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, 13189-13215 [E7-5119]

Agencies

• FEDERAL COMMUNICATIONS COMMISSION

[Federal Register Volume 72, Number 54 (Wednesday, March 21, 2007)]
[Rules and Regulations]
[Pages 13189-13215]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-5119]


=======================================================================
-----------------------------------------------------------------------

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 76

[MB Docket No. 05-311; FCC 06-180]


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: Final rule.

-----------------------------------------------------------------------

SUMMARY: In this document, the Commission adopts rules and provides 
guidance to implement section 621(a)(1) of the Communications Act. The 
Commission solicited and reviewed comments on this section and found

[[Page 13190]]

that the current operation of the local franchising process in many 
jurisdictions constitutes an unreasonable barrier to entry that impedes 
the achievement of the interrelated Federal goals of enhanced cable 
competition and accelerated broadband deployment. The Commission adopts 
measures to address a variety of means by which local franchising 
authorities are unreasonably refusing to award competitive franchises. 
The rules and guidance will facilitate and expedite entry of new cable 
competitors into the market for the delivery of video programming, and 
accelerate broadband deployment.

DATES: The rules in Sec.  76.41 contains information collection 
requirements that have not been approved by OMB, subject to the 
Paperwork Reduction Act. The Federal Communications Commission will 
publish a document announcing the effective date upon OMB approval.

ADDRESSES: You may submit comments, identified by MB Docket No. 05-311, 
by any of the following methods:
     Federal eRulemaking Portal: https://www.regulations.gov. 
Follow the instructions for submitting comments.
     Federal Communications Commission's Web Site: https://
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: FCC504@fcc.gov or phone: 202-418-
0530 or TTY: 202-418-0432.

For additional information on the rulemaking process, see the 
SUPPLEMENTARY INFORMATION section of this document.

FOR FURTHER INFORMATION CONTACT: Holly Saurer, Holly.Saurer@fcc.gov or 
Brendan Murray, Brendan.Murray@fcc.gov of the Media Bureau, Policy 
Division, (202) 418-2120.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Report 
and Order (Order), FCC 06-180, adopted on December 20, 2006, and 
released on March 5, 2007. 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 (https://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 
fcc504@fcc.gov or call the Commission's Consumer and Governmental 
Affairs Bureau at (202) 418-0530 (voice), (202) 418-0432 (TTY).

Paperwork Reduction Act of 1995 Analysis

    This document contains new information collection requirements 
subject to the Paperwork Reduction Act of 1995 (PRA), Public Law 104-
13. It will be submitted to the Office of Management and Budget (OMB) 
for review under Section 3507(d) of the PRA. OMB, the general public, 
and other Federal agencies will be invited to comment on the new 
information collection requirements contained in this proceeding. The 
Commission will publish a separate document in the Federal Register at 
a later date seeking these comments. In addition, we note that pursuant 
to the Small Business Paperwork Relief Act of 2002, Public Law 107-198, 
see 44 U.S.C. 3506(c)(4), we previously sought specific comment on how 
the Commission might ``further reduce the information collection burden 
for small business concerns with fewer than 25 employees.''

