[Federal Register Volume 70, Number 239 (Wednesday, December 14, 2005)]
[Proposed Rules]
[Pages 73973-73980]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-24029]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 76

[MB Docket No. 05-311; FCC 05-189]


Implementation of Section 621(a)(1) of the Cable Communications 
Policy Act of 1984 as Amended by the Cable Television Consumer 
Protection and Competition Act of 1992

AGENCY: Federal Communications Commission.

ACTION: Proposed rule.

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SUMMARY: In this document, the Commission seeks comment on how to 
implement section 621(a)(1) of the Communications Act. Because several 
potential competitors seeking to enter the multichannel video 
programming distributor (MVPD) marketplace have alleged that in many 
areas the current operation of the local franchising process serves as 
a barrier to entry, the Commission solicits comment on section 
621(a)(1)'s directive that local franchising authorities (LFAs) not 
unreasonably refuse to award competitive franchises, and whether the 
franchising process unreasonably impedes the achievement of the 
interrelated federal goals of enhanced cable competition and 
accelerated broadband deployment and, if so, how the Commission should 
act to address that problem.

DATES: Comments for this proceeding are due on or before February 13, 
2006; reply comments are due on or before March 14, 2006.

ADDRESSES: You may submit comments, identified by MB Docket No. 05-311, 
by any of the following methods:
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     Federal Communications Commission's Web Site: http://www.fcc.gov/cgb/ecfs/. Follow the instructions for submitting comments.
     People with Disabilities: Contact the FCC to request 
reasonable accommodations (accessible format documents, sign language 
interpreters, CART, etc.) by e-mail: [email protected] or phone: 202-418-
0530 or TTY: 202-418-0432.
    For detailed instructions for submitting comments and additional 
information on the rulemaking process, see the SUPPLEMENTARY 
INFORMATION section of this document.

FOR FURTHER INFORMATION CONTACT: For additional information on this 
proceeding, contact John Norton, [email protected] or Natalie 
Roisman, [email protected] of the Media Bureau, Policy Division, 
(202) 418-2120.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Notice 
of Proposed Rulemaking (NPRM), FCC 05-189, adopted on November 3, 2005, 
and released on November 18, 2005. The full text of this document is 
available for public inspection and copying during regular business 
hours in the FCC Reference Center, Federal Communications Commission, 
445 12th Street, SW., CY-A257, Washington, DC 20554. These documents 
will also be available via ECFS (http://www.fcc.gov/cgb/ecfs/). 
(Documents will be available electronically in ASCII, Word 97, and/or 
Adobe Acrobat.) The complete text may be purchased from the 
Commission's copy contractor, 445 12th Street, SW., Room CY-B402, 
Washington, DC 20554. To request this document in accessible formats 
(computer diskettes, large print, audio recording, and Braille), send 
an e-mail to [email protected] or call the Commission's Consumer and 
Governmental Affairs Bureau at (202) 418-0530 (voice), (202) 418-0432 
(TTY).

Initial Paperwork Reduction Act of 1995 Analysis

    This NPRM does not contain proposed information collection(s) 
subject to the Paperwork Reduction Act of 1995 (PRA), Public Law 104-
13. In addition, therefore, it does not contain any new or modified 
``information collection burden for small business concerns with fewer 
than 25 employees,'' pursuant to the Small Business Paperwork Relief 
Act of 2002, Public Law 107-198, see 44 U.S.C. 3506(c)(4).

Summary of the Notice of Proposed Rulemaking

I. Introduction

    1. In this Notice of Proposed Rulemaking (NPRM), the Commission 
seeks comment on how to implement section 621(a)(1) of the 
Communications Act of 1934, as amended (the Communications Act or the 
Act). Section 621(a)(1) states in relevant part that ``a franchising 
authority * * * may not unreasonably refuse to award an additional 
competitive franchise.'' While the Commission has found that, 
``[t]oday, almost all consumers have the choice between over-the-air 
broadcast television, a cable service, and at least two DBS 
providers,'' greater competition in the market for the delivery of 
multichannel video programming is one of the primary goals of federal 
communications policy. Increased competition can be expected to lead to 
lower prices and more choices for consumers and, as marketplace 
competition disciplines competitors' behavior, all competing cable 
service providers could require less federal regulation. Moreover, for 
all competitors in the marketplace, the abilities to offer video to 
consumers and to deploy broadband networks rapidly are linked 
intrinsically. Specifically, the construction of modern 
telecommunications facilities requires substantial capital investment, 
and such networks, once completed, are capable of providing not only 
voice and data, but video as well. As a consequence, the ability to 
offer video offers the promise of an additional revenue stream from 
which deployment costs can be recovered. However, potential competitors 
seeking to enter the MVPD marketplace have alleged that in many areas 
the current operation of the local franchising process serves as a 
barrier to entry. Accordingly, this NPRM is designed to solicit comment 
on implementation of section 621(a)(1)'s directive that LFAs not 
unreasonably refuse to award competitive franchises, and whether the 
franchising process

[[Page 73974]]

unreasonably impedes the achievement of the interrelated federal goals 
of enhanced cable competition and accelerated broadband deployment and, 
if so, how the Commission should act to address that problem.

