By Martin H. Bosworth
ConsumerAffairs.Com
July 9, 2008
A federal circuit court has ruled that the Federal Communications Commission (FCC) was within its rights to authorize new video franchising rules that enable telecom companies such as AT&T and Verizon to launch new services in local markets with less regulation than their competitors in the cable industry.
The three-judge panel ruled that the FCC "acted well within its statutorily delineated authority in enacting the Order and that there exists sufficient record evidence to indicate that the FCC did not engage in arbitrary and capricious rulemaking activity."
Telecom companies have been lobbying heavily at the state level to enact statewide video franchising legislation, bypassing local municipalities in order to accelerate buildouts and compete with cable companies for Internet and cable customers in heavily contested -- usually affluent -- regions.
The new FCC rules, published in March 2007, mandated that local municipalities had to limit consideration time of a new franchise in the area to six months, and franchises with existing services in the area to 90 days. The rules also prohibited requirements for "buildouts" of a new franchise, such as mandating that a telecom company provide service to lower-income residents in the area.
The rules were immediately challenged by numerous state and local advocacy groups as constraining the power of localities in favor of global telecom conglomerates. The cable industry also attacked the rules as unfair, given that they still had to abide by local franchising rules and buildout requirements.
But the court found that the FCC's rules were reasonable in order to promote heavier competition of video services for new customers.
Reasonable rules
"[T]he reasons mobilizing the FCC to promulgate these time limits appear more than reasonable," the court said. "Due to protracted franchise negotiations, the agency found that prospective entrants were abandoning attempts to join the cable market and acceding to otherwise unacceptable franchise terms simply to expedite the process."
The court presented as evidence 465 comments received during the rulemaking period on the new franchise rules, including comments from telecom competitors such as Verizon and BellSouth.
"For example, Verizon's comments indicated that, of its 113 franchise negotiations pending as of March 2005, only ten resulted in franchise grants after one year," the Court said. "[C]omments submitted by service provider Qwest indicated that it withdrew franchise applications in eight different regions due to economically burdensome build-out requirements."
FCC chairman Kevin Martin hailed the ruling as a tool to give consumers more choice. "Over the last ten years, cable rates have more than doubled," Martin said.
Consumers need greater choice and more competition to help address the soaring price of cable television. This ruling helps ensure that new competitors to cable are not subjected to unreasonable delays, build-out requirements and fees when trying to compete with the incumbent cable operators."
Martin, a longtime friend of telecom interests and foe to cable companies, was called to testify before the House Commerce Committee in March 2007, along with the other Commissioners.
The video franchise ruling was used by committee chairman Rep. John Dingell (D-MI) as an example of what he believed was the agency's overreach of its mandate. "[Franchise reform] is not the role of the FCC. The Commission chose to ignore the well-settled divisions of responsibilities, that is unwise," Dingell said at the time.
