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Video Franchise Reform – State Administration
Committee on Communications, Technology & Interstate Commerce
Innovation and convergence of existing technologies are radically expanding communications and information services, blurring distinctions between telephone, Internet services, cable, wireless and satellite. These rapid changes often outpace abilities of federal, state and local regulatory regimes to adapt. The failure of government regulation to change, especially when it is diffused by thousands of jurisdictions, in order to keep pace with these developments have not only delayed deployment of new technologies but also has acted as an unintended barrier to competition. It is important that video regulatory policy assure that like services are treated alike, investment is encouraged, and shall extend such services in a non-discriminatory manner.
Current Competition in Video Markets
Today, we enjoy a competitive marketplace for telecommunications services; consumers have various options from the traditional landline phone to wireless and voice over Internet protocol. Telecommunications services are provided not only by the existing incumbent local carriers but by competitive local exchange carriers, wireless companies, Internet providers, cable systems and others. Unlike telecommunications, where providers primarily deal with one state regulator or the Federal Communications Commission, those providers wishing to deliver video currently usually must deal with a patchwork of hundreds and even thousands of jurisdictions in each state.
Threat of Federal Preemption
At the beginning of the 109th Congress, the respective committees of jurisdiction in both the United States Senate and the House of Representatives announced their intention to re-write the Telecommunications Act of 1996. The Chairmen of both congressional committees have made clear their intention to address the current video franchising regime, its impact on competition and the need to enhance competition. Some members of Congress have introduced legislation to preempt all local franchise authority.
State Action
While Congress continues to study and debate video competition, a number of state legislatures have moved forward to increase video marketplace competition by reforming the current video franchise system. In 2005, the Texas Legislature approved the establishment of statewide video franchising. This year, Indiana, Kansas and Virginia have enacted legislation to streamline and expedite the administration of video franchising. In addition, legislatures in California, Connecticut, Florida, Iowa, Kansas, Louisiana, Michigan, Missouri, New Jersey, South Carolina and Tennessee are considering legislation with regard to establishing state level video franchising. As the “laboratories of democracy,” states once again are in the forefront of advancing the benefits of technology and opening markets to competition.
State Administration Will Preserve State Authority
While the federal government through the Federal Communications Commission regulates to some extent the pricing of video services, the use of rights-of-way for the provision of such services is under the domain of the state.
Local jurisdictions are the creation of either state constitutions or law. The powers that these political subdivisions of the state exercise were granted to them over time by state legislatures. Those local jurisdictions that have franchise authority have it as a result of state legislation or the state constitution. Therefore, any attempt by Congress to preempt current local franchise authority is a preemption of state sovereignty.
Numerous court decisions, including decisions by the United States Supreme Court, have reaffirmed that the powers and authorities enjoyed by local governments are at the discretion of the state. For example, in Hunter v. City of Pittsburgh in 1907, the United States Supreme Court stated:
“Municipal corporations are political subdivisions of the State, created as convenient agencies for exercising such of the governmental powers of the State as may be entrusted to them. …The number, nature and duration of the powers conferred upon these corporations and the territory over which they shall be exercised rests in the absolute direction of the State. The State, therefore, at its pleasure may modify or withdraw all such powers, may take without compensation such property, hold it itself, or vest it in other agencies, expand or contract the territorial area, unite the whole or a part of it with another municipality, repeal the charter and destroy the corporation…In all these respects the State is supreme, and its legislative body, conforming its action to the state constitution, may do as it will, unrestrained by any provision of the Constitution of the United States.”
The National Conference of State Legislatures endorses efforts that will remove barriers to entry for video competitors and foster additional consumer choices in the video marketplace and ultimately ensure competitive neutrality. While NCSL rarely advocates the enactment of legislation in state legislatures, NCSL has at times, when states are facing a crisis or a serious threat of federal preemption, urged state legislatures to take action.
The National Conference of State Legislatures, in order to preserve the states’ sovereignty, endorses state action to streamline and expedite the administration of video franchising. If national franchising is enacted the right of states to enact state level administration or reform and the grandfathering of existing state level reform should be preserved. Government should encourage competition and consumer choices for broadband and video services and promote the deployment of broadband services and technologies. Reducing the number of jurisdictions for which a video provider would be required to seek a franchise from 33,000 to one per state will encourage more competition, promote the deployment of broadband services and enhance state and local economies.
Fees and Taxation of Video Providers
Franchise fees today are levied, imposed or collected as a percentage of gross revenues, used for general revenue purposes and not based on the actual direct and identifiable costs of any benefit to the entity that pays the fee. To the extent such fees are intended as payment for use of public rights-of-way, that fee should be limited to the actual, direct and identifiable cost of such use, and that portion of the fee should be applied only to those who use the rights-of-way. Franchise fees should be collected and administered by one central agency per state.
Adopted by the Standing Committee on Communications, Technology & Interstate Commerce by a vote of 14-1 on Friday, April 7, 2006.
Unanimously adopted at the NCSL General Business Meeting, Saturday, April 8, 2006.
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