as either a telecommunications service or an information service but is clearly not a cable
service. We seek comment on whether there are other services offered by incumbent cable operators that
are not listed above that are relevant to our analysis.
26.As an initial matter, we note that the court in Montgomery County vacated the mixed-use
113
rule only as applied to incumbent cable operators that are not common carriers. The court, however,
appears to have left undisturbed application of the mixed-use ruling to incumbent cable operators that are
114
also common carriers. As explained above, some incumbent cable operators provide
107
As discussed above, the court in Montgomery County noted that the Commission acknowledged that its mixed-
use ruling was not meant to prevent LFAs from regulating I-Nets. See supra note 61. We reiterate that nothing in
this Order is intended to limit LFAs’ express authority under Section 611(b) of the Act, 47 U.S.C. § 531(b), to
require I-Net capacity.
108
Business data services refers to the dedicated point-to-point transmission of data at certain guaranteed speeds and
service levels using high-capacity connections. Business Data Services in an Internet Protocol Environment et al.,
Report and Order, 32 FCC Rcd 3459, 3463, para. 6 (2017) (BDS Report and Order). Businesses, non-profits, and
government institutions use business data services to enable secure and reliable communications. Id. See Letter
from Rick Chessen, Chief Legal Officer, Senior Vice President, Legal & Regulatory Affairs, NCTA – The Internet
& Television Association, to Marlene H. Dortch, Secretary, FCC, at n.10 (May 3, 2018) (NCTA May 3, 2018 Ex
Parte Letter) (indicating that some incumbent cable operators provide BDS on a common carrier basis).
109
See Restoring Internet Freedom, Declaratory Ruling, Report and Order, and Order, 33 FCC Rcd 311 (2018)
(Restoring Internet Freedom Order).
110
See BDS Report and Order, 32 FCC Rcd at 3566-80, paras. 267-285.
111
Interconnected VoIP is defined as a service that (1) enables real-time, two-way voice communications; (2)
requires a broadband connection from the user’s location; (3) requires Internet protocol-compatible customer
premises equipment; and (4) permits users generally to receive calls that originate on the public switched telephone
network and to terminate calls to the public switched telephone network. 47 CFR § 9.3.
112
See, e.g., Lifeline and Linkup Reform and Modernization, Third Report and Order, Further Report and Order, and
Order on Reconsideration, 31 FCC Rcd 3962, 4059, para. 262 n.709 (2016) (“we have not generally classified VoIP
as a telecommunications service or information service”); IP-Enabled Services, Report and Order, 24 FCC Rcd
6039, 6043, para. 8 n.21 (2009) (“The Commission to date has not classified interconnected VoIP service as a
telecommunications service or information service as those terms are defined in the Act.”).
113
Montgomery County, 863 F.3d at 493 (finding that “on the record now before us, the ’s extension of the
mixed-use rule to incumbent cable providers that are not common carriers is arbitrary and capricious”).
114
The court in Montgomery County explained:
The Communications Act bars franchising authorities from regulating the “services, facilities, and
equipment provided by a cable operator except to the extent consistent with” the Act. \[47 U.S.C.\] § 544(a).
The Act in turn permits authorities to impose various franchise requirements to the extent that those
requirements are “related to the establishment or operation of a cable system\[.\]” \[47 U.S.C.\] § 544(b)
(emphasis added). Section 522(7) defines a “cable system” as “a facility … that is designed to provide
cable service,” including video programming, “to multiple subscribers within a community \[.\]” \[47 U.S.C.\]
§ 522(7).
The Local Regulators admit that the ’s mixed-use decision is “defensible as applied to Title II
carriers,” since the Act expressly states that local franchising authorities may regulate Title II carriers only
to the extent they provide cable services. \[47 U.S.C.\] § 522(7).
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Federal Communications CommissionFCC 18-131
115
telecommunications services over their facilities. Under Section 3(51) of the Act, a “provider of
telecommunications services” is a “telecommunications carrier,” which the statute directs “shall be
treated as a common carrier under this Act only to the extent that it is engaged in providing
116
telecommunications services.” Thus, an incumbent cable operator, to the extent it offers
117118
telecommunications service, would be treated as a common carrier subject to Title II of the Act.
Section 602(7)(C) of the Act, in turn, excludes from the term “cable system” “a facility of a common
carrier which issubject, in whole or in part, to the provisions of title II of this Act, except that such
facility shall be considered a cable system … to the extent such facility is used in the transmission of
119
\[cable service\].” Accordingly, to the extent that any incumbent cable operators offer any
telecommunications services, we tentatively conclude that they are covered under the common carrier
exception in Section 602(7)(C), and thus can be regulated by LFAs only to the extent they provide cable
120
service. Although we recognize that there are distinctions between the obstacles faced by new entrants
121
and incumbent cable operators, we see no basis in the statute to treat differently incumbent cable
operators that are common carriers and new entrants that are common carriers for purposes of application
of the common carrier exception. We thus tentatively conclude that the mixed-use network ruling
prohibits LFAs from regulating the provision of any services other than cable services offered over the
cable systems of incumbent cable operators that are common carriers, or from regulating any facilities and
equipment used in the provision of any services other than cable services offered over the cable systems
122
of incumbent cable operators that are common carriers (with the exception of I-Nets, as noted above).
We seek comment on this analysis and the tentative conclusions.
27.In addition, we seek comment on LFAs’ authority to regulate the provision of non-cable
123
services by incumbent cable operators that are not also common carriers. We request information on
124
the extent to which incumbent cable operators are not also common carriers. Are the incumbent cable
operators that are also common carriers mostly the largest incumbent cable operators? Regarding non-
cable services provided by incumbent cable operators that are not common carriers, we tentatively
conclude that Section 624(b) of the Act prohibits LFAs from using their franchising authority to regulate
(Continued from previous page)
Id. at 492.
115
See supra para. 25.
116
47 U.S.C. § 153(51).
117
Id. § 153(11) (defining the term “common carrier”).
118
See Title II of the Communications Act of 1934, 47 U.S.C. § 201 et seq. (regulation of common carriers).
119
47 U.S.C. § 522(7)(C) (emphasis added).
120
See supra note 116.
121
See supra para. 22.
122
See 47 U.S.C. § 522(7)(C) (providing that a common carrier facility subject to Title II is considered a cable
system only “to the extent such facility is used in the transmission of video programming ....”). See also id. §§
541(b)(3)(B) (“A franchising authority may not impose any requirement ... that has the purpose or effect of
prohibiting, limiting, restricting, or conditioning the provision of a telecommunications service by a cable operator
or an affiliate thereof.”), 541(b)(3)(D) (“Except as otherwise permitted by sections 611 and 612, a franchising
authority may not require a cable operator to provide any telecommunications service or facilities, other than
institutional networks, as a condition of the initial grant of a franchise, a franchise renewal, or a transfer of a
franchise.”). See supra note 114.
123
We also seek comment on LFAs’ authority to regulate a non-common carrier new entrant’s provision of
information services.
124
See Montgomery County, 863 F.3d at 493 (in the ’s view, most incumbent cable operators are not Title II
carriers, and thus § 522(7)(C) does not apply).
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125
the provision of information services, including broadband Internet access service. Under Section
624(b), LFAs “may not … establish requirements for video programming or other information service s.”
126
127
Section 624 does not define the term “information services,” but the “definitions” section of the
128
legislative history distinguishes “information service” from “cable service.” The House Report states
that a\]ll services offered by a cable system that go beyond providing generally-available video
programming or other programming are not cable services” and “a cable service may not include ‘active
information services’ such as at-home shopping and banking that allow transactions between subscribers
129
and cable operators or third parties.” We also find significant that the description of “information
services” contained in the 1984 Cable ’s legislative history—i.e., “services providing subscribers with
the capacity to engage in transactions or to store, transfer, forward, manipulate, or otherwise process
130
information or data \[which\] would not be cable services”—corresponds closely to the 1996
131
Telecommunications ’s definition of “information service” contained in Section 3(24) of the Act—
i.e., “the offering of a capability for generating, acquiring, storing, transforming, processing, retrieving,
132
utilizing, or making available information via telecommunications.” For all the reasons stated above,
we believe that for purposes of Section 624(b), interpreting “information services” to have the meaning
set forth in Section 3(24) of the Act would best reflect Congressional intent. We further note that the
Commission recently reinstated the “information service” classification of broadband Internet access
133
service. We seek comment on this analysis.
28.Based on the above analysis, we tentatively conclude that the statute also bars LFAs from
regulating the provision of broadband Internet access and other information services by incumbent cable
134
operators that are not common carriers. Although Section 624(b)(2)(B) allows franchising authorities
125
Restoring Internet Freedom Order, 33 FCC Rcd at 320-21, para, 26 (concluding that broadband Internet access
service is an information service under the Act).
