FCC Video Rules Have Telco Tinge

The Federal Communications Commission (FCC) has clarified its new video franchise rules, issuing a previously adopted order that makes it easier for phone companies to offer video service in new markets. (See FCC Approves Telco-Friendly Video Rules.)

But it's not clear whether this new order will make much difference. Several major states, including Texas and California, have already adopted streamlined, statewide franchising rules to pave the way for new video entrants, such as telcos.

As reported in mid-December, the FCC's 91-page order gives local governments 90 days to approve or deny video franchise applications from incumbent telcos that already hold public rights-of-way for their wires. For new TV providers that don't have the same rights-of-way, the order sets a 180-day shot clock. (See FCC Approves Telco-Friendly Video Rules.)

The new telco-friendly franchising regulations keep municipalities from imposing tougher build-out requirements on new video players than those applied to cable incumbents. Plus, the rules prohibit municipalities from piling on new fees above the Commission's existing 5 percent franchise cap and spell out which standing fees can count towards that cap.

Despite strenuous lobbying efforts by National Cable & Telecommunications Association (NCTA) officials, the new franchising rules do not immediately apply to incumbent cable operators. Cable executives had sought the same regulatory relief provided to the Bells.

But the FCC order does tentatively conclude that the new regulations "should apply to cable operators that have existing franchise agreements as they negotiate renewal of those agreements with LFAs (local franchising authorities)." Aiming to establish more permanent regulations for existing franchisees, the agency adopted a further notice of proposed rulemaking (FNPRM) to set these rules within six months.

The Commission clarified that LFAs can't force phone companies that already have rights-of-way for telco services (ROWFTS) to seek local approval for system upgrades not related to video service. This provides another boost for AT&T Inc. (NYSE: T) and Verizon Communications Inc. (NYSE: VZ)

Likewise, the FCC banned LFAs from using their video franchising powers to regulate a phone company's entire network beyond the provision of cable-like video services (RAPCENBTPOCLVS). The agency said it agrees with Verizon that the "entirety of a telecommunications network is not automatically converted to a 'cable system' once subscribers start receiving video programming."

The order does not clarify whether telco-delivered IPTV should be regulated as a cable service. AT&T Inc. (NYSE: T), in the past, has argued that IPTV shouldn't be treated the same as cable TV.

The FCC didn't take all the fun from local politicians, though. It tentatively concluded that it can't preempt state or local customer service laws that exceed its standards. Also, it ruled that it can't stop LFAs and cable operators from agreeing on more stringent standards. The agency is seeking comment on this finding in its new rulemaking proceeding.

The FCC also decided against preempting state regulation of cable service, at least for now. "While there is a sufficient record before us to generally determine what constitutes an 'unreasonable refusal to award an additional competitive franchise' at the local level," the agency said, "we do not have sufficient information to make such determinations" about state franchising decisions.

Industry analysts doubt the telcos have won all that much regulatory relief in the near term. They note that the phone companies still must go to thousands of cities and counties for franchises, rather than one national authority as some bills in Congress last year would have established. Analysts also note that the cities will likely sue the FCC, potentially delaying the implementation of the new rules for years.

— Alan Breznick, Site Editor, Cable Digital News