II. Background

    2. The Communications Act provides new entrants four options for 
entry into the MVPD market. They can provide video programming to 
subscribers via radio communication, a cable system or an open video 
system, or they can provide transmission of video programming on a 
common carrier basis. Any new entrant opting to offer ``cable service'' 
as a ``cable operator'' becomes subject to the requirements of Title VI 
of the Communications Act (See 47 U.S.C. 542(6); 47 U.S.C. 542(5)). 
Section 621 of Title VI sets forth general cable franchise 
requirements. Subsection (b)(1) of section 621 prohibits a cable 
operator from providing cable service in a particular area without 
first obtaining a cable franchise, and subsection (a)(1) grants to LFAs 
the authority to award such franchises. Other provisions of section 621 
provide that, in awarding a franchise, an LFA ``shall assure that 
access to cable service is not denied to any group of potential 
residential cable subscribers because of the income of the residents of 
the local area in which such group resides'' (47 U.S.C. 541(a)(3)); 
``shall allow [a] cable system a reasonable period of time to become 
capable of providing cable service to all households in the franchise 
area'' (47 U.S.C. 541(a)(4)(A)); and ``may require adequate assurance 
that the cable operator will provide adequate public, educational and 
governmental access channel capacity, facilities, or financial 
support'' (47 U.S.C. 541(a)(4)(B)).
    3. The initial purpose of section 621(a)(1), which was added to the 
Communications Act by the Cable Communications Policy Act of 1984 (the 
1984 Cable Act), was to both affirm and delineate the role of LFAs in 
the franchising process (See, e.g., H.R. Rep. No. 98-934, at 59 
(1984)). A few years later, however, the Commission prepared a report 
to Congress on the cable industry pursuant to the requirements of the 
1984 Cable Act (See generally Competition, Rate Deregulation and the 
Commission's Policies Relating to the Provision of Cable Television 
Service, 55 FR 32631, August 10, 1990) (Report). In that Report, the 
Commission concluded that in order ``[t]o encourage more robust 
competition in the local video marketplace, the Congress should * * * 
forbid local franchising authorities from unreasonably denying a 
franchise to potential competitors who are ready and able to provide 
service.''
    4. In response, Congress revised section 621(a)(1) through the 
Cable Television Consumer Protection and Competition Act of 1992 (the 
1992 Cable Act) to read as follows: ``A franchising authority may 
award, in accordance with the provisions of this title, 1 or more 
franchises within its jurisdiction; except that a franchising authority 
may not grant an exclusive franchise and may not unreasonably refuse to 
award an additional competitive franchise.'' (47 U.S.C. 541(a)(1)). As 
the legislative history makes plain, the purpose of this abridgement of 
local government authority was to promote greater cable competition:

    Based on the evidence in the record taken as a whole, it is 
clear that there are benefits from competition between two cable 
systems. Thus, the Committee believes that local franchising 
authorities should be encouraged to award second franchises. 
Accordingly, [the 1992 Cable Act,] as reported, prohibits local 
franchising authorities from unreasonably refusing to grant second 
franchises.

Section 621(a)(1), as revised, established a clear, federal-level 
limitation on the authority of LFAs in the franchising process. In that 
regard, Congress provided that ``[a]ny applicant whose application for 
a second franchise has been denied by a final decision of the 
franchising authority may appeal such final decision pursuant to the 
provisions of section 635. * * *'' Section 635, in turn, states that 
``[a]ny cable operator adversely affected by any final determination 
made by a franchising authority under section 621(a)(1) * * * may 
commence an action within 120 days after receiving notice of such 
determination'' in federal court or a state court of general 
jurisdiction (47 U.S.C. 555).
    5. As potential new entrants seek to enter the MVPD marketplace, 
there have been indications that in many areas the current operation of 
the local franchising process is serving as an unreasonable barrier to 
entry. For example, Verizon recently filed comments in the Commission's 
annual investigation into the state of video competition arguing that 
``[t]he single biggest obstacle to widespread competition in the video 
services market is the requirement that a provider obtain an 
individually negotiated local franchise in each area where it intends 
to provide service.'' In its comments, Verizon contends that the local 
franchising process impedes cable competition in the following ways: 
(1) It ``forces a new entrant to telegraph its deployment plans to the 
incumbent video competitor,'' thereby ``allow[ing] the incumbent not 
only to take steps to prolong the franchise process and delay the onset 
of competition, but also to entrench its position in the market before 
the new entrant has the opportunity to compete;'' (2) it ``simply takes 
too long,'' as a result of ``factors such as inertia, arcane or lengthy 
application procedures, bureaucracy or, in some cases, inattentiveness 
or unresponsiveness at the LFA level;'' (3) it triggers so-called 
``level playing field'' laws, ``which require the new entrant to build-
out and serve an entire franchise area on an expedited basis or to 
match all of the concessions previously provided by the incumbent in 
order for it to gain its original monopoly position in the local area, 
despite the vastly different competitive situation facing the new 
entrant;'' and (4) it involves ``outrageous demands by some LFAs,'' 
which ``are in no way related to video services or to the rationales 
for requiring franchises.''
    6. The efficient operation of the local franchising process is 
especially significant with respect to potential new entrants with 
existing facilities, for a number of reasons. First, because they seek 
to provide video programming to large portions of the country, they 
contend that the sheer number of franchises they first must obtain 
serves as a competitive roadblock. Verizon, for example, has stated 
that it would have to negotiate with more than 10,000 municipalities in 
order to offer service throughout its current service area. Second, 
because the existing service areas of potential new entrants with 
existing facilities do not always coincide perfectly with those covered 
by incumbent cable operators' franchises, they argue that build-out 
requirements demanded by LFAs create disincentives for them to enter 
the marketplace. SBC has told investors that Project Lightspeed, an 
``initiative to expand its fiber-optics network deeper into 
neighborhoods to deliver SBC U-verseSM TV, voice and high-speed 
Internet access services,'' will be deployed to approximately ninety 
percent of its ``high-value,'' seventy percent of its ``medium-value,'' 
and less than five percent of its ``low-value'' customers.
    7. According to the National Association of Telecommunications 
Officers and Advisors, the National League of Cities, the United States 
Conference of Mayors, and the National Association of Counties, local 
governments ``want and welcome real communications competition in 
video, telephone and broadband services,'' and they ``support a 
technology-neutral