Summary of the Report and Order

I. Introduction

    1. In this Report and Order (``Order''), we adopt rules and provide 
guidance to implement Section 621(a)(1) of the Communications Act of 
1934, as amended (the ``Communications Act''), 47 U.S.C. 541(a)(1), 
which prohibits franchising authorities from unreasonably refusing to 
award competitive franchises for the provision of cable services. We 
find that the current operation of the local franchising process in 
many jurisdictions constitutes an unreasonable barrier to entry that 
impedes the achievement of the interrelated Federal goals of enhanced 
cable competition and accelerated broadband deployment. While there is 
a sufficient record before us to generally determine what constitutes 
an ``unreasonable refusal to award an additional competitive 
franchise'' at the local level under Section 621(a)(1), we do not have 
sufficient information to make such determinations with respect to 
franchising decisions where a State is involved, either by issuing 
franchises at the State level or enacting laws governing specific 
aspects of the franchising process. We therefore expressly limit our 
findings and regulations in this Order to actions or inactions at the 
local level where a State has not specifically circumscribed the LFA's 
authority. In light of the differences between the scope of franchises 
issued at the State level and those issued at the local level, we do 
not address the reasonableness of demands made by State level 
franchising authorities, such as Hawaii, which may need to be evaluated 
by different criteria than those applied to the demands of local 
franchising authorities.
    Additionally, what constitutes an unreasonable period of time for a 
State level franchising authority to take to review an application may 
differ from what constitutes an unreasonable period of time at the 
local level. Moreover, many States have enacted comprehensive franchise 
reform laws designed to facilitate competitive entry. Some of these 
laws allow competitive entrants to obtain statewide franchises while 
others establish a comprehensive set of statewide parameters that cabin 
the discretion of LFAs. In light of the fact that many of these laws 
have only been in effect for a short period of time, and we do not have 
an adequate record from those relatively few States that have had 
statewide franchising for a longer period of time to draw general 
conclusions with respect to the operation of the franchising process 
where there is State involvement, we lack a sufficient record to 
evaluate whether and how such State laws may lead to unreasonable 
refusals to award additional competitive franchises. As a result, our 
Order today only addresses decisions made by county- or municipal-level 
franchising authorities. Moreover, it does not address any aspect of an 
LFA's decision-making to the extent that such aspect is specifically 
addressed by State law. For example, the State of Massachusetts 
provides LFAs with 12 months from the date of their decision to begin 
the licensing process to approve or deny a franchise application. These 
laws are not addressed by this decision. Consequently, unless otherwise 
stated, references herein to ``the franchising process'' or 
``franchising'' refer solely to processes controlled by county- or 
municipal-level franchising authorities, including but not limited to 
the ultimate decision to award a franchise. We further find that 
Commission action to address this problem is both authorized and 
necessary. Accordingly, we adopt

[[Page 13191]]

