Saturday, April 22, 2006

Virginia's new cable franchise law

I've been studying the new cable franchise law. It adds to the lexicon the concept of the "ordinance cable franchise."

This blog post analyzes the concept, with the implication that the new law is favorable to the telephone companies, whether for good or for ill.

This VML update has some history. It says, in part:

"Final compromise reached on cable TV competition bill

After more than a year of off-and-on negotiations, a final deal has been struck on legislation designed to promote competition in the cable television industry. HB 1404 (Griffith) and SB 706 (Stolle), identical bills that rewrite how cable TV will be offered and regulated in Virginia, will have a significant effect on many local governments.

. . .


Verizon began pushing for new rules in the 2005 session of the General Assembly. That bill failed, but discussions continued. VML negotiated with Verizon extensively during the 2005 session and into the fall of 2005. In the 2006 session two competing legislative proposals were introduced: one for Verizon and one for the cable TV industry. The four patrons of the bills put all of the industry representatives in a room with a mediator with the charge to develop a single proposal. Local governments were not allowed in the negotiations.

The results of the closed-door negotiations were SB 706 and HB 1404. VML and VACo started work on the bills once they were introduced at General Assembly committee meetings. The four patrons committed to receiving input from the two associations. VML and VACo solicited ideas from local governments and received about 20 suggested amendments. The associations drafted a joint set of amendments and presented them to the patrons and industry. During a meeting last week between industry representatives and VML and VACo, some 40 separate local government amendments were presented. Industry accepted many of the amendments and rejected others. Some were major and some were minor. The four patrons accepted all of the amendments to which the industry representatives agreed.

How the legislation works

The bill generally applies only when a business, usually a telephone company, comes to a locality to provide cable TV in competition with the existing cable operator. Prior to the time that a competitor comes to town, however, the only time the existing operator may use the provisions of the bill is when its franchise agreement is coming to an end or has ended. See Va. Code § 15.2-2108.30.

The existing company must continue to pay its franchise fees, as does the new company. In addition, the new company must pay additional fees so that its share of the total cost of public, educational and government access (PEG) programming and the cost of institutional networks (INET) are covered.

When the competitor comes to town, the locality enters negotiations for a franchise agreement. The agreement may not be more 'onerous' than the rules for the existing operators. (Va. Code § 15.2-2108.20.B) or that unreasonably prejudice either the new entrant or existing operator. This means that if an agreement is negotiated with the new company, the agreement will end up looking much like the existing franchise agreement.

To start the process, the new company files a request to negotiate a franchise. Then, it enters a too-short 45-day period of negotiations. The negotiations may go longer, but at the 46th day, the applicant may file notice that it will begin service in 30 days. Once that happens, the locality adopts a unilateral ordinance setting the rules. The ordinance terms are largely regulated by the new legislation. The process is set up so that the new company begins offering cable service without having received any authority to do so. The ordinance is retroactive to the date service began. The local government must adopt it within 120 days of the filing of the notice by the applicant."

The Northern Virginia Technology Council had this summary:

"These bills provide for a compromise measure which enables Verizon to enter local cable markets quicker while also seeking to provide a level competitive playing field for cable companies. Under the legislation, which now heads to Governor Kaine for his signature, localities would have 45 days to negotiate an agreement with Verizon and in the event an agreement is reached, cable providers would have the right to opt-in to the same terms and conditions as Verizon or to retain their existing agreements. In the event Verizon and a locality are unable to negotiate a deal and come to terms within 45 days, Verizon would be authorized to seek an "ordinance cable franchise" in which case Verizon could begin offering cable 30 days later and in which the case the locality would have 120 days to enact an ordinance that provides for Verizon's entry into the locality. The ordinance would have to extend terms and conditions comparable to those extended to the cable companies in regards to franchise fees, educational and governmental services, audits and reporting requirements, availability of the service to residents, rights of way fees and other provisions."

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