126
47 U.S.C. § 544(b). See also id. § 544(a) (barring LFAs from regulating the “services, facilities, and equipment
provided by a cable operator except to the extent consistent with” the Act); id. § 556(c) (“any provision of law of
any State, political subdivision, or agency thereof, or franchising authority . . . which is inconsistent with this \[Act\]
shall be deemed to be preempted and superseded.”).
127
Id. § 544. We note that the term “information services” predates the 1984 Cable Act. See, e.g., United States v.
AT&T, 552 F. Supp 131, 178 (D.D.C. 1982) (“information services” defined as “the offering of a capability for
generating, acquiring, storing, transforming, processing, retrieving, utilizing or making available information which
may be conveyed via telecommunications…”), ’d sub nom. Maryland v. United States, 460 U.S. 1001 (1983).
128
H.R. Rep. No. 98-934, 1984 U.S.C.C.A.N. at 4705.
129
Id., 1984 U.S.C.C.A.N. at 4679 (emphasis added). See also id., 1984 U.S.C.C.A.N. at 4681 (“Some examples of
non-cable services would be: shop-at-home and bank-at-home services, electronic mail, one-way and two-way
transmission on non-video data and information not offered to all subscribers, data processing, video-conferencing,
and all voice communications”); id. (“Many commercial information services today offer a package of services,
some of which (such as news services and stock listings) would be cable services and some of which (such as
electronic mail and data processing) would not be cable services….\[T\]he combined offering of a non-cable shop-at-
home service with service that by itself met all the conditions for being a cable service would not transform the
shop-at-home service into a cable service, or transform the cable service into a non-cable communications service”)
(emphasis added).
130
Id., 1984 U.S.C.C.A.N. at 4679.
131
Telecommunications Act of 1996, Pub.L. No.104-104, 110 Stat. 56 (1996) (1996 Act).
132
47 U.S.C. § 153(24).
133
Restoring Internet Freedom Order, 33 FCC Rcd at 320-321, para. 26-29.
134
In addition, we note that the Commission has previously determined that an LFA is prohibited from assessing
franchise fees on revenues from non-cable services. See supra para. 6 & note 24. As discussed above, requests
from LFAs for in-kind contributions unrelated to the provision of cable services, such as requests for free or
16
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to enforce requirements for “broad categories of video programming or other services,” when read in light
of Section 624(b)(1) and the legislative history, we believe that Congress intended to bar LFAs from
135
regulating information services. We further note that under Section 624(b), “the franchising authority,
to the extent related to the establishment or operation of a cable system … may establish requirements for
136
facilities and equipment.” In light of our tentative finding that Section 624(b)(1) bars LFAs from
regulating information services, we do not believe this provision authorizes LFAs to regulate facilities or
equipment to the extent they are used to provide such services, including broadband Internet access
service. We seek comment on this interpretation and our tentative conclusion. Would such an
137
interpretation best effectuate the statutory purpose? We also seek comment on the extent to which
LFAs currently attempt to regulate the provision of information services by incumbent cable operators or
the facilities and equipment used in the provision of such services. Do LFAs require incumbent cable
operators to obtain a separate franchise or pay franchise fees in connection with their provision of
broadband Internet access or other information services, and if so, what are the circumstances and
rationale for such requirements? What other franchise requirements do LFAs impose on information
services provided by incumbent cable operators? What effect, if any, do such franchise requirements
have on the deployment of new information services, including broadband Internet access service?
29.In any event, we believe that LFA regulation of such services would be inconsistent with
longstanding federal policy. The Commission has previously concluded that broadband Internet access
service is “a jurisdictionally interstate service because ‘a substantial portion of Internet traffic involves
138
accessing interstate or foreign websites.’” Therefore, we tentatively conclude that LFAs may not
regulate such interstate services and that doing so would frustrate the light-touch information service
framework established by Congress that the Commission has previously found necessary to promote
139
investment and innovation. In the Restoring Internet Freedom Order, the Commission concluded that
(Continued from previous page)
discounted broadband Internet access service, are permissible but are subject to the statutory five percent franchise
fee cap. See supra para. 5 and accompanying notes.
135
The limitation on the authority of LFAs in Section 624(b)(1) extends specifically to “information services”
whereas the authority granted to LFAs in (b)(2) makes no mention of “information services.” Compare 47 U.S.C. §
544(b)(1) (prohibiting LFAs from establishing “requirements for video programming or other information services”)
with 47 U.S.C. § 544(b)(2)(B) (permitting LFAs to “enforce any requirements contained within the franchise” “for
broad categories of video programming or other service”) (emphasis added). See Russello v. United States, 464 U.S.
16, 23 (1983) (“\[W\]here Congress includes particular language in one section of a statute but omits it in another
section of the same Act, it is generally presumed that Congress acts intentionally and purposely in the disparate
inclusion or exclusion.”) (internal quotation marks omitted). Moreover, the legislative history explains that the
’s “ability to enforce provisions related to program service assures the franchising authority that commitments
made in an arms-length situation will be met, yet also protects the cable operator from being forced to provide
specific programming or items of value which are not utilized in the operation of the cable system.” H.R. Rep. No.
98-934, 1984 U.S.C.C.A.N. at 4706.
136
47 U.S.C. § 544(b)(1). The term “cable system” means “a facility, consisting of a set of closed transmission
paths and associated signal generation, reception, and control equipment that is designed to provide cable
service….” Id. § 522(7). The term “cable service” means “(A) the one-way transmission to subscribers of (i) video
programming, or (ii) other programming service, and (B) subscriber interaction, if any, which is required for the
selection or use of such video programming or other programming service.” Id. § 522(6).
137
See supra note 100.
138
Restoring Internet Freedom Order, 33 FCC Rcd at 439, para. 199.
139
Id. at 312, para. 1-2. See also Section 706 of the 1996 Act, 47 U.S.C. § 1302(a) (directing the Commission to
promote deployment of advanced telecommunications capability to all Americans “by utilizing, in a manner
consistent with the public interest, convenience and necessity, price-cap regulation, regulatory forbearance,
measures that promote competition in the local telecommunications market, or other regulating methods that remove
barriers to infrastructure investment”); id. § 1302(b) (“If the Commission’s determination” under an annual inquiry
into deployment of advanced telecommunications capability “is negative, it shall take immediate action to accelerate
deployment of such capability by removing barriers”; id. § 230(b)(2) (stating that it is the policy of the United States
17
Federal Communications CommissionFCC 18-131
“regulation of broadband Internet access service should be governed principally by a uniform set of
140
federal regulations, rather than by a patchwork that includes separate state and local requirements.”
The Commission found that allowing state and local governments to regulate broadband Internet access
service could disrupt the procompetitive, deregulatory goals of the federal regulatory regime and impair
the provision of broadband Internet access service by requiring each provider to comply with a patchwork
of separate and potentially conflicting requirements across all of the different jurisdictions in which it
141
operates. The Commission therefore preempted any state or local measures that would impose rules or
requirements that it had repealed or decided to refrain from imposing in that order or that would impose
142
more stringent requirements for any aspect of broadband service addressed in that order. Among other
things, the Commission expressly preempted any “economic” or “public utility-type” regulations,
143
including entry and exit restrictions. For similar reasons, we tentatively conclude that entry and exit
restrictions include a requirement that an incumbent cable operator obtain a franchise to provide
broadband Internet access service and that LFAs therefore are expressly preempted from requiring
incumbent cable operators to obtain franchises to provide broadband Internet access service. We seek
comment on this tentative conclusion. We also seek comment on whether there are other regulations
imposed by LFAs on incumbent cable operators’ provision of broadband Internet access service that
should be considered entry and exit restrictions, or other types of economic or public utility-type
regulations, preempted by the Commission.
30.Moreover, we tentatively conclude that it would be contrary to the goals of the
Communications Act to permit LFAs to treat incumbent cable operators that are not also common carriers
differently than incumbent cable operators and new entrants that are also common carriers in their
provision of information services, including broadband Internet access services. Incumbent cable
operators and new entrants (whether they are common carriers or non-common carriers) often compete
against each other in the same markets, and often provide nearly identical services to consumers. Thus, to
regulate incumbent cable operators that are not also common carriers more strictly, by permitting LFAs to
place franchise requirements on their non-cable services and assess fees on these services, could put these
incumbents at a competitive disadvantage that Section 621 was intended to avoid. This competitive
disadvantage could impact not only the incumbents’ provision of broadband Internet access and other
information services, but also their provision of cable services. Such a result could ultimately have a
negative impact on consumers, thereby undermining the goal of the Telecommunications Act of 1996 Act
to “promote competition” across communications providers and “to secure lower prices and higher
144
quality services for American telecommunications consumers” by reducing regulation. We seek
145
comment on this analysis.
31.Finally, we seek comment on whether there are any other statutory provisions that relate
to the authority of LFAs to regulate the provision of non-cable services offered over a cable system by an
incumbent cable operator or the facilities and equipment used in the provision of such services. For
example, NCTA cites several additional provisions in support of its assertion that the Commission should
(Continued from previous page)
“to preserve the vibrant and competitive free market that presently exists for the Internet and other interactive
computer services, unfettered by Federal or State regulation”).