[[Page 73975]]

approach that promotes broadband deployment and competitive service 
offerings.'' While acknowledging that consumers ``demand real 
competition to increase their options and improve the quality of 
services,'' local governments argue that franchising ``need not be a 
complex or time-consuming process.'' They argue that the current 
framework ``[s]afeguards [a]gainst [a]buse and [p]rotects 
[c]ompetition.'' Furthermore, local governments maintain that local 
franchisors take their fiduciary responsibilities seriously and strive 
to ``manage and facilitate in an orderly and timely fashion the use of 
[local] property.''
    8. Anecdotal evidence suggests that new entrants have been able to 
obtain cable franchises. SNET and Ameritech both obtained cable 
franchises before being acquired by SBC. BellSouth and Qwest have 
obtained franchises, as have many cable overbuilders--RCN has acquired 
over 100. Verizon has stated that it ``has obtained nine local cable 
franchises for FiOS TV from various local franchising authorities 
(LFAs) in California, Florida, Virginia, and Texas'' and ``is 
negotiating franchises with more than 200 municipalities.'' According 
to a survey of 161 National Telecommunications Cooperative Association 
(NTCA) members, ``[f]orty-two percent of survey respondents offer video 
service to their customers. Ninety-four percent of those offer video 
under a cable franchise, while six percent offer video as an Open Video 
System (OVS) * * *.''
    9. In addition, there have been recent efforts at the state level 
to facilitate entry by competitive cable providers. For example, 
legislation was passed in Texas in September 2005 enabling new entrants 
in the video programming distribution marketplace to provide service 
pursuant to state-issued certificates of franchising authority. Upon 
the submission of a completed affidavit by an applicant, Texas 
regulators now are required to issue a certificate of franchising 
authority within seventeen business days. Similar bills have been 
introduced in Virginia and New Jersey although they are yet to be 
enacted.
    10. With this NPRM, the Commission seeks to determine whether, in 
awarding franchises, LFAs are carrying out legitimate policy objectives 
allowed by the Communications Act or are hindering the federal 
communications policy objectives of increased competition in the 
delivery of video programming and accelerated broadband deployment and, 
if that is the case, whether and how to remedy the problem.

III. Discussion

    11. Potential competitive cable providers have alleged that the 
local franchising process serves as a barrier to entry, and that state 
and local franchise requirements serve to unreasonably delay 
competitive entry. Given the interrelated federal goals of enhanced 
cable competition and rapid broadband deployment, below we seek comment 
on a number of issues relating to the cable franchising process 
generally, and, in particular, the process by which competitive cable 
franchises are awarded.

A. Potential Competitors' Current Ability To Obtain Franchises

    12. The Commission requests comment on the current environment in 
which would-be new entrants attempt to obtain competitive cable 
franchises. How many franchising authorities are there nationally? How 
many franchises are needed to reach sixty or eighty percent of cable 
subscribers? In how many of these franchise areas do new entrants 
provide or intend to provide competitive video services? Are cable 
systems generally equivalent to franchise areas? To what extent does 
the regulatory process involved in obtaining franchises--particularly 
multiple franchises covering broad territories, such as those today 
served by facilities-based providers of telephone and/or broadband 
services--impede the realization of the Commission's policy goals? Are 
potential competitors obtaining from LFAs the authority needed to offer 
video programming to consumers in a timely manner? What is the impact 
of state-wide franchise authority on the ability of the competitive 
provider to access the market? Is there evidence that such state-wide 
franchises are causing delay? What impact has state-level legislative 
or regulatory activity had on the franchising process? Are competitors 
taking advantage of new opportunities provided by state legislatures 
and regulators? How many competitive franchises have been awarded to 
date? How many competitive franchises have potential new entrants 
requested to date? How much time, on average, has elapsed between the 
date of application and the date of grant, and during that time period, 
how much time, on average, was spent in active negotiations? How many 
applications have been denied?
    13. How many negotiations currently are ongoing? Are the terms 
being proffered consistent with the requirements of Title VI? How has 
the cable marketplace changed since the passage of the 1992 Cable Act, 
and what effect have those changes had on the process of obtaining a 
competitive cable franchise? Are current procedures or requirements 
appropriate for any cable operator, including existing cable operators? 
What problems have cable incumbents encountered with LFAs? Should cable 
service requirements vary greatly from jurisdiction to jurisdiction? 
Are certain cable service requirements no longer needed in light of 
competition in the MVPD marketplace? To what extent are LFAs demanding 
concessions that are not relevant to providing cable services? 
Commenters arguing that such abuses are occurring are asked to provide 
specific examples of such demands. Parties should submit empirical data 
on the extent to which LFAs unreasonably refuse to award competitive 
franchises. The Commission seeks record evidence of both concrete 
examples and broader information that demonstrate the extent to which 
any problems exist.
    14. The Commission also asks commenters to address the impact that 
state laws have on the ability of new entrants to obtain competitive 
franchises. Some parties state that so-called ``level-playing-field'' 
statutes, which typically impose upon new entrants terms and conditions 
that are neither ``more favorable'' nor ``less burdensome'' that those 
to which existing franchises are subject, create unreasonable 
regulatory barriers to entry. Others state that they create 
comparability among all providers. The Commission seeks comment on 
these issues. The Commission also seeks comment on the impact of state 
laws establishing a multi-step franchising process. Do such laws create 
unreasonable delays in the franchising process?

