LFA, PEG Interests See Little Silver Lining, Possible Legal Challenge, in Coming Vote

The focus now is on reviewing the draft order and arranging ex parte meetings possibly to urge improvements and to get material on the record for a possible appeal, said local government lawyer Gerard Lederer of Best Best. NATOA General Counsel Nancy Werner said it would be worth additional lobbying to try to get clarity on aspects of the draft. She didn't specify which.

The order would pre-empt most state or local regulation of a cable operator's non-cable services and pre-empt LFAs requiring an operator secure an additional franchise or other authorization to provide those non-cable services through its cable system. Werner said the order would have the effects localities were concerned about, sizably cutting franchise fees.

Most cable-related in-kind contributions need to be included for calculating the statutory 5 percent cap on franchise fees, under the draft order. It says there's no reason to treat in-kind payments differently from monetary payments when determining what's a franchise fee. Costs that could be under that 5 percent cap include providing free or discounted service to public buildings and in-kind construction for PEG access facilities. It says capital costs apply to equipment and not just costs of construction of a PEG access facility.

That the FCC "read a dictionary and accepted common business practices" when it comes to capital costs is a slight victory, said Alliance for Community Media President Mike Wassenaar. His tongue was in cheek.

That the draft order says the record isn't sufficient for the FCC to decide how to treat the provision of PEG channel capacity is "really more of a reprieve" than final word on the issue, said local governments lawyer Tim Lay of Spiegel and McDiarmid. Some anticipate the FCC bringing up the channel capacity issue again through a future proceeding, when political heat from Capitol Hill is less. Lay said the channel capacity issue also could arise in individual renewal proceedings or negotiations with operators arguing the FCC didn't preclude them from charging capacity against their caps.

Also undecided is what "essential to cable service" means when the draft order says PEG requirements, unlike buildout or customer service requirements, aren't an essential part of cable service, Wassenaar said. Transport costs are exempt from the cap, but the channel itself that's being transported would also seem to be essential, he said, saying there's concern this could lead to a future proceeding.

The draft order's finding that the costs associated with constructing, maintaining and servicing an institutional network fall within the 5 percent cap on franchise fees might lead cities with institutional network agreements to look to reduce those obligations or forego them altogether by signing service contracts with an ISP instead, Wassenaar said. That could accelerate the trend of moving away from i-nets, he said.

Experts expect a 3-2 vote along party lines. Lay said cable interests might seek some tweaks to the draft order, though cable's largely getting what it wants. NCTA and America's Communications Association didn't comment.

The FCC "isn’t doing something radical here," just affirming the Communications Act, Roslyn Layton, visiting scholar at the American Enterprise Institute, blogged Monday. "Understandably, LFAs like siphoning cable TV revenues to help service pension debt and other liabilities." Making cable operators and their subscribers "a piggy bank for local spending needs" was never Congress' intent, she said.