140
Restoring Internet Freedom Order, 33 FCC Rcd at 426-27, para. 194; id. at 429-432, paras. 197-204 (discussing
the Commission’s legal authority to preempt inconsistent state and local regulation of broadband Internet access
service).
141
Id. at 426-27, para. 194.
142
Id. at 428, para. 195.
143
Id.
144
Preamble, Telecommunications Act of 1996, Pub. L. No. 104-104, 110 Stat. 56 (1996) (1996 Act).
145
We believe these same concerns would apply to new entrants that are not common carriers and seek comment on
this analysis with respect to such entities.
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146147
apply the mixed-use network ruling to incumbent cable operators: Section 621(a)(2) of the Act;
148149150
Section 622 of the Act; Section 624(e) of the Act; Section 230(b) of the Act; and Section 253 of the
151
Act. We seek comment on the extent to which these and any other relevant statutory provisions relate
146
In addition to the listed statutory provisions, NCTA also points to Section 706 of the 1996 Act, asserting that this
provision reflects “congressional intent to reduce local barriers to competition and to promote the provision of
information services.” NCTA May 3, 2018 Ex Parte Letter at 6-7. See 47 U.S.C. § 1302(a) (directing the FCC to
encourage the deployment on a reasonable and timely basis of broadband to all Americans by “remov\[ing\] barriers
to infrastructure investment”). We note, however, that in the Restoring Internet Freedom Order, the Commission
found that “the directives to the Commission in section 706(a) and (b) of the 1996 Act to promote deployment of
advanced telecommunications capability are better interpreted as hortatory, and not as grants of regulatory
authority.” Restoring Internet Freedom Order, 33 FCC Rcd at 470, para. 268.
147
NCTA May 3, 2018 Ex Parte Letter at 3-4 (asserting that Section 621(a)(2) grants franchised cable operators the
right to construct and operate a cable system in the public rights-of-way and, therefore, “delivering non-cable
services over a cable system is within the scope of the rights that Congress intended a cable franchise to grant and
LFAs may not impose additional burdens on the provision of non-cable services over a franchised cable system”).
See 47 U.S.C. § 541(a)(2) ( “Any franchise shall be construed to authorize the construction of a cable system over
public rights-of-way, and through easements, which is within the area to be served by the cable system and which
have been dedicated for compatible uses ….”). In contrast, LFAs argue that they have a legitimate interest in
regulating the use of public rights-of-way by cable operators for non-cable services. See, e.g., Letter from Janine
Hill, Communications Administrator, City of Bloomington, Minnesota, to Marlene H. Dortch, Secretary, FCC, WC
Docket No. 17-84, at 3 (Aug. 23, 2018) (City of Bloomington Ex Parte Letter); Letter from Patty Latham, Chair,
Southwest Suburban Cable Commission, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 17-84, at 2-3
(Aug. 21, 2018) (SWSCC Ex Parte Letter); Letter from George Tourville, Mayor, Inver Grove Heights, Minnesota
and Chair, Northern Dakota County Cable Communications Commission, to Marlene H. Dortch, Secretary, FCC,
WC Docket No. 17-84, at 3 (Aug. 20, 2018) (NDC4 Ex Parte Letter).
148
NCTA May 3, 2018 Ex Parte Letter at 5 (asserting that Section 622 reinforces the Commission’s authority to
prohibit LFAs from imposing unwarranted and duplicative fees on franchised cable operators that offer non-cable
services over their cable systems). See 47 U.S.C. § 542(b) (“For any twelve-month period, 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”); id. § 542(g)(1)
(defining “franchise ” 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”).
LFAs assert that while federally-authorized cable franchise fees are fair and reasonable compensation for the use of
public rights-of-way for the operation of a cable system to provide cable services, Congress has not determined that
the payment of the cable franchise fee is fair and reasonable compensation for the use of the public rights-of-way to
provide non-cable services. City of Bloomington Ex Parte Letter at 4; SWSCC Ex Parte Letter at 3; NDC4 Ex
Parte Letter at 4.
149
Letter from Tara M. Corvo, Counsel for NCTA, to Marlene H. Dortch, Secretary, FCC, at 1 (Sept. 20, 2018)
(asserting that Section 624(e) prohibits LFAs from regulating the facilities and equipment used to offer non-cable
services over franchised cable systems) (NCTA Sept. 20, 2018 Ex Parte Letter); NCTA May 3, 2018 Ex Parte
Letter at 3 n.14 (asserting that “Section 624(e) further promotes innovative uses of cable systems…. As amended in
1996, that provision prohibits local governments from limiting the use of particular transmission technologies or
subscriber equipment, in order to avoid ‘the patchwork of regulations that would result from a locality-by-locality
approach,’ which would be “particularly inappropriate in today’s intensely dynamic technological environment.’”)
(quoting H.R. Rep. No. 104-204, at 110 (1995), as reprinted in 1996 U.S.C.C.A.N. 11, 78). See 47 U.S.C. § 544(e)
(stating that n\]o State or franchising authority may prohibit, condition, or restrict a cable system’s use of … any
transmission technology.”).
150
NCTA May 3, 2018 Ex Parte Letter at 6-7 (asserting that Section 230(b) embodies “congressional intent to
reduce local barriers to competition and to promote the provision of information services”). See 47 U.S.C. § 230(b)
(stating that it is the policy of the United States to “promote the continued development of the Internet” and to
“preserve the vibrant and competitive free market that presently exists for the Internet . . . unfettered by Federal or
State regulation”).
151
NCTA May 3, 2018 Ex Parte Letter at 7-8 (asserting that “requiring further ‘compensation’ from cable operators
who already pay more than ‘fair and reasonable compensation’ for their use of the public ROW in franchise fees,
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to the authority of LFAs to regulate the provision of non-cable services offered over a cable system by an
incumbent cable operator.
C.State Franchising Regulations
32.We seek comment on whether to apply the proposals and tentative conclusions set forth
152
herein, as well as the Commission’s decisions in the First Report and Order and Second Report and
153154
Order, as clarified in the Order on Reconsideration, to franchising actions taken at the state level and
155
state regulations that impose requirements on local franchising. As explained above, the Commission
limited its decisions in the First Report and Order and Second Report and Order to actions or inactions at
the local level where a state has not specifically circumscribed the ’s authority, finding that many of
the state franchising laws had been in effect for only a short period of time and that it did not have a
(Continued from previous page)
PEG access, institutional networks, and other obligations cannot be ‘fair and reasonable,’ or ‘competitively neutral
and nondiscriminatory’” under Section 253, particularly where the provision of new services has no incremental
impact on the public ROW). See also 47 U.S.C. § 253(a) (“No State or local statute or regulation, or other State or
local legal requirement, may prohibit or have the effect of prohibiting the ability of any entity to provide any
interstate or intrastate telecommunications service.”); id. § 253(c) (“Nothing in this section affects the authority of
a State or local government to manage the public rights-of-way or to require fair and reasonable compensation
from telecommunications providers, on a competitively neutral and nondiscriminatory basis, for use of public rights-
of-way on a nondiscriminatory basis, if the compensation required is publicly disclosed by such government.”). We
note that in the Wireline Infrastructure proceeding, we found that express and de facto moratoria violate Section
253(a) and generally do not fall within the Section 253(b) and (c) exceptions because such moratoria prohibit or
have the effect of prohibiting the deployment of telecommunications services or facilities. See Accelerating
Wireline Broadband Deployment by Removing Barriers to Infrastructure Investment, Third Report and Order and
Declaratory Ruling, FCC 18-111, paras. 140-68 (rel. Aug. 3, 2018). We are considering the interplay between
Section 253 preemption authority and state and local actions that prohibit or have the effect of prohibiting
telecommunications service. See id. para. 149 n.551, para. 150 n.556, para. 159 n.586; Accelerating Wireline
Broadband Deployment by Removing Barriers to Infrastructure Investment, Notice of Proposed Rulemaking, Notice
of Inquiry, and Request for Comment, 32 FCC Rcd 3266, 3296-3302, paras. 100-114 (2017); see also Accelerating
Wireless Broadband Deployment by Removing Barriers to Infrastructure Investment, Notice of Proposed
Rulemaking and Notice of Inquiry, 32 FCC Rcd 3330, 3336-37, paras. 15-16 (2017).
152
In the First Report and Order, the Commission adopted time limits for LFAs to render a final decision on a new
entrant’s franchise application and established a remedy for applicants that do not receive a decision within the
applicable time frame; concluded that it was unlawful for LFAs to refuse to grant a franchise to a new entrant on the
basis of unreasonable build-out mandates; clarified which revenue-generating services should be included in a new
entrant’s franchise fee revenue base and which franchise-related costs should and should not be included within the
statutory five percent franchise fee cap; concluded that LFAs may not make unreasonable demands of new entrants
relating to PEG channels and I-Nets; adopted the mixed-use network ruling for new entrants; and preempted local
franchising laws, regulations, and agreements to the extent they conflict with the rules adopted in that order. First
Report and Order, 22 FCC Rcd at 5134-40, paras. 66-81; id. at 5143-44, paras. 89-90; id. at 5144-51, paras. 94-109;
id. at 5151-54, paras. 110-120; id. at 5155-56, paras. 121-24; id. at 5157-64, paras. 125-38.
