Obstacles Not Expected When Comcast and Time Warner Seek Local Approvals

Local cable authorities will come into play in deciding whether to allow cable franchise agreements to be transferred to Comcast, the attorneys said. That’s unlikely to pose much of an obstacle because the questions examined in those decisions tend to be limited, Baller said. Nothing forbids local authorities from examining broader questions such as the impacts of consolidation, he said. In practice, state, municipal and county bodies tend to stick to the standards set under U.S. Code 541 for the initial approval and renewal of franchise agreements, he said. The law allows cable authorities to require assurances cable operators will provide channels, financial support and facilities for public, educational and governmental programming. It can also require operators to show they have the financial, technical or legal qualifications to provide cable service. Renewal decisions tend to focus on whether companies have met the terms of their franchise agreements and whether the new franchisee can carry out the terms of the existing agreement. “Each of these communities have entered into [franchise] negotiations in good faith, and the question is who are the new people,” said municipal lawyer Gerard Lederer of the Best Best law firm.

While the deal could have implications for broadband, local authorities are able to examine issues only related to cable service, said former NATOA Board President Kenneth Fellman, an attorney who represents a number of cable authorities in Colorado. A Comcast spokeswoman said the company doesn’t believe it needs to obtain transfer agreements in markets where it already has an agreement. She said Time Warner Cable, which has more than 5,000 franchise agreements nationally, would have to get transfer agreements. The company expects no issues in getting local approvals, she said.

"Cities are now looking into it further,” Fellman said. At first blush, the deal would not require approval in Contra Costa County, Calif., because the franchisee would remain Comcast, said that county’s Director of Communications and Media Betsy Burkhart. “We must better understand the nature of the transaction before we can determine whether Seattle’s approval is required,” said Tony Perez, director of the Seattle Office of Cable Communications. Should approval be required, Baller said local authorities would have 120 days to make a decision after the company files an FCC Form 394 laying out details about the proposed deal.

Lederer noted that Comcast/Time Warner Cable comes within a different political landscape than the Comcast’s purchase of AT&T Broadband in 2002. Since then, according to NATOA, 20 states have taken jurisdiction over cable service from local governments. In some deregulated states, like Texas and Michigan, no approval of a transfer is required, spokespeople for the utility regulatory agencies in those states said. Texas requires cable companies to sign a certificate to provide cable service. Michigan has a standard franchise contract all cable providers must agree to.

Some issues have arisen in past transfer cases. In a 2002 case, Charter Communications, which sought to buy Time Warner Cable but was bested with a higher Comcast offer for TWC, unsuccessfully sued Santa Cruz County, Calif., for refusing to grant a transfer because Charter wouldn’t disclose enough financial information. For local authorities, a transfer agreement is an opportunity to make sure the new entity addresses any problems that existed with the old cable provider, Fellman said. In one case, a Colorado authority refused to grant a transfer without assurances the new provider would provide free cable in government buildings, said Fellman. The incumbent company had failed to do so. In other cases, cable authorities have required new companies to take steps to ensure no repeat of safety violations that existed with the old company, said Fellman. Generally, the terms are just “clean ups” of issues that existed with the old company, he said. Even if there are problems getting transfer agreements, Lederer said Comcast could get insurance in case disputes cannot be resolved and markets have to be dropped, and go on with buying Time Warner Cable. “These aren’t things that hold up big transactions,” he said.

Concerns are rampant about the effects of consolidation, Lederer said. Local officials will likely voice them, but more likely they will be addressed before the FCC or with congressional representatives. Seattle’s Murray said that short of being able to stop the deal, he will look closely to see whether Comcast has been meeting the terms of its franchise agreement and the city could choose not to renew it when it runs out in 2016. Murray stopped short of saying the city would try to build a municipal broadband network, as the city has discussed previously, should it refuse to renew Comcast’s franchise. With Google announcing plans to bring Google Fiber (CD Feb 20 p14) to potentially 34 more cities, including some served by Comcast, the Time Warner Cable purchase raises question whether the transaction will spur more municipalities to consider creating their own broadband networks. Lederer didn’t know the answer, but noted than several municipalities were looking at the idea anyway even before the deal.

"Increasingly local government leaders are troubled at being held hostage by a limited number of broadband providers,” said Lederer. A spokesman for Salt Lake City Mayor Ralph Becker, whose city is exploring Google Fiber, said that “this partnership, from our perspective, is completely unrelated to merger talks between Time Warner [Cable] and Comcast.”