LFA Agreement Modifications, Pre-emptions New Language in Order
The idea of a 120-day process for modifying an existing local franchise authority agreement gets a softer sell in the LFA final order approved 3-2 last week (see 1907010011) than in the draft released in July, according to our analysis. The draft had the agency preferring a proposal whereby a cable operator can request a modification and the LFA would have 120 days to make a final decision, but the final order released Friday says that procedure would have violated Section 625 of the Cable Act, and instead encourages the two sides to negotiate modifications "within a reasonable time" and that 120 days "in most cases" should fit that bill.
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If a franchising authority won't modify an agreement that's inconsistent with the order, the provision is subject to pre-emption under the Cable Act's Section 636(c), the final order says -- language not found in the draft.
The final order also narrowed language on what franchise terms essential to providing cable service don't count toward the franchise fee cap. In the draft, it said those essentials included but weren't limited to buildout and customer service requirements. In the final order, it names solely those two requirements but didn't indicate there might be other essentials.
The final order says it has "not yet determined" whether public, educational and government channel capacity should count toward the franchise fee cap. It says it wants parties to supplement the record on channel capacity and if it gets sufficient input on "the complex questions raised ... we intend to resolve them in the next twelve months."
The final order also specifically lists buildings leased by or under control of the franchise authority when it says the 5 percent franchise fee cap also covers costs attributable to franchise terms requiring a cable operator to provide free or discounted service to public buildings. The draft order didn't specifically mention those leased/under control buildings.
Some rationale also changed in the final order on how franchise terms essential to provision of cable service to subscribers, such as requiring a system buildout to cover some areas, don't count toward the fee cap. In the final order, the agency cited Section 621(a)(2)(B) of the Cable Act, on how cable operators are responsible for the cost of building out their systems, not LFAs, it wouldn't be consistent to count those costs as part of the franchise fee, the agency said. It didn't specifically note that section of law in the draft.
The final order also expands on the FCC's rationale for concluding franchise terms requiring cable operators to comply with customer service standards don't count toward the cap since they're regulatory standards rather than taxes, fees or assessments. The agency said that based on its look at statute and legislative history, there's no sign Congress intended that standards for a cable operators direct business relation with subscribers should count toward the franchise fee cap.
Commissioner Brendan Carr was responsible for several edits to the draft (see 1907300037). LFA and PEG interests had indicated litigation challenging the order is likely.