Year After Cable LFA Order, No Wave of In-Kind Renegotiations, Despite Expectations
The FCC's local franchise authority (LFA) order 12 months ago (see 1908010011) opened the door for cable operators to renegotiate their cable LFA agreements to account for the expense of in-kind services they provide, but few have done so, lawyers and localities interests told us. Some expect cable operators will try to come up with valuations for such services as institutional networks (I-Net) and free service to public buildings, while others wonder if the industry isn't that interested in getting into what could be protracted fights with local communities over cable franchise fee amounts.
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ACA Connects President Matt Polka emailed he doesn't know of any widespread or organized effort by cable operators on franchise fees, and it's not something members have brought up in a notable way. "Most of these issues are handled on the local level with cable operators and their counsel working with their local governments to find the best solution as possible within the rules," he said. Comcast and Charter didn't comment.
Even when the issue has come up in franchise renewal negotiations, it hasn't been pressed hard, we were told. Localities lawyer Tim Lay of Spiegel & McDiarmid said there's some speculation cable could start being more active presenting LFAs with offset proposals starting this fall. The size of such offset proposals could vary considerably from local franchise to local franchise, since some communities don't have I-Nets, Lay said. He said cable operators, especially larger ones across multiple states, might be trying to figure out a uniform way of valuing the in-kind contributions.
Some think cable might wait to see how the legal challenge to the FCC order before the 6th U.S. Circuit Court of Appeals plays out. Lawyers said oral argument on the case will likely be next year.
Cable also might be reluctant because of the order's terms that say if local government is spending more on public, educational and government channel capital costs than it's getting in cable in-kind services, the cable operator could have to pay money, a localities lawyer said.
A lawyer involved in franchise issues said some cable companies indicated a concern about creating waves with local governments on an issue that could change after the November election. The COVID-19 pandemic also could be a factor, said municipalities lawyer Dan Cohen. Cable operators are aware that now "is not the time to be pulling cable service from fire houses or police stations,” he said.
Cable operators might be holding off in part because of a lack of clarity from the FCC on the procedural framework for implementing possible offsets against the franchise fee, said a lawyer with cable franchise experience. The August 2019 order said cable and communities were "encourage[d]" to negotiate franchise modifications if an existing franchise agreement conflicted with the order, and the conflicting provision could be subject to preemption if the franchising authority refuses to modify the agreement. But a November denial of a motion for stay of the order included vaguer language about whether an amendment is required, he said. It also isn't clear what kind of cable operator notification would qualify as a trigger for renegotiation, he said. If those negotiations fail, the franchise terms stay in place until the cable operator challenges them and proves the terms violate the order, but it's unclear what form that challenge might take, the lawyer said.