FCC Issues Preliminary Rules Expanding Media Ownership

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FCC Second Report and Order

On November 6, the FCC approved a Second Report and Order providing new regulations on local video franchising for both traditional video providers such as Comcast Corp. and Time Warner Cable, and for new entrants in the video market such as AT&T Inc. and Verizon Communications Inc. The Second Report extends a number of the rules issued in the First Report and Order earlier this year for new entrants to traditional cable providers. The Order is expected to go into effect on December 24, 2007.

The FCC made clear in the Second Report and Order that the build out rulings and the “shot clock” rule (which establishes a limit on the time local governments will have to approve franchise agreements) will not apply. However, rulings on franchise fees, PEG, and most but not all of the rules related I-Nets will apply to cable companies. Acknowledging that existing franchises with cable companies involve contractual obligations, the FCC indicated that cable operators may not unilaterally breach these obligations and that each situation must be assessed on a case by case basis under applicable law to determine whether the FCC’s statutory interpretation should alter the incumbent’s franchise agreement. The question of retroactive relief for cable contributions such as I-Nets, cable drops, etc. was also not entirely clarified.

Over all, a number of questions remain unanswered, but here are highlights:

• On mixed use networks, local franchises can only regulate Title VI cable services.


• Franchise fees cannot be required on revenues from non-cable services.
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  “Non-Incidental charges.” The term “incidental” should be limited to the list of incidentals in the statutory provision, as well as other minor expenses – fees charged by franchising authorities that are not “incidental” must count toward the 5 percent franchise fee cap.


• Any municipal projects requested by LFAs unrelated to the provision of cable services that do not fall within the exempted categories in Section 622(g)(2) are subject to the statutory 5 percent franchise fee cap.


• Payments made to support the operation of PEG access facilities are considered franchise fees and are subject to the 5 percent cap, unless they are for capital costs.

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Content contact: Linda Seesz