153
In the Second Report and Order, the Commission extended to incumbent cable operators the rulings in the First
Report and Order relating to franchise fees and mixed-use networks and the PEG and I-Net rulings that were
deemed applicable to incumbent cable operators, i.e., the findings that the non-capital costs of PEG requirements
must be offset from the cable operator’s franchise fee payments, that it is not necessary to adopt standard terms for
PEG channels, and that it is not per se unreasonable for LFAs to require the payment of ongoing costs to support
PEG, so longas such support costs as applicable are subject to the franchise fee cap. Second Report and Order, 22
FCC Rcd at 19637-41, paras. 10-17. We seek comment on whether these rulings should apply to state franchising as
well.
154
Order on Reconsideration, 30 FCC Rcd at 812-13, para. 7.
155
NCTA Sept. 20, 2018 Ex Parte Letter at 1 (asserting that franchising authorities at both the state and local levels
seek fees that exceed five percent of gross cable revenues, as well as substantial in-kind contributions, and urging
the Commission to seek further comment on the applicability of the proposed rules to state as well as local
franchising authorities).
20
Federal Communications CommissionFCC 18-131
156
sufficient record to apply these decisions to franchising decisions where a state is involved. The
Commission, however, indicated that it would revisit this issue in the future if it received evidence that
the findings in the First Report and Order and/or the Second Report and Order were of practical
157
relevance to the franchising process at the state level. More than ten years has passed since the
Commission first considered whether to apply its decisions interpreting Section 621(a)(1) to state-level
franchising actions and state regulations that impose requirements on local franchising. Accordingly, we
invite comment on whether we should apply the proposals and tentative conclusions discussed above, as
well as any or all aspects of the Commission’s decisions in the First Report and Order and Second Report
and Order, to state level franchising actions and state regulations that impose requirements on local
franchising. Is there any statutory basis to maintain the distinction between state-level franchising actions
and local franchising actions? Do state level franchising actions or state regulations governing the local
franchise process today impede competition or discourage investment in infrastructure that can be used to
provide services, including video, voice, and broadband Internet access service, to consumers?
IV.PROCEDURAL MATTERS
A.Initial Regulatory Flexibility Analysis
158
33.As required by the Regulatory Flexibility Act of 1980, as amended (RFA), the
Commission has prepared an Initial Regulatory Flexibility Analysis (IRFA) relating to this Second
FNPRM. The IRFA is set forth in Appendix A.
B.Initial Paperwork Reduction Act Analysis
34.This document does not contain any proposed information collections 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
35.Permit-But-Disclose. This proceeding shall be treated as a “permit-but-disclose”
159
proceeding in accordance with the Commission’s ex parte rules. Persons making ex parte presentations
must file a copy of any written presentation or a memorandum summarizing any oral presentation within
two business days after the presentation (unless a different deadline applicable to the Sunshine period
applies). Persons making oral ex parte presentations are reminded that memoranda summarizing the
presentation must (1) list all persons attending or otherwise participating in the meeting at which the ex
parte presentation was made, and (2) summarize all data presented and arguments made during the
presentation. If the presentation consisted in whole or in part of the presentation of data or arguments
already reflected in the presenter’s written comments, memoranda, or other filings in the proceeding, the
presenter may provide citations to such data or arguments in his or her prior comments, memoranda, or
other filings (specifying the relevant page and/or paragraph numbers where such data or arguments can be
found) in lieu of summarizing them in the memorandum. Documents shown or given to Commission
staff during ex parte meetings are deemed to be written ex parte presentations and must be filed
consistent with rule 1.1206(b). In proceedings governed by rule 1.49(f) or for which the Commission has
made available a method of electronic filing, written ex parte presentations and memoranda summarizing
oral ex parte presentations, and all attachments thereto, must be filed through the electronic comment
156
First Report and Order, 22 FCC Rcd at 5102 n.2; Order on Reconsideration, 30 FCC Rcd at 812-13, para. 7.
157
Order on Reconsideration, 30 FCC Rcd at 812-13, para. 7.
158
See 5 U.S.C. § 603. The RFA, see 5 U.S.C. § 601 et seq., has been amended by the Small Business Regulatory
Enforcement Fairness Act of 1996 (SBREFA), Pub. L. No. 104-121, Title II, 110 Stat. 857 (1996). The SBREFA
was enacted as Title II of the Contract with America Advancement Act of 1996 (CWAAA).
159
47 CFR §§ 1.1200 et seq.
21
Federal Communications CommissionFCC 18-131
filing system available for that proceeding, and must be filed in their native format (e.g., .doc, .xml, .ppt,
searchable .pdf). Participants in this proceeding should familiarize themselves with the Commission’s ex
parte rules.
D.Filing Requirements
36.Comments and Replies. Pursuant to sections 1.415 and 1.419 of the Commission’s rules,
47 CFR §§ 1.415, 1.419, interested parties may file comments and reply comments on or before the dates
indicated on the first page of this document. Comments may be filed using the Commission’s Electronic
Comment Filing System (ECFS). See Electronic Filing of Documents in Rulemaking Proceedings, 63 FR
24121 (1998).
•Electronic Filers: Comments may be filed electronically using the Internet by accessing the
ECFS: http://fjallfoss.fcc.gov/ecfs2/.
•Paper Filers: Parties who choose to file by paper must file an original and one copy 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. All filings must be addressed to the Commission’s
Secretary, Officeof the Secretary, Federal Communications Commission.
•All hand-delivered or messenger-delivered paper filings for the Commission’s Secretary must be
th
delivered to FCC Headquarters at 445 12 Street, SW, TW-A325, Washington, DC 20554. The
filing hours are 8:00 a.m. to 7:00 p.m. All hand deliveries must be held together with rubber
bands or fasteners. Any envelopes and boxes 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 9050 Junction Drive, Annapolis Junction, MD 20701.
th
•U.S. Postal Service first-class, Express, and Priority mail must be addressed to 445 12 Street,
SW, Washington, DC 20554.
37.Availability of Documents. Comments, reply comments, and ex parte submissions will
be available for public inspection during regular business hours in the FCC Reference Center, Federal
th
Communications Commission, 445 12 Street, SW, CY-A257, Washington, DC 20554. These
documents will also be available via ECFS. Documents will be available electronically in ASCII,
Microsoft Word, and/or Adobe Acrobat.
38.People with Disabilities. To request materials in accessible formats for people with
disabilities (Braille, large print, electronic files, audio format), send an e-mail to fcc504@fcc.gov or call
the ’s Consumer and Governmental Affairs Bureau at (202) 418-0530 (voice), (202) 418-0432
(TTY).
E.Additional Information
39.For additional information on this proceeding, contact Kathy Berthot,
Kathy.Berthot@fcc.gov, of the Media Bureau, Policy Division, (202) 418-2120.
V.ORDERING CLAUSES
40.Accordingly, IT IS ORDERED that, pursuant to the authority found in sections 1, 4(i),
303, 602, 621, 622, and 624 of the Communications Act of 1934, as amended, 47 U.S.C. §§ 151, 154(i),
303, 522, 541, 542, and 544, this Second Further Notice of Proposed Rulemaking IS ADOPTED.
41.IT IS FURTHER ORDERED that the Commission’s Consumer and Governmental
22
Federal Communications CommissionFCC 18-131
Affairs Bureau, Reference Information Center, SHALL SEND a copy of this Notice of Proposed
Rulemaking, including the Initial Regulatory Flexibility Analysis, to the Chief Counsel for Advocacy of
the Small Business Administration.
FEDERAL COMMUNICATIONS COMMISSION
Marlene H. Dortch
Secretary
23
Federal Communications CommissionFCC 18-131
APPENDIX A
Initial Regulatory Flexibility Analysis
1
1.As required by the Regulatory Flexibility Act of 1980, as amended (RFA), the
Commission has prepared this present Initial Regulatory Flexibility Analysis (IRFA) concerning the
possible significant economic impact on small entities by the policies and rules proposed in the Second
Further Notice of Proposed Rulemaking (Second FNPRM). 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 provided on the first page of the Second FNPRM. The Commission will send a copy of the
Second FNPRM, including this IRFA, to the Chief Counsel for Advocacy of the Small Business
2
Administration (SBA). In addition, the Second FNPRM and IRFA (or summaries thereof) will be
3
published in the Federal Register.