measures to address a variety of means by which local franchising 
authorities, i.e., county- or municipal-level franchising authorities 
(``LFAs''), are unreasonably refusing to award competitive franchises. 
We anticipate that the rules and guidance we adopt today will 
facilitate and expedite entry of new cable competitors into the market 
for the delivery of video programming, and accelerate broadband 
deployment consistent with our statutory responsibilities. References 
throughout this Order to ``video programming'' or ``video services'' 
are intended to mean cable services.
    2. New competitors are entering markets for the delivery of 
services historically offered by monopolists: Traditional phone 
companies are primed to enter the cable market, while traditional cable 
companies are competing in the telephony market. Ultimately, both types 
of companies are projected to offer customers a ``triple play'' of 
voice, high-speed Internet access, and video services over their 
respective networks. We believe this competition for delivery of 
bundled services will benefit consumers by driving down prices and 
improving the quality of service offerings. We are concerned, however, 
that traditional phone companies seeking to enter the video market face 
unreasonable regulatory obstacles, to the detriment of competition 
generally and cable subscribers in particular.
    3. The Communications Act sets forth the basic rules concerning 
what franchising authorities may and may not do in evaluating 
applications for competitive franchises. Despite the parameters 
established by the Communications Act, however, operation of the 
franchising process has proven far more complex and time consuming than 
it should be, particularly with respect to facilities-based 
telecommunications and broadband providers that already have access to 
rights-of-way. New entrants have demonstrated that they are willing and 
able to upgrade their networks to provide video services, but the 
current operation of the franchising process at the local level 
unreasonably delays and, in some cases, derails these efforts due to 
LFAs' unreasonable demands on competitive applicants. These delays 
discourage investment in the fiber-based infrastructure necessary for 
the provision of advanced broadband services, because franchise 
applicants do not have the promise of revenues from video services to 
offset the costs of such deployment. Thus, the current operation of the 
franchising process often not only contravenes the statutory imperative 
to foster competition in the multichannel video programming 
distribution (``MVPD'') market, but also defeats the congressional goal 
of encouraging broadband deployment.
    4. In light of the problems with the current operation of the 
franchising process, we believe that it is now appropriate for the 
Commission to exercise its authority and take steps to prevent LFAs 
from unreasonably refusing to award competitive franchises. We have 
broad rulemaking authority to implement the provisions of the 
Communications Act, including Title VI generally and Section 621(a)(1) 
in particular. In addition, Section 706 of the Telecommunications Act 
of 1996 directs the Commission to encourage broadband deployment by 
removing barriers to infrastructure investment, and the U.S. Court of 
Appeals for the District of Columbia Circuit has held that the 
Commission may fashion its rules to fulfill the goals of Section 706.
    5. To eliminate the unreasonable barriers to entry into the cable 
market, and to encourage investment in broadband facilities, we: (1) 
Find that an LFA's failure to issue a decision on a competitive 
application within the time frames specified herein constitutes an 
unreasonable refusal to award a competitive franchise within the 
meaning of Section 621(a)(1) of the Communications Act; (2) find that 
an LFA's refusal to grant a competitive franchise because of an 
applicant's unwillingness to agree to unreasonable build-out mandates 
constitutes an unreasonable refusal to award a competitive franchise 
within the meaning of Section 621(a)(1); (3) find that unless certain 
specified costs, fees, and other compensation required by LFAs are 
counted toward the statutory 5 percent cap on franchise fees, demanding 
them could result in an unreasonable refusal to award a competitive 
franchise; (4) find that it would be an unreasonable refusal to award a 
competitive franchise if the LFA denied an application based upon a new 
entrant's refusal to undertake certain obligations relating to public, 
educational, and government (``PEG'') and institutional networks (``I-
Nets'') and (5) find that it is unreasonable under Section 621(a)(1) 
for an LFA to refuse to grant a franchise based on issues related to 
non-cable services or facilities. Furthermore, we preempt local laws, 
regulations, and requirements, including level-playing-field 
provisions, to the extent they permit LFAs to impose greater 
restrictions on market entry than the rules adopted herein. We also 
adopt a Further Notice of Proposed Rulemaking (``FNPRM'') seeking 
comment on how our findings in this Order should affect existing 
franchisees. In addition, the FNPRM asks for comment on local consumer 
protection and customer service standards as applied to new entrants.

II. Background

    6. Section 621. Any new entrant seeking to offer ``cable service'' 
as a ``cable operator'' becomes subject to the requirements of Title 
VI. 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 
franchising authorities the power to award such franchises.
    7. 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 delineate the role of LFAs in the 
franchising process. As originally enacted, Section 621(a)(1) simply 
stated that ``[a] franchising authority may award, in accordance with 
the provisions of this title, 1 or more franchises within its 
jurisdiction.'' 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. 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.''
    8. 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.'' In the Conference Report 
on the legislation, Congress found that competition in the cable 
industry was sorely lacking:

    For a variety of reasons, including local franchising 
requirements and the extraordinary expense of constructing more than 
one cable television system to serve a particular geographic area, 
most cable television subscribers have no opportunity to select 
between competing cable systems. Without the presence of another 
multichannel video programming distributor,

[[Page 13192]]

a cable system faces no local competition. The result is undue 
market power for the cable operator as compared to that of consumers 
and video programmers.

    To address this problem, Congress abridged local government 
authority over the franchising process 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.

