FCC, Allies Assail Localities' Video Franchising Rules Challenge to 6th Circuit
Arguments that only money, not in-kind requirements, can be counted as franchise fees by local franchise authorities (LFAs) were settled by 6th U.S. Circuit Court of Appeals in its 2008 Alliance for Community Media v. FCC decision (see 0806300119) and shouldn't be rehashed, said the FCC and intervenor allies in briefs in a newer 6th Circuit case. They (see here and here in Pacer) were filed Friday with the 6th Circuit in a consolidated challenge to 2007 and 2015 FCC orders on video franchising rules. A lawyer for one of the parties said there likely will be oral argument this fall, after a reply brief by the petitioners.
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The consolidated appeals of Montgomery and Anne Arundel counties, Maryland, and of Dubuque, Iowa, involve the FCC's 2007 order that extended to incumbent cable operators many of the limits it put on new entrants (see 0712120119) and its 2015 order clarifying that franchising regulations don't apply to state laws on cable TV or to state-level franchising authorities. A lawyer for another of the parties told us the FCC's subsequent 2015 decision that the cable market is subject to effective competition (see 1509090058) doesn't affect the case substantially.
The FCC said even if the court were to hear new argument on the franchise fee issue, not counting noncash requirements as franchise fees would let LFAs evade the franchise fee cap through all manner of in-kind payment demands. It also defended its decision not to void most-favored-nation clauses in existing franchises, despite the petitioners' argument this flies in the face of its level playing field rules, saying MFN and level playing field clauses are designed to establish regulatory parity but aren't the same. Despite that more than eight years have passed since the order, the FCC said, Montgomery County and the others don't have any examples showing incumbent cable operators' exercising of MFN clauses resulted in reduced service.
The FCC also said petitioners were wrong when they claim they can regulate non-cable services under Title VI of the Communications Act, and their concern that the agency's mixed-use network ruling undermines local authorities trying to require the provision of institutional network (I-Net) capacity "is baseless." The order didn't mention I-Nets or in any way restrict LFA jurisdiction over them, and petitioners can't "bootstrap their jurisdiction over I-Nets" to include regulating mixed-use networks, given the statutory restrictions on LFA jurisdiction, the FCC said. The agency said it disagreed with the petitioners' argument that the 2007 order applied only to local franchising and not any state regulation as contradictory, saying it was merely clarifying that a district court lacks jurisdiction to review the substantive validity of FCC final orders, with such jurisdiction belonging to federal courts of appeals.
The petitioners are as without merit now as they were when the 6th Circuit rejected their Alliance challenge in 2008, ruling the FCC reasonably followed Congress' limitations on the local cable TV franchising process as set out in the Cable Act's sections 621 and 622, said interveners NCTA, USTelecom and Verizon in a joint brief. They said the FCC was reasonable in its decision to leave in place MFN provisions between LFAs and incumbent cable operators, arguing it lowered the competitive entry barrier LFAs put on new entrants -- such as phone companies -- into cable markets by not requiring LFAs enter into MFNs while prohibiting any LFA from revisiting the terms at the new franchise renewal.
The interveners also said any petitioner challenge to the FCC franchise fee decision is barred "because they already had their day in court on that very issue," and the commission was reasonable when it said a broad definition of franchise fee should include an LFA's demand for in-kind compensation. NCTA and the others said petitioners' discussion of I-Net regulation "is a red herring with no relevance," and the FCC didn't depart from precedent when it said LFA jurisdiction is limited to providing cable service over cable networks. Counsel for the petitioners didn't comment Monday.
The twin FCC orders "turn[ed] the Cable Act on its head" by denying local governments their Cable Act jurisdictions, placing franchise fee caps and failing to recognize local franchise authority over cable systems, Montgomery County and the others said in a brief in February. Backed by interveners Boston, Houston, some small communities in New York state, the Mount Hood (Oregon) Cable Regulatory Commission and the Texas Coalition of Cities for Utility Issues, petitioners said the twin orders were arbitrary and capricious when the FCC said cable-related free or discounted services are counted against the franchise fee, against its own precedent, and when the agency applied its rulings in states that have state-level franchising statutes. The FCC also failed to consider the effect of its rulings on small local government jurisdictions, as it was obligated to do, they said. They said since the FCC decided competitive providers could enter markets with franchise provision terms more favorable than what the incumbent had, the agency couldn't then "reasonably allow incumbents to reduce their obligations to the level of the new entrant" because the end result would be a "one-way downward ratchet" that prohibits LFAs from being able to ensure community needs are met.