A.Need for, and Objectives of, the Proposed Rules
2.Section 621(a)(1) of the Communications Act of 1934, as amended, (Act) prohibits local
franchising authorities (LFAs) from unreasonably refusing to award competitive franchises for the
4
provision of cable television services. The Commission has adopted rules implementing Section
621(a)(1), including rules governing the treatment of certain costs and fees charged to cable operators by
LFAs and LFAs’ regulation of cable operators’ “mixed-use” networks (i.e., facilities used to provide both
5
cable services and non-cable services). In Montgomery County, Md. et al. v. FCC, the United States
6
Court of Appeals for the Sixth Circuit addressed challenges to these rules. The court directed the
Commission on remand to provide an explanation for its decision to treat cable-related, in-kind
contributions charged to cable operators by LFAs as “franchise fees” subject to the statutory five percent
7
cap on franchise fees set forth in Section 622(g) of the Act. The court also directed the Commission to
provide a statutory basis for its decision to extend its “mixed-use” ruling—which prohibits LFAs from
regulating the provision of services other than cable services offered over cable systems used to provide
8
both cable services and non-cable services—to incumbent cable operators that are not common carriers.
3.The Second FNPRM tentatively concludes that cable-related, in-kind contributions
required by LFAs from cable operators as a condition or requirement of a franchise agreement should be
treated as “franchise fees” subject to the statutory five percent franchise fee cap set forth in Section 622 of
the Act, with limited exceptions. For any franchise granted prior to 1984, Section 622(g)(2)(B)contains
1
See 5 U.S.C. § 603. The RFA, see 5 U.S.C. §§ 601-612, has been amended by the Small Business Regulatory
Enforcement Fairness Act of 1996 (SBREFA), Pub. L. No. 104-121, Title II, 110 Stat. 857 (1996). The SBREFA
was enacted as Title II of the Contract With America Advancement Act of 1996 (CWAAA).
2
See 5 U.S.C. § 603(a).
3
See id.
4
47 U.S.C. § 541(a)(1).
5
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, Report and Order and Further Notice of Proposed
Rulemaking, 22 FCC Rcd 5101 (2007) (First Report and Order), ’d sub nom. Alliance for Community Media et
al. v. FCC, 529 F.3d 763 (6th Cir. 2008) (Alliance), cert. denied, 557 U.S. 904 (2009); 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) (Second Report and
Order), recon. granted in part, denied in part, 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, Order
on Reconsideration, 30 FCC Rcd 810 (2015) (Order on Reconsideration).
6
Montgomery County, Md. et al. v. FCC, 863 F.3d 485 (6th Cir. 2017).
7
Id. at 491-92.
8
Id. at 493.
24
Federal Communications CommissionFCC 18-131
9
an exclusion for PEG support payments. For any franchise granted after 1984, Section 622(g)(2)(C)
contains a narrow exclusion covering in-kind, cable related payments for “capital costs which are required
by the franchise to be incurred by the cable operator for public, educational, or governmental \[PEG\]
10
access facilities.” Accordingly, the Second FNPRM tentatively concludes that PEG support payments
required by franchises granted prior to 1984 and PEG capital costs required by franchises granted after
1984 are cable-related, in-kind contributions excluded from the five percent cap. The Second FNPRM
also tentatively concludes that this treatment of cable-related, in-kind contributions should be applied to
both new entrants and incumbent cable operators. The Second FNPRM tentatively concludes that doing
so would ensure a more level playing field and that the FCC should not place its thumb on the scale to
give a regulatory advantage to any competitor.
4.The Second FNPRM proposes to define “cable-related, in-kind contributions” to include
“any non-monetary contributions related to the provision of cable services provided by cable operators as
a condition or requirement of a local franchise agreement, such as free or discounted cable services, and
the use of cable facilities or equipment. It does not include the cost of franchise obligations that do not
directly benefit the LFA, including, but not limited to, build-out requirements.” The Second FNPRM
further proposes that cable-related, in-kind contributions be valued for purposes of the franchise fee cap at
their fair market value.
5.Additionally, the Second FNPRM tentatively concludes that the mixed-use network
ruling should be applied to incumbent cable operators to the extent that they offer or begin offering non-
cable services, prohibiting LFAs from using their video franchising authority to regulate certain non-cable
services offered over cable systems by incumbent cable operators. The Second FNPRM tentatively
concludes that the mixed-use network ruling prohibits LFAs from regulating the provision of any services
other than cable services offered over the cable systems of incumbent cable operators that are common
carriers. Further, the Second FNPRM tentatively concludes that LFAs may not use their franchising
authority to regulate incumbent cable operators’ provision of information services, including broadband
Internet access service. The Second FNPRM also tentatively concludes that consistent with the
Commission’s decision in the Restoring Internet Freedom Order, which preempted any state or local
measures that would impose rules or requirements that the Commission repealed or decided to refrain
from imposing in that order or that would impose more stringent requirements for any aspect of
broadband service addressed in that order, LFAs are expressly preempted from requiring incumbent cable
11
operators to obtain franchises to provide broadband Internet access service.
9
47 U.S.C. § 542(g)(2)(B) (excluding from the term “franchise ” “in the case of any franchise in effect on the
date of the enactment of this title, payments which are required by the franchise to be made by the cable operator
during the term of such franchise for, or in support of the use of, public, educational, or governmental access
facilities”) (emphasis added).
10
47 U.S.C. § 542(g)(2)(C) (excluding from the term “franchise ” “in the case of any franchise granted after such
date of enactment, capital costs which are required by the franchise to be incurred by the cable operator for public,
educational, or governmental access facilities”) (emphasis added). Section 611 of the Act authorizes a franchising
authority to require a cable operator, as part of a franchise, to designate channel capacity for public, educational, or
governmental \[PEG\] use. Id. § 531.
11
Restoring Internet Freedom Order, 33 FCC Rcd at 428, para. 195. The Second FNPRM also explains that the
Commission views its proposals in this proceeding as part of its larger, ongoing effort to implement statutory
requirements to reduce regulatory barriers to infrastructure investment. See generally Accelerating Wireline
Broadband Deployment by Removing Barriers to Infrastructure Investment, Report and Order, Declaratory Ruling,
and Further Notice of Proposed Rulemaking, 32 FCC Rcd 11128 (2017) (enacting reforms to the rules and
procedures regarding pole attachments, copper retirement, and discontinuances of legacy services to better enable
providers to invest in next generation networks); Accelerating Wireless Broadband Deployment by Removing
Barriers to Infrastructure Investment, Second Report and Order, FCC 18-30 (Mar. 30, 2018) (revising the rules and
procedures for deployments subject to the National Historic Preservation Act and National Environmental Policy
Act to enable and to speed the deployment of wireless service throughout America); Accelerating Wireless
Broadband Deployment by Removing Barriers to Infrastructure Investment, Report and Order, 32 FCC Rcd 9760
(2017) (making changes to the historic preservation review requirement for replacement utility poles); Accelerating
25
Federal Communications CommissionFCC 18-131
6.The Second FNPRM also seeks comment on whether to apply the proposals and tentative
conclusions discussed in the instant proceeding, as well as the Commission’s decisions in the First Report
121314
and Order and Second Report and Order, as clarified in the Order on Reconsideration, to franchising
actions taken at the state level and state regulations imposing requirements on local franchising.
B.Legal Basis
7.The proposed action is authorized pursuant to sections 1, 4(i), 303. 602, 621, 622, and
624 of the Communications Act of 1934, as amended, 47 U.S.C. §§ 151, 154(i), 303, 522, 541, 542, and
544.
C.Description and Estimate of the Number of Small Entities To Which the Proposed
Rules Will Apply
8.The RFA directs agencies to provide a description of, and where feasible, an estimate of
15
the number of small entities that may be affected by the proposed rules, if adopted. TheRFA generally
defines the term “small entity” as having the same meaning as the terms “small business,” “small
16
organization,” and “small governmental jurisdiction.” In addition, the term “small business” has the
17
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
18
operation; and (3) satisfies any additional criteria established by the SBA. Below, we provide a
description of such small entities, as well as an estimate of the number of such small entities, where
feasible.
(Continued from previous page)
Wireless Broadband Deployment by Removing Barriers to Infrastructure Investment, Public Notice, 32 FCC Rcd
10715 (2017) (seeking comment on a proposal that would make existing infrastructure available for additional
wireless deployments on towers that previously have been unavailable).
12
In the First Report and Order, the Commission adopted time limits for LFAs to render a final decision on a new
entrant’s franchise application and established a remedy for applicants that do not receive a decision within the
applicable time frame; concluded that it was unlawful for LFAs to refuse to grant a franchise to a new entrant on the
basis of unreasonable build-out mandates; clarified which revenue-generating services should be included in a new
entrant’s franchise fee revenue base and which franchise-related costs should and should not be included within the
statutory five percent franchise fee cap; concluded that LFAs may not make unreasonable demands of new entrants
relating to PEG channels and I-Nets; adopted the mixed-use network ruling for new entrants; and preempted local
franchising laws, regulations, and agreements to the extent they conflict with the rules adopted in that order. First
Report and Order, 22 FCC Rcd at 5134-40, paras. 66-81; id. at 5143-44, paras. 89-90; id. at 5144-51, paras. 94-109;
id. at 5151-54, paras. 110-120; id. at 5155-56, paras. 121-24; id. at 5157-64, paras. 125-38.