    As revised, Section 621(a)(1) establishes a clear, Federal-level 
limitation on the authority of LFAs in the franchising process in order 
to ``promote the availability to the public of a diversity of views and 
information through cable television and other video distribution 
media,'' and to ``rely on the marketplace, to the maximum extent 
feasible, to achieve that availability.'' Congress further recognized 
that increased competition in the video programming industry would curb 
excessive rate increases and enhance customer service, two areas in 
particular which Congress found had deteriorated because of the 
monopoly power of cable operators brought about, at least in part, by 
the local franchising process.
    9. In 1992, Congress also revised Section 621(a)(1) to provide 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. Congress did not, however, provide an explicit 
judicial remedy for other forms of unreasonable refusals to award 
competitive franchises, such as an LFA's refusal to act on a pending 
franchise application within a reasonable time period.
    10. The Local Franchising NPRM. Notwithstanding the limitation 
imposed on LFAs by Section 621(a)(1), prior to commencement of this 
proceeding, the Commission had seen indications that the current 
operation of the franchising process still serves as an unreasonable 
barrier to entry for potential new cable entrants into the MVPD market. 
We refer herein to ``new entrants,'' ``new cable entrants,'' and ``new 
cable competitors'' interchangeably. Specifically, we intend these 
terms to describe entities that opt to offer ``cable service'' over a 
``cable system'' utilizing public rights-of-way, and thus are defined 
under the Communications Act as ``cable operator[s]'' that must obtain 
a franchise. Although we recognize that there are numerous other ways 
to enter the MVPD market (e.g., direct broadcast satellite (``DBS''), 
wireless cable, private cable), our actions in this proceeding relate 
to our authority under Section 621(a)(1) of the Communications Act, and 
thus are limited to competitive entrants seeking to obtain cable 
franchises. In November 2005, the Commission issued a Notice of 
Proposed Rulemaking (``Local Franchising NPRM'') to determine whether 
LFAs are unreasonably refusing to award competitive franchises and 
thereby impeding achievement of the statute's goals of increasing 
competition in the delivery of video programming and accelerating 
broadband deployment.
    11. The Commission sought comment on the current environment in 
which new cable entrants attempt to obtain competitive cable 
franchises. For example, the Commission requested input on the number 
of: (a) LFAs in the United States; (b) competitive franchise 
applications filed to date; and (c) ongoing franchise negotiations. To 
determine whether the current operation of the franchising process 
discourages competition and broadband deployment, the Commission also 
sought information regarding, among other things:
     How much time, on average, elapses between the date a 
franchise application is filed and the date an LFA acts on the 
application, and during that period, how much time is spent in active 
negotiations;
     Whether to establish a maximum time frame for an LFA to 
act on an application for a competitive franchise;
     Whether ``level-playing-field'' mandates, which impose on 
new entrants terms and conditions identical to those in the incumbent 
cable operator's franchise, constitute unreasonable barriers to entry;
     Whether build-out requirements (i.e., requirements that a 
franchisee deploy cable service to parts or all of the franchise area 
within a specified period of time) are creating unreasonable barriers 
to competitive entry;
     Specific examples of any monetary or in-kind LFA demands 
unrelated to cable services that could be adversely affecting new 
entrants' ability to obtain franchises; and
     Whether current procedures or requirements are appropriate 
for any cable operator, including incumbent cable operators.
    12. In the Local Franchising NPRM, we tentatively concluded that 
Section 621(a)(1) empowers the Commission to adopt rules to ensure that 
the franchising process does not unduly interfere with the ability of 
potential competitors to provide video programming to consumers. 
Accordingly, the Commission sought comment on how it could best remedy 
any problems with the current franchising process.
    13. The Commission also asked whether Section 706 provides a basis 
for the Commission to address barriers faced by would-be entrants to 
the video market. Section 706 directs the Commission to encourage 
broadband deployment by utilizing ``measures that promote competition * 
* * or other regulating methods that remove barriers to infrastructure 
investment.'' Competitive entrants in the video market are, in large 
part, deploying new fiber-based facilities that allow companies to 
offer the ``triple play'' of voice, data, and video services. New 
entrants' video offerings thus directly affect their roll-out of new 
broadband services. Revenues from cable services are, in fact, a driver 
for broadband deployment. In light of that relationship, the Commission 
sought comment on whether it could take remedial action pursuant to 
Section 706.
    14. The Franchising Process. The record in this proceeding 
demonstrates that the franchising process differs significantly from 
locality to locality. In most States, franchising is conducted at the 
local level, affording counties and municipalities broad discretion in 
deciding whether to grant a franchise. Some counties and municipalities 
have cable ordinances that govern the structure of negotiations, while 
others may proceed on an applicant-by-applicant basis. Where 
franchising negotiations are focused at the local level, some LFAs 
create formal or informal consortia to pool their resources and 
expedite competitive entry.
    15. To provide video services over a geographic area that 
encompasses more than one LFA, a prospective entrant must become 
familiar with all applicable regulations. This is a time-consuming and 
expensive process that has a chilling effect on competitors. Verizon 
estimates, for example, that it will need 2,500-3,000 franchises in 
order to provide video services throughout its service area. AT&T 
states that its Project Lightspeed deployment