B. The Commission's Authority To Adopt Rules Implementing Section 
621(a)(1)

    15. The Commission tentatively concludes that it has authority to 
implement section 621(a)(1)'s directive that LFAs not unreasonably 
refuse to award competitive franchises. As an initial matter, the 
Commission is charged by Congress with the administration of Title VI, 
which, as courts have held, necessarily includes the authority to 
interpret and implement section 621. Moreover, the Commission believes 
that the 1992 Cable Act's revisions to section 621(a)(1) indicate that 
Congress considered the goal of greater cable competition to be 
sufficiently important to justify the Commission's adoption of rules. 
Under the Supremacy Clause, the enforcement

[[Page 73976]]

of a state law or regulation may be preempted by federal law when it 
stands as an obstacle to the accomplishment and execution of the full 
purposes and objectives of Congress. The Supreme Court has held that 
federal regulations properly adopted in accordance with an agency's 
statutory authorization have no less preemptive effect than federal 
statutes and, applying this principle, the Court has approved the 
preemptive authority that the Commission has asserted over the 
regulation of cable television systems. In addition, section 636(c) of 
the Act states that ``any provision of law of any State, political 
subdivision, or agency thereof, or franchising authority or any 
provision of any franchise granted by such authority, which is 
inconsistent with [the Communications] Act shall be deemed to be 
preempted and superseded.'' Thus, the Commission tentatively concludes 
that, pursuant to the authority granted under sections 621(a) and 
636(c) of the Act, and under the Supremacy Clause, the Commission may 
deem to be preempted and superceded any law or regulation of a State or 
LFA that causes an unreasonable refusal to award a competitive 
franchise in contravention of section 621(a). At the same time, 
however, the Commission recognize that section 636(a) states that 
``[n]othing in this title shall be construed to affect any authority of 
any State, political subdivision, or agency thereof, or franchising 
authority, regarding matters of public health, safety, and welfare, to 
the extent consistent with the express provisions of this title.'' 
Finally, the Commission notes that it is empowered by section 1 of the 
Act ``to execute and enforce the provisions of this Act'' and by 
section 4(i) ``to perform any and all acts, make such rules and 
regulations, and issue such orders, not inconsistent with this Act, as 
may be necessary in the execution of its functions.'' The Commission 
seeks input from commenters on the tentative conclusion that the 
Commission is authorized to implement section 621(a)(1) as amended. The 
Commission also seeks comment on the manner in which the Commission 
should proceed. Do the Commission have the authority to adopt rules or 
is it limited to providing guidance?
    16. The first sentence of section 621(a)(1) states that a 
franchising authority may award ``1 or more franchises'' and may not 
unreasonably refuse to award ``an additional competitive franchise.'' 
The Commission tentatively concludes that section 621(a)(1) empowers it 
to ensure that the local franchising process does not unreasonably 
interfere with the ability of any potential new entrant to provide 
video programming to consumers. The Commission seeks comment on this 
tentative conclusion.
    17. Section 621(a)(1) states in relevant part that ``[a]ny 
applicant whose application for a second franchise has been denied by a 
final decision of the franchising authority may appeal such final 
decision pursuant to the provisions of section 635 for failure to 
comply with this subsection.'' Section 635, in turn, sets forth the 
specific procedures for such judicial proceedings. Apart from those 
remedies available to aggrieved cable operators under section 635, the 
Commission tentatively concludes that section 621(a)(1) authorizes the 
Commission to take actions, consistent with section 636(a), to ensure 
that the local franchising process does not undermine the well-
established policy goal of increased MVPD competition and, in 
particular, greater cable competition within a given franchise 
territory. The Commission seeks comment on this tentative conclusion as 
well. How might the Commission best assure that the local franchising 
process is not inhibiting the ability of incumbent cable operators to 
invest in broadband services?
    18. Finally, the Commission seeks comment on possible sources of 
Commission authority, other than section 621(a)(1), to address problems 
caused by the local franchising process. For example, given the 
relationship between the ability to offer video programming and the 
willingness to invest in broadband facilities identified above, could 
the Commission take action to address franchise-related concerns 
pursuant to section 706?

