In Volume 2, Issue 1 (Spring, 2005):
• State Issues Renewal Guidelines
• Municipalities Rev Up for Verizon Cable
• Supreme Court to Hear Brand X Case in March
• ACM Northeast to Hold Conference
• Comcast & Time Warner Bid on Bankrupt Adelphia Communications
State Issues Renewal Guidelines
and Amends License Application
The Massachusetts Cable Television Division recently issued an advisory Policy Statement on license renewal and municipal ascertainment of community cable-related needs. The Cable Division’s Policy Statement also amended the cable license renewal and initial license application form (Form 100).
Declaring that “the importance of ascertainment cannot be overstated,” the Cable Division’s Policy Statement focused on the license renewal ascertainment process and the role of the license application form in the provision of information to municipal franchise issuing authorities. Ascertainment is the process prescribed by federal law by which issuing authorities identify community cable-related needs and interests through public hearings, surveys, focus groups and research. Cable operators had proposed a requirement that ascertainment terminate 18 months prior to license expiration. In comments filed on behalf of twenty-three municipalities and access centers, Epstein & August, LLP, with the support of the Massachusetts Municipal Association and the Alliance for Community Media-Northeast, urged that this proposal would drastically reduce the time period for municipal ascertainment. While the Cable Division’s Policy Statement rejected the industry’s proposal, the Cable Division did, however, recommend that municipalities complete ascertainment 12-6 months before expiration. It should be noted that the Policy Statement section on license renewal is advisory; it is not a new regulation.
The revised Form 100 went into effect on January 1, 2005. The Cable Division stated that the license application is the minimum documentation that must be presented to Issuing Authorities. In its Policy Statement, the Cable Division emphasized that use or filing of the new license application form “in no way limit[s] the rights of the Issuing Authority to request additional relevant information…we specifically state that the Issuing Authority may ask an applicant for additional, relevant information.” Significantly, the Cable Division also clarified that the license application should not generally be treated as a formal renewal proposal unless and until the Issuing Authority has first concluded ascertainment or requested filing of such a formal renewal proposal.
The Cable Division clarified that the license application must include a statement regarding how the cable operator’s proposed service offerings differ from current offerings. Over cable operator objections, the Cable Division retained questions concerning Local Origination and PEG Access, and further required applicants to reveal their proposed amount of financial support. The Cable Division added a question requiring applicants to state their intentions concerning maintenance and/or construction of an I-Net.
Municipalities Rev Up
for Verizon Cable Licensing
Verizon is currently seeking cable licenses in approximately 23 northeast Massachusetts municipalities and reports it will be seeking additional cable licenses throughout much of Massachusetts and other states.
Initial discussions between Verizon and municipal officials have addressed matters such as licensing rules, Verizon’s fiber build, known as fiber to the premises (FTTP), and “level playing field” language in existing cable licenses. Municipal officials have emphasized their desire to have Verizon match or exceed the incumbent licensee’s provision of license terms and conditions, at a minimum to the extent required under existing level playing field terms (if any).
Verizon’s entry into cable licensing will require municipalities to implement initial licensing procedures, which are substantially different from renewal licensing. Accordingly, municipal officials in Massachusetts need to familiarize themselves with initial licensing procedures described below.
Depending upon the form of municipal charter in a community, the Issuing Authority can commence initial licensing by an initial selectmen’s, Mayor’s or City Manager’s decision. The Issuing Authority then advertises for license applications to be submitted to the community from any and all bidders. Once received, the Issuing Authority reviews license application(s) received and prepares an “Issuing Authority Report” (“IAR”) which will include specifications for a new cable television license. The license applicant(s) then submits a revised application in response to the IAR. If Verizon is the only applicant, the municipality and Verizon may engage in direct negotiations. If there are multiple applicants, which is unlikely, the municipality must treat the applications as competitive bids. Because the initial licensing process is open to multiple applicants, the Cable Division’s rules are designed for a competitive bidding process (in contrast to license renewal in which the municipality must address the incumbent licensee on a stand-alone basis). Essential details regarding the foregoing procedures may be found in 207 Code of Massachusetts Regulations 3.00 et seq.