13
In the Second Report and Order, the Commission extended to incumbent cable operators the rulings in the First
Report and Order relating to franchise fees and mixed-use networks and the PEG and I-Net rulings that were
deemed applicable to incumbent cable operators, i.e., the findings that the non-capital costs of PEG requirements
must be offset from the cable operator’s franchise fee payments, that it is not necessary to adopt standard terms for
PEG channels, and that it is not per se unreasonable for LFAs to require the payment of ongoing costs to support
PEG, so longas such support costs as applicable are subject to the franchise fee cap. Second Report and Order, 22
FCC Rcd at 19637-41, paras. 10-17.
14
Order on Reconsideration, 30 FCC Rcd at 812-13, para. 7.
15
5 U.S.C.§ 603(b)(3).
16
Id. § 601(6).
17
Id. § 601(3) (incorporating by reference the definition of “small-business concern” in 15 U.S.C. § 632). Pursuant
to 5 U.S.C. § 601(3), the statutory definition of a small business applies “unless an agency, after consultation with
the Office of Advocacy of the Small Business Administration and after opportunity for public comment, establishes
one or more definitions of such term which are appropriate to the activities of the agency and publishes such
definition(s) in the Federal Register.” 5 U.S.C. § 601(3).
18
15 U.S.C. § 632.
26
Federal Communications CommissionFCC 18-131
9.Small Businesses, Small Organizations, Small Governmental Jurisdictions. Our actions,
over time, may affect small entities that are not easily categorized at present. We therefore describe here,
19
at the outset, three broad groups of small entities that could be directly affected herein. First, while
there are industry specific size standards for small businesses that are used in the regulatory flexibility
analysis, according to data from the ’s Office of Advocacy, in general a small business is an
20
independent business having fewer than 500 employees. These types of small businesses represent
21
99.9% of all businesses in the United States which translates to 28.8 million businesses.
10.Next, the type of small entity described as a “small organization” is generally “any not-
22
for-profit enterprise which is independently owned and operated and is not dominant in its field.”
Nationwide, as of Aug 2016, there were approximately 356,494 small organizations based on registration
23
and tax data filed by nonprofits with the Internal Revenue Service (IRS).
11.Finally, the small entity described as a “small governmental jurisdiction” is defined
generally as “governments of cities, counties, towns, townships, villages, school districts, or special
24
districts, with a population of less than fifty thousand.” U.S. Census Bureau data from the 2012 Census
25
of Governments indicates that there were 90,056 local governmental jurisdictions consisting of general
26
purpose governments and special purpose governments in the United States. Of this number there were
2728
37,132 General purpose governments (county, municipal and town or township) with populations of
19
See 5 U.S.C. § 601(3)-(6).
20
See SBA, Office of Advocacy, “Frequently Asked Questions, Question 1 – What is a small business?”
https://www.sba.gov/sites/default/files/advocacy/SB-FAQ-2016_WEB.pdf (June 2016)
21
See SBA, Office of Advocacy, “Frequently Asked Questions, Question 2- How many small businesses are there in
the U.S.?” https://www.sba.gov/sites/default/files/advocacy/SB-FAQ-2016_WEB.pdf (June 2016).
22
5 U.S.C. § 601(4).
23
Data from the Urban Institute, National Center for Charitable Statistics (NCCS) reporting on nonprofit
organizations registered with the IRS was used to estimate the number of small organizations. Reports generated
using the NCCS online database indicated that as of August 2016 there were 356,494registered nonprofits with total
revenues of less than $100,000. Of this number, 326,897 entities filed tax returns with 65,113 registered nonprofits
reporting total revenues of $50,000 or less on the IRS Form 990-N for Small Exempt Organizations and 261,784
nonprofits reporting total revenues of $100,000 or less on some other version of the IRS Form 990 within 24 months
of the August 2016 data release date. See http://nccs.urban.org/sites/all/nccs-archive/html//tablewiz/tw.php where
the report showing this data can be generated by selecting the following data fields: Show: “Registered Nonprofit
Organizations”; By: “Total Revenue Level (years 1995, Aug to 2016, Aug)”; and For: “2016, ” then selecting
“Show Results”.
24
5 U.S.C. § 601(5).
25
See 13 U.S.C. § 161. The Census of Government is conducted every five (5) years compiling data for years
ending with “2” and “7”. See also Program Description Census of Government
https://factfinder.census.gov/faces/affhelp/jsf/pages/metadata.xhtml?lang=en&type=program&id=program.en.COG#
26
See U.S. Census Bureau, 2012 Census of Governments, Local Governments by Type and State: 2012 - United
States-States. https://factfinder.census.gov/faces/tableservices/jsf/pages/productview.xhtml?src=bkmk. Local
governmental jurisdictions are classified in two categories - General purpose governments (county, municipal and
town or township) and Special purpose governments (special districts and independent school districts).
27
See U.S. Census Bureau, 2012 Census of Governments, County Governments by Population-Size Group and
State: 2012 - United States-States.
https://factfinder.census.gov/faces/tableservices/jsf/pages/productview.xhtml?src=bkmk. There were 2,114 county
governments with populations less than 50,000.
28
See U.S. Census Bureau, 2012 Census of Governments, Subcounty General-Purpose Governments by Population-
Size Group and State: 2012 - United States – States.
27
Federal Communications CommissionFCC 18-131
29
less than 50,000 and 12,184 Special purpose governments (independent school districts and special
30
districts) with populations of less than 50,000. The 2012 U.S. Census Bureau data for most types of
governments in the local government category shows that the majority of these governments have
31
populations of less than 50,000. Based on this data we estimate that at least 49,316 local government
32
jurisdictions fall in the category of “small governmental jurisdictions.”
12.Wired Telecommunications Carriers. The U.S. Census Bureau defines this industry as
“establishments primarily engaged in operating and/or providing access to transmission facilities and
infrastructure that they own and/or lease for the transmission of voice, data, text, sound, and video using
wired communications networks. Transmission facilities may be based on a single technology or a
combination of technologies. Establishments in this industry use the wired telecommunications network
facilities that they operate to provide a variety of services, such as wired telephony services, including
VoIP services, wired (cable) audio and video programming distribution, and wired broadband Internet
services. By exception, establishments providing satellite television distribution services using facilities
33
and infrastructure that they operate are included in this industry.” The SBA has developed a small
business size standard for Wired Telecommunications Carriers, which consists of all such companies
34
having 1,500 or fewer employees. U.S. Census data for 2012 shows that there were 3,117 firms that
3536
operated that year. Of this total, 3,083 operated with fewer than 1,000 employees. Thus, under this
size standard, the majority of firms in this industry can be considered small.
13.Cable Companies and Systems (Rate Regulation Standard). The Commission has
developed its own small business size standards, for the purpose of cable rate regulation. Under the
(Continued from previous page)
https://factfinder.census.gov/faces/tableservices/jsf/pages/productview.xhtml?src=bkmk. There were 18,811
municipal and 16,207 town and township governments with populations less than 50,000.
29
See U.S. Census Bureau, 2012 Census of Governments, Elementary and Secondary School Systems by
Enrollment-Size Group and State: 2012 - United States-States.
https://factfinder.census.gov/faces/tableservices/jsf/pages/productview.xhtml?src=bkmk. There were 12,184
independent school districts with enrollment populations less than 50,000.
30
See U.S. Census Bureau, 2012 Census of Governments, Special District Governments by Function and State:
2012 - United States-States.
https://factfinder.census.gov/faces/tableservices/jsf/pages/productview.xhtml?src=bkmk. The U.S. Census Bureau
data did not provide a population breakout for special district governments.
31
See U.S. Census Bureau, 2012 Census of Governments, C ounty Governments by Population-Size Group and
State: 2012 - United States-States -
https://factfinder.census.gov/faces/tableservices/jsf/pages/productview.xhtml?src=bkmk; Subcounty General-
Purpose Governments by Population-Size Group and State: 2012 - United States–States -
https://factfinder.census.gov/faces/tableservices/jsf/pages/productview.xhtml?src=bkmk; and Elementary and
Secondary School Systems by Enrollment-Size Group and State: 2012 - United States-States.
https://factfinder.census.gov/faces/tableservices/jsf/pages/productview.xhtml?src=bkmk. While U.S. Census Bureau
data did not provide a population breakout for special district governments, if the population of less than 50,000 for
this category of local government is consistent with the other types of local governments the majority of the 38, 266
special district governments have populations of less than 50,000.
32
Id.
33
See 13 CFR § 120.201. The Wired Telecommunications Carrier category formerly used the NAICS code of
517110. As of 2017 the U.S. Census Bureau definition shows the NAICS code as 517311 for Wired
Telecommunications Carriers. See https://www.census.gov/cgi-in/sssd/naics/naicsrch?code=517311&search=2017.