C. Steps the Commission Should Take To Ensure That the Local 
Franchising Process Does Not Unreasonably Interfere With Competitive 
Cable Entry and Rapid Broadband Deployment

    19. The Commission seeks comment on how to should define what 
constitutes an unreasonable refusal to award an additional competitive 
franchise under section 621(a)(1). While that section refers to the 
``unreasonable refus[al] to award an additional competitive 
franchise,'' the Commission tentatively concludes that section 
621(a)(1) prohibits not only the ultimate refusal to award a 
competitive franchise, but also the establishment of procedures and 
other requirements that have the effect of unreasonably interfering 
with the ability of a would-be competitor to obtain a competitive 
franchise, either by (1) creating unreasonable delays in the process, 
or (2) imposing unreasonable regulatory roadblocks, such that they 
effectively constitute a de facto ``unreasonable refusal to award an 
additional competitive franchise'' within the meaning of section 
621(a)(1). The Commission tentatively finds that this interpretation is 
consistent with the language in the statute and appropriate because it 
captures more appropriately the range of behavior that would constitute 
an ``unreasonable refusal to award an additional competitive 
franchise.'' The Commission seeks comment on this tentative conclusion.
    20. Further, the Commission tentatively concludes that it is not 
unreasonable for an LFA, in awarding a franchise, to ``assure that 
access to cable service is not denied to any group of potential 
residential cable subscribers because of the income of the residents of 
the local area in which such group resides;'' ``allow [a] cable system 
a reasonable period of time to become capable of providing cable 
service to all households in the franchise area;'' and ``require 
adequate assurance that the cable operator will provide adequate 
public, educational and governmental access channel capacity, 
facilities, or financial support.'' These powers and limitations on 
franchising authorities promote important public policy goals.
    21. The Commission solicits comment on what, if any, specific 
rules, guidance or best practices should be adopted to ensure that the 
local cable franchising process does not unreasonably impede 
competitive cable entry. What would the appropriate remedy or remedies 
be for violations of such rules, guidance or best practices? Should the 
Commission establish specific rules to which LFAs must adhere or 
specific guidelines for LFAs? For example, should the Commission 
address maximum timeframes for considering an application for a 
competitive franchise? Are there certain practices that should be found 
unreasonable through rules or guidelines? If so, what are these 
practices?
    22. In addition, it is not clear how the primary justification for 
a cable franchise--i.e., the locality's need to regulate and receive 
compensation for the use of public rights of way--applies to entities 
that already have franchises that authorize their use of those rights 
of way. Does section 621(a)(1) provide the Commission with the 
authority to establish different--specifically, higher--standards for 
``reasonableness'' with respect to such entities? In that context, the 
Commission seeks comment on whether section 621(a)(1) permits the 
imposition of greater restrictions on the

[[Page 73977]]

authority of LFAs with respect to those entities (e.g., facilities-
based providers of telephone and/or broadband services) that already 
have permission to access public rights of way.
    23. The Commission also seeks comment on whether build-out 
requirements are creating unreasonable barriers to entry for 
facilities-based providers of telephone and/or broadband services. The 
areas served by such entities frequently do not coincide perfectly with 
the areas under the jurisdiction of the relevant LFAs. Section 
621(a)(4)(A) states that, ``[i]n awarding a franchise, the franchising 
authority shall allow the applicant's cable system a reasonable period 
of time to become capable of providing cable service to all households 
in the franchise area.'' (For purposes of this discussion, there is a 
distinction between (1) requirements that may function as barriers to 
competitive entry for providers of telephone and/or broadband services 
with existing facilities, and (2) prohibitions against discriminatory 
deployment of cable services based upon economic considerations.) The 
Commission seeks comment on the FCC's authority in this area. Given the 
language of section 621(a)(4)(A), does the Commission have authority 
under section 621(a)(1) to direct LFAs to allow such new entrants a 
specific, minimum amount of time to expand their networks beyond their 
current footprints? If so, and in light of the fact that a new entrant 
generally faces competition from at least one incumbent cable operator 
and two direct broadcast satellite (``DBS'') providers, what would 
constitute a reasonable amount of time to do so?
    24. Finally, section 602 of the Act defines ``franchising 
authority'' as ``any governmental entity empowered by Federal, State, 
or local law to grant a franchise.'' In some cases it may be the state 
itself, rather than the LFA, that has taken steps which unreasonably 
interfere with new entrants' ability to obtain a competitive franchise. 
Commenters should address whether it may be appropriate to preempt such 
state-level legislation to the extent that the Commission finds it 
serves as an unreasonable barrier to the grant of competitive 
franchises.

