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Ministry of Innovation / Business of Technology

FCC kills build-out requirements for telecoms’ video services (updated)

In a partisan vote today, the FCC voted to reform cable franchising rules and …

In a meeting today, FCC commissioners voted 3-2 in favor of reforming cable franchising laws across the US. The move will make it easier for telephone companies like Verizon and AT&T to offer video services over their networks and will restrict local attempts to regulate their behavior.

The FCC order imposes a 90-day limit on local communities' franchising decisions and requires communities to abide by a five percent cap on the fees they charge franchisees (some communities have attempted to evade this limit by requesting non-cash benefits like local swimming pools in addition to fees).

But more importantly, the vote does away with most build-out requirements. Those requirements generally insist that companies offer service to all the residents in the town, rather than cherry-picking the profitable areas (note that this is a different thing from cherry-picking wealthy areas; there's little evidence that phone and TV companies do this, since uptake rates are similar across the salary spectrum). It's a big win for AT&T in particular, as the company has steadfastly refused to sign any build-out agreements for its U-verse IPTV service (see our investigative report on the topic).

FCC Chairman Kevin Martin, who voted for the new rules, said that the build-out requirements provision was "particularly difficult." He wants to "strike a balance between encouraging as widespread deployment of broadband as possible while not deterring entry altogether."

Commissioner Copps, one of the two Democrats, voted against a proposal that he thinks is bad for consumers. Copps argued that most examples of bad behavior by local municipalities were merely "isolated episodes or anecdotal evidence" and stood up for the "long-standing principles of federalism" that recognized local control over local issues. Limiting local authority will make it difficult for towns to "deal with the huge companies that are coming into our cities and towns to build important infrastructure."

The vote was along party lines, and it already has some observers calling foul. Even before the vote, trade groups representing the cable industry questioned whether the FCC had the authority to make such a change. That question is also being raised by a powerful figure in Washington, Rep. Ed Markey (D-MA), who will be heading up the House Subcommittee on Telecommunications and the Internet when Congress reconvenes in January.

In a statement sent to Ars Technica, Markey worried that the FCC had upstaged Congress by taking the matter into its own hands after Congress failed to pass pending legislation on the topic earlier this year. "Overall, I believe the haste with which the Commission has acted may lead to problematic and unintended consequences," Markey went on to say. "In some instances, the Commission may be acting without clear legal authority." Markey then said that he looked forward to "reviewing today's decision and examining its implications for consumers, communities, and competition next year."

What about the cable companies?

We've yet to address one major question: what happens to the cable companies that have already taken out video franchises and are usually subject to build-out requirements? After all, if they have to play by a different set of rules from the phone companies, they are going to be mighty upset.

The FCC has tentatively decided that their findings will apply to everyone, but won't take effect until a company renews its franchise agreement. "Level playing field" statutes in many states make it illegal for cities to offer different terms to different franchisees, but the FCC preempts these laws "to the extent they impose greater restrictions on market entry than the rules adopted herein."

This means that phone companies could be playing from a different rulebook than the cable companies, at least until cable franchises come up for renewal. Once that happens, and if the FCC decision withstands the inevitable court challenge and Congressional scrutiny, it will be far more difficult for local authorities to require either phone or cable companies to build out their services.

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