34
13 CFR § 201.121.
35
See U.S. Census Bureau, 2012 Economic Census of the United States, Table No. EC1251SSSZ5, Information:
Subject Series - Estab & Firm Size: Employment Size of Firms: 2012 (517110 Wired Telecommunications Carriers).
https://factfinder.census.gov/bkmk/table/1.0/en/ECN/2012_US/51SSSZ5//naics~517110.
36
Id.
28
Federal Communications CommissionFCC 18-131
37
Commission’s rules, a “small cable company” is one serving 400,000 or fewer subscribers, nationwide.
Industry data indicate that, of 4,600 cable operators nationwide, all but 9 are small under this size
38
standard. In addition, under the Commission’s rules, a “small system” is a cable system serving 15,000
39
or fewer subscribers. Industry data indicate that, of 4,600 systems nationwide, 3,900 have fewer than
40
15,000 subscribers, based on the same records. Thus, under this second size standard, the Commission
believes that most cable systems are small.
14.Cable System Operators. The Act 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
41
gross annual revenues in the aggregate exceed $250,000,000.” There are approximately 52,403,705
42
cable subscribers in the United States today. Accordingly, an operator serving fewer than 524,037
subscribers shall be deemed a small operator, if its annual revenues, when combined with the total
43
revenues of all its affiliates, do not exceed $250 million in the aggregate. Based on the available data,
we find that all but nine independent cable operators are affiliated with entities whose gross annual
44
revenues exceed $250 million. Although it seems certain that some of these cable system operators are
affiliated with entities whose gross annual revenues exceed $250 million, we note that the Commission
neither requests nor collects information on whether cable system operators are affiliated with entities
45
whose gross annual revenues exceed $250 million, and therefore we are unable to estimate more
accurately the number of cable system operators that would qualify as small under the definition in the
Communications Act.
15.Open Video Services. Open Video Service (OVS) systems provide subscription services.
46
The open video system framework was established in 1996, and is one of four statutorily recognized
47
options for the provision of video programming services by local exchange carriers. The OVS
framework provides opportunities for the distribution of video programming other than through cable
48
systems. Because OVS operators provide subscription services, OVS falls within the SBA small
37
47 CFR § 76.901(e). The Commission determined that this size standard equates approximately to a size
standard of $100 million or less in annual revenues. Implementation of Sections of the 1992 Cable Act: Rate
Regulation, Sixth Report and Order and Eleventh Order on Reconsideration, 10 FCC Rcd 7393, 7408 (1995).
38
The number of active, registered cable systems comes from the Commission’s Cable Operations and Licensing
System (COALS) database on August 15,2015. See FCC, Cable Operations and Licensing Systems (COALS),
www.fcc.gov/coals (last visited Oct.25, 2016).
39
47 CFR § 76.901(c).
40
See supra note 34.
41
47 U.S.C. § 543(m)(2); see also 47 CFR § 76.901(f) & nn.1–3.
42
See SNL Kagan at http://www.snl.com/interactivex/MultichannelIndustryBenchmaks.aspx.
43
47 CFR § 76.901(f); see FCC Announces New Subscriber Count for the Definition of Small Cable Operator,
Public Notice, 16 FCC Rcd 2225 (Cable Services Bur. 2001).
44
See SNL Kagan at http//:www.snl.com/interactivex/TopCableMSOs.aspx.
45
The Commission does receive such information on a case-by-case basis if a cable operator appeals a local
franchise authority’s finding that the operator does not qualify as a small cable operator pursuant to § 76.901(f) of
the Commission’s rules.
46
See 47 U.S.C. § 573.
47
Id. § 571(a)(3)-(4). Annual Assessment of the Status of Competition in the Market for the Delivery of Video
th
Programming, Thirteenth Annual Report, 24 FCC Rcd 542, 606, para. 135 (2009) (13 Annual Report).
48
See 47 U.S.C. § 573.
29
Federal Communications CommissionFCC 18-131
49
business size standard covering cable services, which is “Wired Telecommunications Carriers.” The
SBA has developed a small business size standard for this category, which is: all such firms having 1,500
50
or fewer employees. To gauge small business prevalence for the OVS service, the Commission relies
on data currently available from the U.S. Census for the year 2012. According to that source, there were
3,117 firms that in 2012 were Wired Telecommunications Carriers. Of these, 3,083 operated with less
51
than 1,000 employees. Based on this data, the majority of these firms can be considered small. In
addition, we note that the Commission has certified some OVS operators, with some now providing
52
service. Broadband service providers (BSPs) are currently the only significant holders of OVS
53
certifications or local OVS franchises. The Commission does not have financial or employment
information regarding the entities authorized to provide OVS, some of which may not yet be operational.
Thus, at least some of the OVS operators may qualify as small entities. The Commission further notes
that it has certified approximately 45 OVS operators to serve 116 areas, and some of these are currently
54
providing service. Affiliates of Residential Communications Network, Inc. (RCN) received approval to
operate OVS systems in New York City, Boston, Washington, D.C., 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 44 OVS operators (those remaining) might qualify as small businesses
that may be affected by the rules and policies adopted herein.
D.Description of Projected Reporting, Recordkeeping, and Other Compliance
Requirements
16.The rules proposed in the Second FNPRM would not impose any additional reporting or
recordkeeping requirements and any compliance requirements imposed by the proposed rules are
expected to have only a de minimis effect on small governmental jurisdictions. LFAs would continue to
perform their role of reviewing and making decisions on applications for cable franchises and any
modifications to the local franchising process resulting from the proposed rules would further streamline
that process. The proposed rules would streamline the local franchising process by providing guidance as
to the appropriate treatment of cable-related, in-kind contributions demanded by LFAs for purposes of the
statutory five percent franchise fee cap, what constitutes “cable-related, in-kind contributions,” and how
such contributions are to be valued. In addition, the proposed rules would streamline the local franchising
process by making clear that LFAs may not use their video franchising authority to regulate the provision
of certain non-cable services offered over cable systems by incumbent cable operators.
E.Steps Taken to Minimize Significant Economic Impact on Small Entities and
Significant Alternatives Considered
17.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
49
13 CFR § 201.121. The Wired Telecommunications Carrier category formerly used the NAICS code of 517110.
As of 2017 the U.S. Census Bureau definition shows the NAICS code as 517311 for Wired Telecommunications
Carriers. See https://www.census.gov/cgi-in/sssd/naics/naicsrch?code=517311&search=2017.
50
13 CFR § 201.121.
51
See U.S. Census Bureau, Table EC1251SSSZ5, https://www.census.gov/cgi-
in/sssd/naics/naicsrch?code=517311&search=2017.
52
A list of OVS certifications may be found at https://www.fcc.gov/general/current-filings-certification-open-video-
systems#block-menu-block-4.
53
See 13th Annual Report, 24 FCC Rcd at 606-07, para. 135. BSPs are newer firms that are building state-of-the-
art, facilities-based networks to provide video, voice, and data services over a single network.
54
See https://www.fcc.gov/general/current-filings-certification-open-video-systems#block-menu-block-4.
30
Federal Communications CommissionFCC 18-131
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
55
small entities.”
18.To the extent that the proposed rules are matters of statutory interpretation, we tentatively
find that the proposed rules are statutorily mandated and therefore no meaningful alternatives exist.
Moreover, as noted above, the proposed rules are expected to have only a de minimis effect on small
governmental jurisdictions. The proposed rules would streamline the local franchising process by
providing additional guidance to LFAs.
19.In addition, the proposal to treat cable-related, in-kind contributions as “franchise fees”
subject the statutory five percent franchise fee cap, with one limited exception, would benefit small cable
operators by ensuring that LFAs do not circumvent the statutory five percent cap by demanding, for
example, unlimited free or discounted services. This in turn would help to ensure that local franchising
requirements do not deter small cable operators from investing in new services and facilities.
F.Federal Rules that May Duplicate, Overlap, or Conflict With the Proposed Rules
20.None
55
5 U.S.C.§ 603(c)(1)-(4).
31
Federal Communications CommissionFCC 18-131
STATEMENT OF
COMMISSIONER MICHAEL O’RIELLY
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, MB Docket
No. 05-311
The market for communications services is dramatically changing before our very eyes, making many
parts of current law and Commission regulations vastly anachronistic. Unregulated over-the-top
providers have achieved enormous popularity and success. For this and other reasons, I have endorsed
efforts by Congress to rewrite the Communications Act, particularly Title VI, which governs a significant
portion of the video services offered by traditional video providers. Moreover, I have pushed the
Commission to update its own rules and internal structure to reflect the current and future marketplace for
video and other services. With such a dynamic video marketplace and a shrinking role of franchise
authorities, it is unsurprising that the latter entities are under intense pressure – both financial and political
– to expand their reach outside their respective jurisdictions into various businesses and activities of local
video franchisees. But such unauthorized expansion is wrong and must be curtailed.
After a remand from the United States Court of Appeals for the Sixth Circuit, this item appropriately and
justifiably starts the procedural steps to prevent the overreach of franchise authorities in two instances.