IV. Procedural Matters

A. Initial Regulatory Flexibility Analysis

    25. As required by the Regulatory Flexibility Act of 1980, as 
amended (the RFA), the Commission has prepared this Initial Regulatory 
Flexibility Analysis (IRFA) of the possible significant economic impact 
of the policies and rules proposed in this NPRM on a substantial number 
of small entities. Written public comments are requested on this IRFA. 
Comments must be identified as responses to the IRFA and must be filed 
by the deadlines for comments on the NPRM provided in paragraph 28 of 
the item. The Commission will send a copy of the NPRM, including this 
IRFA, to the Chief Counsel for Advocacy of the Small Business 
Administration (SBA) (See 5 U.S.C. 603(a)).
a. Need for, and Objectives of, the Proposed Rules
    26. The NPRM initiates a process to implement section 621(a)(1) of 
the Communications Act in order to further the interrelated goals of 
enhanced cable competition and accelerated broadband deployment. 
Specifically, the NPRM solicits comment on how to best ensure that 
LFAs, which are the governmental entities responsible for regulating 
cable providers at the local level, do not ``unreasonably refuse to 
award * * * additional competitive franchise[s].'' The NPRM also seeks 
comment on the specific approach the Commission should take in order to 
implement section 621(a)(1). Specifically, it asks whether the 
Commission should establish (1) specific guidelines and/or model terms 
for competitive cable franchises, or (2) general principles that are 
designed to provide LFAs with the guidance necessary to ensure that 
competitive franchises are awarded in a timely fashion.
b. Legal Basis
    27. The NPRM tentatively concludes that the Commission has 
authority to implement section 621(a)(1)'s mandate that LFAs do not 
``unreasonably refuse to award * * * additional competitive 
franchises.'' The item notes that the Commission is empowered by 
section 1 of the Communications Act ``to execute and enforce [its] 
provisions'' and by section 4(i) ``to perform any and all acts, make 
such rules and regulations, and issue such orders, not inconsistent 
with this Act, as may be necessary in the execution of its functions.'' 
Finally, the NPRM finds that section 636(c) makes plain that ``any 
provision of law of any State, political subdivision, or agency 
thereof, or franchising authority or any provision of any franchise 
granted by such authority, which is inconsistent with this Act shall be 
deemed to be preempted and superceded.'' The NPRM is adopted pursuant 
to sections 1, 4(i), 621(a)(1), and 636(c) of the Communications Act of 
1934, as amended.
c. Description and Estimate of the Number of Small Entities to Which 
the Proposed Rules Will Apply
    28. The RFA directs agencies to provide a description of, and where 
feasible, an estimate of the number of small entities that may be 
affected by the proposed rules, if adopted. The RFA generally defines 
the term ``small entity'' as having the same meaning as the terms 
``small business,'' ``small organization,'' and ``small governmental 
jurisdiction.'' In addition, the term ``small business'' has the same 
meaning as the term ``small business concern'' under the Small Business 
Act. A ``small business concern'' is one which: (1) Is independently 
owned and operated; (2) is not dominant in its field of operation; and 
(3) satisfies any additional criteria established by the Small Business 
Administration (SBA).
    29. Small Businesses. Nationwide, there are a total of 
approximately 22.4 million small businesses, according to SBA data.
    30. Small Organizations. Nationwide, there are approximately 1.6 
million small organizations.
    31. The Commission has determined that the group of small entities 
possibly directly affected by the proposed rules herein, if adopted, 
consists of small governmental entities (which, in some cases, may be 
represented in the local franchising process by not-for-profit 
enterprises). A description of these entities is provided below. In 
addition the Commission voluntarily provides descriptions of a number 
of entities that may be merely indirectly affected by any rules that 
result from the NPRM.

1. Small Governmental Jurisdictions

    32. The term ``small governmental jurisdiction'' is defined as 
``governments of cities, towns, townships, villages, school districts, 
or special districts, with a population of less than fifty thousand.'' 
As of 1997, there were approximately 87,453 governmental jurisdictions 
in the United States. This number includes 39,044 county governments, 
municipalities, and townships, of which 37,546 (approximately 96.2 
percent) have populations of fewer than 50,000, and of which 1,498 have 
populations of 50,000 or more. Thus, we estimate the number of small 
governmental jurisdictions overall to be 84,098 or fewer.

2. Miscellaneous Entities

    33. The entities described in this section are affected merely 
indirectly by the NPRM, and therefore are not formally a part of this 
RFA analysis. They are included, however, to broaden

[[Page 73978]]

