FCC: Local Franchise Authorities Can't Regulate Broadband

Votes to confirm earlier FCC decision remanded by court
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The FCC has voted to confirm that a local franchise authority's (LFA) ability to regulate cable service does not extend to broadband and other non-cable services, and that in-kind commitments those authorities get from providers as part of franchise agreements count toward the 5% franchise fee cap, with the exception of providing public, educational and government (PEG) channels.

The FCC is also asking for input on whether it should extend the prohibition on LFA regulation to state franchises and state regulations.

That is according to the FCC, which deleted the item, a Notice of Proposed Rulemaking, from its agenda for a Sept. 26 vote at the public meeting, saying it had already been adopted. The FCC still has to vote on a final order, but with the majority in favor, that will almost certainly happen.

The Free State Foundation whose supporters include major media companies, had hailed the FCC's planned Sept. 26 vote on an item regarding local franchising authorities (LFAs) as important pushback on localities trying to re-regulate internet access.

In Montgomery County, Md., v. FCC, the Sixth Circuit Court of Appeals last year found that the FCC could not use its mixed-use rule to bar LFAs from requiring franchisees to provide non-cable services because that would appear to prevent LFAs from regulating institutional networks, which statute clearly allows them to do.

The court also concluded that the FCC had not sufficiently justified why it had expanded its definition of franchise fees to include non-cash requirements by LFAs and thus count toward the 5% cap on franchise fees.

The court vacated those portions and remanded them back to the FCC for action, if necessary.

The FCC has now responded to the court by telling the court that the "mixed-use network ruling should be applied to prohibit LFAs from using their video franchising authority to regulate non-cable services offered over cable systems by incumbent cable operators," which includes internet access services, and clarifying that they can still regulate institutional networks.

The FCC decision should help in its pushback on state and localities trying to re-regulate internet access services.

Following the FCC's decision last fall to reclassify ISPs as information services and eliminate the rules against blocking, throttling or paid prioritization of internet access, various states and localities have been trying to restore the rules for their own state's internet customers, including through state laws and executive orders. That comes despite the FCC's assertion that states are preempted from trying to undo that deregulation by regulating the internet.

Local franchising authorities trying to tie broadband regs to traditional video service franchises is another potential flashpoint the FCC move would try to head off with the vote.

The FCC launched the revamp of local franchising rules in 2006 to make sure localities were not "unnecessarily refusing" to award cable franchises to new entrants. In its first order, it eased the franchise path for those new entrants by, among other things, putting a shot clock on local franchise negotiations, limiting build-out requirements and franchise conditions, and capping public and government access channel investments.

It then issued a second Report and Order that extended most of those new rules to incumbent cable operators as well when their franchises came up for renewal, concluding that "to promote the federal goals of enhanced cable competition and accelerated broadband development, the Commission's rules regarding the local franchising process should be extended to incumbent cable operators."

“Chairman Pai and the Commission deserve credit for proposing this rulemaking to preserve a free market environment for broadband," said Free State senior fellow Seth Cooper. "Congress has designated information services such as broadband for non-regulated or light-touch treatment. The Commission's proposed rulemaking clarifies that local governments cannot leverage their cable franchising authority to regulate broadband services. This will help shore up important limits on local government regulation set out in the Communications Act.”

“Today's unanimous FCC action rightly proposes to reinstate its earlier rules establishing clear limits on franchising authorities' ability to impose undue and unwarranted regulations and fees on cable operators that have the effect of delaying the deployment of broadband and other new services and making those services more expensive for consumers," said NCTA-the Internet & Television Association "We look forward to participating in the rulemaking proceeding.”

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