First, it correctly proposes to count cable-related “in kind” contributions against the cap on franchise fees.
The absence of such a limitation leaves franchise authorities with the ability to end-run the fee cap,
making a mockery of the law. And this ’t simply a theoretical issue, as there are concrete instances in
which franchise authorities have already abused their powers to force these “contributions.” Beyond
violating their legal authority, such efforts have many destructive impacts, including directly increasing
consumer costs and indirectly harming the ability of providers to deploy and offer service.
Second, the item properly seeks comment on the tentative conclusion that franchise authorities cannot
impose regulatory burdens on incumbent non-cable services. Title VI only authorizes franchise
authorities to oversee or regulate certain aspects of cable services, not other portions of a cable provider’s
business. Without our action today, which is consistent with past Commission rulings, franchise
authorities would be emboldened to intervene, impose mandates, extract concessions and more on host of
services outside the scope of Congress’ directive. In fact, absent our action, it’s hard to see any
boundaries to the meddling of franchise authorities, creating the perverse circumstance in which such
non-cable services could be regulated by multiple governmental layers, generating confusing and
conflicting obligations.
Consistent with this approach, I am pleased that the Chairman added my request to seek comment on
whether statewide cable provider franchises should be subject to similar limitations asthose enacted for
local franchise authorities. Authorizing or implementing statewide franchising doesn’t eliminate the
possibility of the same type of overreach inflicted by local franchise authorities, and we must curtail these
efforts as well.
Lastly, I appreciate Chairman ’s willingness to expand our media modernization effort for cable
services beyond the fairly technical items. Until recent life events took over, I had been working on a
project to outline significant, substantive reforms that the Commission can and should pursue to reflect
the current marketplace. While critical, some of these actions may require alterations of law, but doing so
would provide a pathway for Congress to consider the same, if it was so inclined.
32
Media Contact:
Janice Wise, (202) 418-8165
janice.wise@fcc.gov
For Immediate Release
FCC SEEKS FURTHER COMMENT ON PROPOSALS TO REDUCE
BARRIERS TO INFRASTRUCTURE INVESTMENT
WASHINGTON, September 25, 2018—The Federal Communications Commission adopted a
Second Further Notice of Proposed Rulemaking (FNPRM) yesterday to address how local
franchising authorities’ (LFAs) may regulate cable operators. Specifically, the Second FNPRM
addresses two issues raised by a remand from the U.S. Court of Appeals for the Sixth Circuit in
Montgomery County, MD. v. FCC.
In the Second FNPRM, the FCC advances proposals that are intended to place new entrants
and incumbent cable operators on an equal regulatory footing and remove obstacles to the
deployment of broadband.
The Second FNPRM tentatively concludes, with certain limited exceptions, that cable-related,
in-kind contributions required under afranchise agreement, such as free or discounted cable
service to local governments, should betreated as “franchise fees” subject to the statutory five
percent cap on such fees.
The item also tentatively concludes that LFAs are prohibited by federal law from using their
video franchising authority to regulate most non-cable services offered over cable systems by
incumbent cable operators, including information services, such as broadband Internet access
service. Under this proposal, LFAs would not be precluded from regulating institutional
networks.
In addition, the Second FNPRM seeks comment on whether to apply the proposals and
tentative conclusions discussed in the Second FNPRM, as well as prior Commission decisions
addressing LFA regulation of cable operators, to state-level franchising actions and state
regulations that impose requirements on local franchising.
###
Office of Media Relations: (202) 418-0500
ASL Videophone: (844) 432-2275
TTY: (888) 835-5322
Twitter: @FCC
www.fcc.gov/media-relations
This is an unofficial announcement of Commission action. Release of the full text of a Commission order constitutes
official action. See MCI v. FCC, 515 F.2d 385 (D.C. Cir. 1974).
SUMMARY OF THE FCC’S SECOND FURTHER NOTICE OF PROPOSED
RULEMAKING ON CABLE FRANCHISE FEES AND MIXED-USE NETWORKS
On September 25, 2018, theFCC released a Second Further Notice of Proposed Rulemaking
proposing new rules that, if adopted, likely will have a significant impact on cable franchise fees,
PEG channels and other common cable-related obligations in cable franchiseagreements. The
proposed rules also would preempt local regulations of non-cable servicesprovided by certain
incumbent cable operators, potentially creating disparitiesbetween cable operators and non-cable
operators in the applicability of these regulations.
Specifically, the FNPRM proposesnew rules thatwould:
Allow all cable-related, in-kind contributions, other than PEG capital costs and build out
requirements, tobe treated as “franchise fees” subject to the 5% franchise fee cap.
o This holding would appear to allow cable operators to deduct from their cable
franchise fee payments the value of franchise requirements such asPEG channel
capacity, connections toprogramming origination points, andcomplementary cable
services to schools and other public buildings.
o The FNPRM proposesthat the value to be deducted would be the fair market value
of these “contributions,”though the Commissionrequests comment on whether it
instead should be the cable operators’ costs.
Prohibit local franchising authorities fromregulating thenon-cable services offered over
cable systems,other thanI-Nets, and prohibit LFAs fromregulating thefacilities and
equipmentused in the provision of these non-cable services.
o This holding would apply to incumbent cable operators that are common carriers,
and the FNPRM seeks comment on whether it should also apply to cable operators
that are not common carriers.
o Though it is ambiguous, the proposed rule can be read to allow certain cable
operators to construct and install facilities and equipment for non-cable services in
the rights of way without any local regulation or compensation, which raises safety
considerations and potentialdisparities in the application of regulations among
competing providers.
Potentially apply to state-level franchising actions. Unlike the draft FNPRM, which
expressly excluded state-leveling franchising actions,the final FNPRMseeks comment on
whether the new rules should apply to both state and local franchising actions.
Comments on the proposed rules will be due 30 days after the FNPRM is published in the
Federal Register. Reply comments will be due 60 days after such publication.
Town of Lexington, Massachusetts
OFFICE OF SELECTMEN
SUZANNE E. BARRY, CHAIRMAN
JOSEPH N. PATO
MICHELLE L. CICCOLO
DOUGLAS M. LUCENTETEL: (781) 698-4580
JILL I. HAI FAX:(781) 863-9468
Before the
Federal Communications Commission
Washington, D.C. 20554
In the Matter of
Implementation of Section 621(a)(1) of the CableMB Docket No. 05-311
Communications Policy Act of 1984 as Amended
by the Cable Television ConsumerProtection and
Competition Act of 1992
COMMENTS OF BOARD OF SELECTMEN | TOWN OF LEXINGTON, MA
The Board of Selectmen of Lexington, Massachusetts appreciates the opportunity to file comments on the Second
Further Notice and Proposed Rulemaking(“FNPRM”) in the above-referenced docket. Lexington Community Media
Center, Inc.(LexMedia) which operates public, educational and governmental channels for approximately 10,0000
subscriber in the Town of Lexington, MA would be put at risk. We strongly oppose the tentative conclusion in the
FNPRM that cable-related in-kind contributions, such as those that allow our programming to be viewed on the cable
system, are franchise fees.
LexMedia is a highly valued asset to the town. It produces over 800 hours of community programming a year, a
majority governmental programming. In the last year, LexMedia made over 200 town government meetings available for
public viewing on its channels, service residents rely upon to stay informed and involved in town affairs. The education
channel offers a wide variety of programming from life-long learning to school activities to youth produced programs. On
the public channel and all its channels, LexMedia is dedicated to bringing a voice to our community and provide an outlet
for creative expression, thereby preserving the free-thinking, free-speech legacy of Lexington.
1625 MASSACHUSETTS AVENUE ·LEXINGTON, MASSACHUSETTS 02420
e-mail selectmen@lexingtonma.gov
We reject the implication in the FNPRM that PEG programming is for the benefit of the local franchising
authority (LFA) or a third-party PEG provider, ratherthan for the public or the cable consumer. As demonstrated above,
LexMedia provides valuable local programming that is not otherwise available on the cable system or in other modes of
video delivery such as satellite. Yet the Commission tentatively concludes that non-capital PEG requirements should be
considered franchise fees because they are, in essence, taxes imposed for the benefit of LFAs or their designated PEG
providers. By contrast, the FNPRM tentatively concludes that build-out requirements are not franchise fees because they
are not contributions to the franchising authority. The FNPRM then requests comment on “other requirements besides
build-out obligations that are not specifically for the use or benefit of the LFA or an entity designated theLFA and
therefore should not be considered contributions to an LFA.” PEG programming fits squarely into the category of benefits
that do not accrue to the LFA or its designated access provider, yet the Commission concludes without any discussion of
the public benefits of local programming that non-capital PEG-related provisions benefit the LFA or its designee rather
than the public at large.
We appreciate the opportunity to add to the record in this proceeding.
Respectfully submitted,
Suzanne E. Barry
Chairmen
November 13, 2018
1625 MASSACHUSETTS AVENUE · LEXINGTON, MASSACHUSETTS 02420
e-mail selectmen@lexingtonma.gov
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