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FCC Eyeing Local Franchises?

Cable’s political war with local phone giants, so far played out at the state and local levels, could be moving to higher ground: the Federal Communications Commission.

According to two high-ranking FCC officials, chairman Kevin Martin is ready to examine the scope of the agency’s authority to elbow aside local governments if they are hindering efforts by SBC Communications Inc. and Verizon Communications Inc. to obtain permission to offer video service.

Martin is hoping to launch the effort formally at the agency’s Nov. 3 public meeting. The officials did not say whether the FCC would begin with a notice of inquiry, which is designed to collect information, or with a notice of proposed rulemaking, which usually signals that it intends to adopt rules.

Since reviving their interest in offering video in competition with cable incumbents, SBC and Verizon have argued that the local franchising process is slow and outdated.

Texas recently responded by creating a statewide-franchise process designed to expedite entry. The Texas Cable & Telecommunications Association is fighting the new law in federal court.

The stakes are high for both industries. Cable wants to protect its turf from new entrants granted easy terms and conditions never offered to cable incumbents. Meanwhile, the regional Bell operating companies don’t want to see billions of dollars in planned capital investment held up by tedious negotiations with myriad local officials.

At Martin’s request, FCC staff has been studying a provision in the 1992 Cable Act that states that a city “may not unreasonably refuse to award an additional competitive franchise.” The provision was added in conjunction with other language that ended the practice of awarding exclusive franchises.

Martin’s interest in a federal solution could relieve SBC and Verizon from having to go up against cable lobbyists when trying to persuade friendly state governments to adopt the Texas model.

In September, Verizon called on the FCC to enforce section 621(a) of the 1992 Cable Act in a manner that limits demands made by local governments.

“These include unreasonable delay, unreasonable buildout and ‘level-playing-field’ requirements, and unreasonable demands by [local governments], including any that are unrelated to the provision of video service,” Verizon said in comments filed with the FCC Sept. 19.

The National Cable & Telecommunications Association, responding to Verizon’s request, told the FCC that if the agency adopts rules, it should ensure that they apply equally to new entrants and incumbents.

“It would be inappropriate to initiate an inquiry whose sole or primary intent is to relieve new competitors alone of core [cable law] obligations, while incumbent cable operators remain subject to such requirements and responsibilities,” the trade group said in an Oct. 11 FCC filing.

In a request far broader than Verizon’s, SBC asked the FCC in May to declare that Internet-protocol-video networks bear no resemblance to traditional cable networks and, therefore, no franchising requirements apply. The FCC has that request under review in a separate proceeding on the regulatory classification of IP-enabled services.

“The FCC is highly sympathetic to the Bells. They just have limited authority to fix this problem,” Precursor media and telecommunications analyst Scott Cleland said. “You can’t wave a magic wand and eliminate [cable law] authority.”