the record in this proceeding and to alert them to the Commission's 
tentative conclusions.
aa. Cable Operators
    34. The ``Cable and Other Program Distribution'' census category 
includes cable systems operators, closed circuit television services, 
direct broadcast satellite services, multipoint distribution systems, 
satellite master antenna systems, and subscription television services. 
The SBA has developed small business size standard for this census 
category, which includes all such companies generating $12.5 million or 
less in revenue annually. According to Census Bureau data for 1997, 
there were a total of 1,311 firms in this category, total, that had 
operated for the entire year. Of this total, 1,180 firms had annual 
receipts of under $10 million and an additional 52 firms had receipts 
of $10 million or more but less than $25 million. Consequently, the 
Commission estimates that the majority of providers in this service 
category are small businesses that may be affected by the rules and 
policies adopted herein.
    35. Cable System Operators (Rate Regulation Standard). The 
Commission has developed its own small-business-size standard for cable 
system operators, for purposes of rate regulation. Under the 
Commission's rules, a ``small cable company'' is one serving fewer than 
400,000 subscribers nationwide. The most recent estimates indicate that 
there were 1,439 cable operators who qualified as small cable system 
operators at the end of 1995. Since then, some of those companies may 
have grown to serve over 400,000 subscribers, and others may have been 
involved in transactions that caused them to be combined with other 
cable operators. Consequently, the Commission estimates that there are 
now fewer than 1,439 small entity cable system operators that may be 
affected by the rules and policies adopted herein.
    36. Cable System Operators (Telecom Act Standard). The 
Communications Act of 1934, as amended, also contains a size standard 
for small cable system operators, which is ``a cable operator that, 
directly or through an affiliate, serves in the aggregate fewer than 1 
percent of all subscribers in the United States and is not affiliated 
with any entity or entities whose gross annual revenues in the 
aggregate exceed $250,000,000.'' The Commission has determined that 
there are 67,700,000 subscribers in the United States. Therefore, an 
operator serving fewer than 677,000 subscribers shall be deemed a small 
operator, if its annual revenues, when combined with the total annual 
revenues of all its affiliates, do not exceed $250 million in the 
aggregate. Based on available data, the Commission estimates that the 
number of cable operators serving 677,000 subscribers or fewer, totals 
1,450. The Commission neither requests nor collects information on 
whether cable system operators are affiliated with entities whose gross 
annual revenues exceed $250 million, and therefore is unable, at this 
time, to estimate more accurately the number of cable system operators 
that would qualify as small cable operators under the size standard 
contained in the Communications Act of 1934.
    37. Open Video Services. Open Video Service (OVS) systems provide 
subscription services. As noted above, the SBA has created a small 
business size standard for Cable and Other Program Distribution. This 
standard provides that a small entity is one with $12.5 million or less 
in annual receipts. The Commission has certified approximately 25 OVS 
operators to serve 75 areas, and some of these are currently providing 
service. Affiliates of Residential Communications Network, Inc. (RCN) 
received approval to operate OVS systems in New York City, Boston, 
Washington, DC, and other areas. RCN has sufficient revenues to assure 
that they do not qualify as a small business entity. Little financial 
information is available for the other entities that are authorized to 
provide OVS and are not yet operational. Given that some entities 
authorized to provide OVS service have not yet begun to generate 
revenues, the Commission concludes that up to 24 OVS operators (those 
remaining) might qualify as small businesses that may be affected by 
the rules and policies adopted herein.
bb. Telecommunications Service Entities
    38. As noted above, a ``small business'' under the RFA is one that, 
inter alia, meets the pertinent small business size standard (e.g., a 
telephone communications business having 1,500 or fewer employees), and 
``is not dominant in its field of operation.'' The SBA's Office of 
Advocacy contends that, for RFA purposes, small incumbent local 
exchange carriers are not dominant in their field of operation because 
any such dominance is not ``national'' in scope.
    39. Incumbent Local Exchange Carriers (LECs). Neither the 
Commission nor the SBA has developed a small business size standard 
specifically for incumbent local exchange services. The appropriate 
size standard under SBA rules is for the category Wired 
Telecommunications Carriers. Under that size standard, such a business 
is small if it has 1,500 or fewer employees. According to Commission 
data, 1,303 carriers have reported that they are engaged in the 
provision of incumbent local exchange services. Of these 1,303 
carriers, an estimated 1,020 have 1,500 or fewer employees and 283 have 
more than 1,500 employees. Consequently, the Commission estimates that 
most providers of incumbent local exchange service are small businesses 
that may be affected by our action. In addition, limited preliminary 
census data for 2002 indicate that the total number of wired 
communications carriers increased approximately 34 percent from 1997 to 
2002.
    40. Competitive Local Exchange Carriers, Competitive Access 
Providers (CAPs), ``Shared-Tenant Service Providers,'' and ``Other 
Local Service Providers.'' Neither the Commission nor the SBA has 
developed a small business size standard specifically for these service 
providers. The appropriate size standard under SBA rules is for the 
category Wired Telecommunications Carriers. Under that size standard, 
such a business is small if it has 1,500 or fewer employees. According 
to Commission data, 769 carriers have reported that they are engaged in 
the provision of either competitive access provider services or 
competitive local exchange carrier services. Of these 769 carriers, an 
estimated 676 have 1,500 or fewer employees and 93 have more than 1,500 
employees. In addition, 12 carriers have reported that they are 
``Shared-Tenant Service Providers,'' and all 12 are estimated to have 
1,500 or fewer employees. In addition, 39 carriers have reported that 
they are ``Other Local Service Providers.'' Of the 39, an estimated 38 
have 1,500 or fewer employees and one has more than 1,500 employees. 
Consequently, the Commission estimates that most providers of 
competitive local exchange service, competitive access providers, 
``Shared-Tenant Service Providers,'' and ``Other Local Service 
Providers'' are small entities that may be affected by our action. In 
addition, limited preliminary census data for 2002 indicate that the 
total number of wired communications carriers increased approximately 
34 percent from 1997 to 2002.
d. Description of Projected Reporting, Recordkeeping and Other 
Compliance Requirements
    41. The Commission anticipates that any rules implementing section 
621(a)(1) that result from this action would have at most a de minimis 
impact

[[Page 73979]]