Municipal officials should consider the licensing process only after carefully considering level playing field language, if any, in the incumbent’s license. Because some level playing field clauses may allow a current cable provider to ask for amendment of existing license provisions if it can demonstrate that the new cable provider has received more favorable terms, it is essential to negotiate a Verizon license that contains provisions that are not more favorable or less burdensome than those in the incumbent’s license. Although not binding law in Massachusetts, a recent Connecticut case illustrates potentially applicable level playing field clause principles. The Connecticut Department of Public Utility Control was upheld in its ruling that level playing field equivalency between new and incumbent cable licenses could be gauged by comparing the aggregate burdens and benefits of the two licenses when taken as a whole, and equivalency need not be established on an item-by-item basis. United Cable Television Services Corp. v. Dept. of Public Utility Control, 235 Conn. 334 (1995).
Another municipal concern is Verizon’s reported efforts to seek further federal deregulation of municipal licensing requirements, which could undermine municipal licensing efforts. Some municipal officials are concerned that Verizon is representing that it will be subject to local licensing at the same time Verizon is reported to be seeking federal relief from that same licensing.
Supreme Court to Hear
Brand X Case in March
The U.S. Supreme Court granted the Federal Communication Commission’s petition for certiorari in FCC v. Brand X Internet Services. The case involves the landmark issue of whether cable modem service should be defined as a telecommunications service, cable service or as an information service.
Each such classification results in dramatically different regulatory and municipal treatment. If the Supreme Court upholds an earlier FCC ruling, cable modem service will be classified as a mostly deregulated “information service” not subject to cable service licensing and therefore not subject to franchise fees, among other things. Likewise, an information service is not subject to common carrier regulation under Title II of the Telecommunications Act of 1996.
The U.S. Court of Appeals for the 9th Circuit held in Brand X that cable modem service was a combination telecommunications and information service. Under that decision, cable modem services would not be subject to the cable television regulatory scheme, including licensing. However, these services could be subject to diverse state and federal common carrier regulatory frameworks.
Municipalities generally would prefer to see cable modem service defined as a cable service, since it would then be subject to municipal licensing, as is cable television. The case will be argued before the Supreme Court on March 29, 2005.
ACM Northeast To Hold Conference
The Alliance for Community Media is holding its Spring conference for the Northeast on May 12-13, 2005. Entitled “Changing Tides”, the conference will feature workshops, speakers, and roundtable discussions, including:
· Public policy workshops on Verizon licensing and license renewals;
· “Ask the Lawyers” Panel;
· Community television studio management and fundraising;
· Trade show Thursday, May 12th.
The conference is co-sponsored by the Massachusetts chapter of the National Association of Telecommunications Officers and Advisors (NATOA). It will be held at the Seacrest Resort and Conference Center in Falmouth, MA.
Additional information and registration forms are available online at www.acm-ne.org
Comcast & Time Warner Bid on
Bankrupt Adelphia Communications
Thirty-six Massachusetts municipalities with Adelphia Communications, Corp. cable systems, and many more New England licensing authorities, will be conducting license transfer proceedings if Adelphia accepts recent acquisition bids. In addition to other bids, Comcast and Time Warner tendered a joint bid for Adelphia, worth approximately $17 billion. Colorado-based Adelphia is the fifth largest cable provider in the United States.
Adelphia filed for bankruptcy in June 2002 and is attempting reorganization. Adelphia began the sale process in November 2004. A sale of Adelphia would trigger municipal transfer proceedings under state and federal transfer rules. License transfer proceedings provide municipalities an opportunity to ensure that the new cable provider will “step into the shoes” of the existing cable provider. Municipal officials may review the transferee’s intent to fulfill existing license provisions and more generally review the transferee’s management, financial, technical and legal qualifications.
In Massachusetts, transfer is governed by Cable Division transfer regulations set forth at 207 CMR 4.00 et seq. State and federal regulations allow the municipality 120 days from the filing of a completed transfer application form to take final action on the proposed transfer.
The "Municipal Wire" is a newsletter produced by Epstein & August, LLP. The Municipal Wire focuses on developments in cable television regulation and related municipal technology issues. Readers are advised that the newsletter is for general information purposes and should not be applied to individual situations without inquiry or legal counsel as needed.
Editor's Note: The Municipal Wire is published by Epstein & August, LLP, a partnership of attorneys Bill August and Peter Epstein. We look forward to sharing information on local, state and federal cable television, telecommunications and public right-of-way issues. We extend special thanks to Marc Lucas for his editorial assistance. Copyright Epstein& August, LLP.
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