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FCC Challenges OVS Decision

Washington -- The Federal Communications Commission is
seeking a rehearing on a federal court ruling that cities may require open-video-system
operators to obtain local franchises.

In its OVS rules, the FCC pre-empted cities from imposing
franchises. The commission said its decision tracked with the Telecommunications Act of
1996, which stated that OVS operators did not need franchises like traditional cable

However, a three-judge panel of the U.S. Court of Appeals
for the Fifth Circuit said in January that although the law established that OVS
franchises were unnecessary, it did not automatically preclude cities and states from
forcing OVS operators to sign franchise agreements.

The FCC asked the panel and the Fifth Circuit en banc to
rehear arguments on the franchise issue.

The FCC said Congress promised OVS operators fewer
regulatory restrictions than incumbent cable operators if they were willing to allow
unaffiliated programmers to occupy up to two-thirds of their channels.

But the commission added that the court's holding
"eviscerates" the intent of Congress, and that the decision effectively
destroyed any incentive for companies to choose OVS over cable.

"It is difficult, if not impossible, to imagine why
any company would choose to provide OVS service if it is required both to obtain a local
franchise and to share its channel capacity with other programmers," the FCC said in
a March 3 filing.

The FCC declined to seek rehearings on other OVS policies
that were struck down.

For example, the court said the commission erred by saying
that cable operators not subject to effective competition were barred from converting to
OVS even if they were certified to provide local phone service.