on small governmental jurisdictions (e.g., one-time proceedings to 
amend existing procedures regarding the method of granting competitive 
franchises). LFAs today must review and decide upon competitive cable 
franchise applications, and will continue to perform that role upon the 
conclusion of this proceeding; any rules that might be adopted pursuant 
to this NPRM likely would require at most only modifications to that 
process.
e. Steps Taken To Minimize Significant Economic Impact on Small 
Entities and Significant Alternatives Considered
    42. The RFA requires an agency to describe any significant, 
specifically small business, alternatives that it has considered in 
reaching its proposed approach, which may include the following four 
alternatives (among others): ``(1) The establishment of differing 
compliance or reporting requirements or timetables that take into 
account the resources available to small entities; (2) the 
clarification, consolidation, or simplification of compliance and 
reporting requirements under the rule for such small entities; (3) the 
use of performance rather than design standards; and (4) an exemption 
from coverage of the rule, or any part thereof, for such small 
entities.''
    43. As discussed in the NPRM, section 621(a)(1) states that LFAs 
must not unreasonably refuse to award competitive franchises. Should 
the Commission conclude ultimately that the procedures by which LFAs 
currently award competitive franchises conflict with the mandate of 
section 621(a)(1), it may adopt rules designed to ensure that the local 
franchising process does not create unreasonable barriers to 
competitive entry. Such rules may consist of specific guidelines (e.g., 
maximum timeframes for considering a competitive franchise application) 
or general principles designed to provide LFAs with the guidance 
necessary to conform their behavior to the directive of section 
621(a)(1). As noted above, these rules likely would have at most a de 
minimis impact on small governmental jurisdictions. Even if that were 
not the case, however, the interrelated, high-priority federal 
communications policy goals of enhanced cable competition and 
accelerated broadband deployment would necessitate the establishment of 
specific guidelines and/or general principles for LFAs with respect to 
the process by which they grant competitive cable franchises. The 
alternative (i.e., continuing to allow LFAs to follow procedures that 
do not ensure that competitive cable franchises are not unreasonably 
refused) would be unacceptable, as it would be flatly inconsistent with 
section 621(a)(1). The Commission seeks comment on the impact that such 
rules might have on small entities, and on what effect alternative 
rules would have on those entities. The Commission also invites comment 
on ways in which the Commission might implement section 621(a)(1) while 
at the same time impose lesser burdens on small entities.
f. Federal Rules That May Duplicate, Overlap, or Conflict With the 
Proposed Rules
    44. None.

B. Initial Paperwork Reduction Act of 1995 Analysis

    45. This document does not contain proposed information 
collection(s) subject to the Paperwork Reduction Act of 1995 (PRA), 
Public Law 104-13. In addition, therefore, it does not contain any new 
or modified ``information collection burden for small business concerns 
with fewer than 25 employees,'' pursuant to the Small Business 
Paperwork Relief Act of 2002, Public Law 107-198, see 44 U.S.C. 
3506(c)(4).

C. Ex Parte Rules

    46. Permit-But-Disclose. This proceeding will be treated as a 
``permit-but-disclose'' proceeding subject to the ``permit-but-
disclose'' requirements under Sec.  1.1206(b) of the Commission's 
rules. Ex parte presentations are permissible if disclosed in 
accordance with Commission rules, except during the Sunshine Agenda 
period when presentations, ex parte or otherwise, are generally 
prohibited. Persons making oral ex parte presentations are reminded 
that a memorandum summarizing a presentation must contain a summary of 
the substance of the presentation and not merely a listing of the 
subjects discussed. More than a one-or two-sentence description of the 
views and arguments presented is generally required. Additional rules 
pertaining to oral and written presentations are set forth in Sec.  
1.1206(b).

D. Filing Requirements

    47. Comments and Replies. Pursuant to Sec. Sec.  1.415 and 1.419 of 
the Commission's rules, interested parties may file comments on or 
before the dates indicated on the first page of this document. Comments 
may be filed using: (1) The Commission's Electronic Comment Filing 
System (ECFS), (2) the Federal Government's eRulemaking Portal, or (3) 
by filing paper copies.
    48. Electronic Filers: Comments may be filed electronically using 
the Internet by accessing the ECFS: http://www.fcc.gov/cgb/ecfs/ or the 
Federal eRulemaking Portal: http://www.regulations.gov. Filers should 
follow the instructions provided on the Web site for submitting 
comments. For ECFS filers, if multiple docket or rulemaking numbers 
appear in the caption of this proceeding, filers must transmit one 
electronic copy of the comments for each docket or rulemaking number 
referenced in the caption. In completing the transmittal screen, filers 
should include their full name, U.S. Postal Service mailing address, 
and the applicable docket or rulemaking number. Parties may also submit 
an electronic comment by Internet e-mail. To get filing instructions, 
filers should send an e-mail to [email protected], and include the following 
words in the body of the message, ``get form.'' A sample form and 
directions will be sent in response.
    49. Paper Filers: Parties who choose to file by paper must file an 
original and four copies of each filing. If more than one docket or 
rulemaking number appears in the caption of this proceeding, filers 
must submit two additional copies for each additional docket or 
rulemaking number. Filings can be sent by hand or messenger delivery, 
by commercial overnight courier, or by first-class or overnight U.S. 
Postal Service mail (although we continue to experience delays in 
receiving U.S. Postal Service mail). All filings must be addressed to 
the Commission's Secretary, Office of the Secretary, Federal 
Communications Commission.
     The Commission's contractor will receive hand-delivered or 
messenger-delivered paper filings for the Commission's Secretary at 236 
Massachusetts Avenue, NE., Suite 110, Washington, DC 20002. The filing 
hours at this location are 8 a.m. to 7 p.m. All hand deliveries must be 
held together with rubber bands or fasteners. Any envelopes must be 
disposed of before entering the building.
     Commercial overnight mail (other than U.S. Postal Service 
Express Mail and Priority Mail) must be sent to 9300 East Hampton 
Drive, Capitol Heights, MD 20743.
     U.S. Postal Service first-class, Express, and Priority 
mail should be addressed to 445 12th Street, SW., Washington, DC 20554.


[[Page 73980]]


Federal Communications Commission.
Marlene H. Dortch,
Secretary.
[FR Doc. 05-24029 Filed 12-13-05; 8:45 am]
BILLING CODE 6712-01-P