FCC OKs New Franchise Rules

The FCC approved (by a 3-2 vote) chairman Kevin Martin’s proposal to increase competition for cable operators by making it easier for telcos to secure local franchises.

The controversial plan places a 90-day "shot clock" review period on local franchising authorities to assess new video franchise applications from competitors with access to local rights-of-way (i.e. the major telcos who backed the proposal: Verizon and AT&T) and a six-month limit on other new entrants.

Martin’s narrowly approved proposal also bans local cable franchise bodies from attaching conditions to video franchise applications from new competitors, such as insisting the likes of Verizon and AT&T must build out their new systems faster than the incumbent cable operator in that market.

Today’s meeting also featured the presentation of Martin’s much ballyhooed (and NCTA-disdained) 2005 cable industry price survey, which asserts that cable prices shot up 93% over a 10-year period (1995-2005). NCTA pres/CEO Kyle McSlarrow addressed that claim and Martin’s other anti-cable moves in his hour-long press conference call yesterday (click here to listen.)

The NCTA website also posted a rebuttal yesterday—"Cable Prices: The Real Story" (plus some stats)—to support its view that "the FCC’s 2005 price survey is out of date and doesn’t reflect the current state of competition or the rapidly changing marketplace." Or as McSlarrow zinged in his year-end briefing, the FCC pricing survey conclusions and methodology are "almost entirely useless."

McSlarrow commented in a follow-up statement today:

"The FCC’s pricing survey fails to account for the benefits of bundled pricing, its favorable impact on cable prices, and the greatly increased value of cable services in a digital world.  Ignoring these factors makes the pricing survey obsolete on arrival and an unsound basis for policy decisions.

On today’s decision on video franchising, it appears that the FCC pared back some of the more troubling proposals that had been floated in recent days.  The Commission made crystal clear that its order isn’t a license for AT&T to ignore the franchising process and operate under different rules from its competitors. 

In addition, the Commission stepped back from pre-empting all state franchising laws, many of which have acknowledged the value to consumers of a level playing field for all competitors.  We appreciate the FCC’s commitment to complete action within six months on a further notice to address regulatory parity.

But the simple fact is that today’s order doesn’t provide a level playing field, a concept that has been universally supported up until now at federal, state, and local levels.  We don’t believe the Commission has the legal authority to establish separate regimes for incumbents and new entrants in today’s highly competitive marketplace."

The Associated Press noted earlier this week that Martin’s proposal "alarmed local franchising authorities that have heard Martin’s remarks. They contend his ‘barrier to entry’ argument is bogus and action by the agency may wind up hurting consumers. There also is some question about whether Martin’s proposal is within the limits of the agency’s authority."

Find out more:

• FCC’s new "rules to ensure reasonable franchising process for new video market entrants" (Approved 12/20/06)

Press release | Martin statement | Copps statement | Tate statement | McDowell statement | Verizon’s reaction | Alcatel-Lucent reaction

• FCC’s report on 2005 cable industry prices (Released 12/20/06)

Press release | Martin statement | Copps statement | Adelstein statement | McDowell statement

• Click here to read the Dec. 12 letter from the National League of Cities, NATOA and other concerned parties to Martin and the FCC