[[Page 13193]]

is projected to cover a geographic area that would encompass as many as 
2,000 local franchise areas. BellSouth estimates that there are 
approximately 1,500 LFAs within its service area. Qwest's in-region 
territory covers a potential 5,389 LFAs. While other companies are also 
considering competitive entry, these estimates amply demonstrate the 
regulatory burden faced by competitors that seek to enter the market on 
a wide scale, a burden that is amplified when individual LFAs 
unreasonably refuse to grant competitive franchises.
    16. A few States and municipalities recently have recognized the 
need for reform and have established expedited franchising processes 
for new entrants. Although these processes also vary greatly and thus 
are of limited help to new cable providers seeking to quickly enter the 
marketplace on a regional basis, they do provide more uniformity in the 
franchising process on an intrastate basis. These State level reforms 
appear to offer promise in assisting new entrants to more quickly begin 
offering consumers a competitive choice among cable providers. In 2005, 
the Texas legislature designated the Texas Public Utility Commission 
(``PUC'') as the franchising authority for State-issued franchises, and 
required the PUC to issue a franchise within 17 business days after 
receipt of a completed application from an eligible applicant. In 2006, 
Indiana, Kansas, South Carolina, New Jersey, North Carolina, and 
California also passed legislation to streamline the franchising 
process by providing for expedited, State level grants of franchises. 
Virginia, by contrast, did not establish statewide franchises but 
mandated uniform time frames for negotiations, public hearings, and 
ultimate franchise approval at the local level. In particular, a 
``certificated provider of telecommunications service'' with existing 
authority to use public rights-of-way is authorized to provide video 
service within 75 days of filing a request to negotiate with each 
individual LFA. Similarly, Michigan recently enacted legislation that 
streamlines the franchise application process, establishes a 30-day 
timeframe within which an LFA must make a decision, and eliminates 
build-out requirements.
    17. In some States, however, franchise reform efforts launched in 
recent months have failed. For example, in Florida, bills that would 
have allowed competitive providers to enter the market with a permit 
from the Office of the Secretary of State, and contained no build-out 
or service delivery schedules, died in committee. In Louisiana, the 
Governor vetoed a bill that would have created a State franchise 
structure, provided for automatic grant of an application 45 days after 
filing, and contained no build-out requirements. In Maine, a bill that 
would have replaced municipal franchises with State franchises was 
withdrawn. Finally, a Missouri bill that would have given the Public 
Service Commission the authority to grant franchises and would have 
prohibited local franchising died in committee.

III. Discussion

    18. Based on the voluminous record in this proceeding, which 
includes comments filed by new entrants, incumbent cable operators, 
LFAs, consumer groups, and others, we conclude that the current 
operation of the franchising process can constitute an unreasonable 
barrier to entry for potential cable competitors, and thus justifies 
Commission action. We find that we have authority under Section 
621(a)(1) to address this problem by establishing limits on LFAs' 
ability to delay, condition, or otherwise ``unreasonably refuse to 
award'' competitive franchises. We find that we also have the authority 
to consider the goals of Section 706 in addressing this problem under 
Section 621(a)(1). We believe that, absent Commission action, 
deployment of competitive video services by new cable entrants will 
continue to be unreasonably delayed or, at worst, derailed. 
Accordingly, we adopt incremental measures directed to LFA-controlled 
franchising processes, as described in detail below. We anticipate that 
the rules and guidance we adopt today will facilitate and expedite 
entry of new cable competitors into the market for the delivery of 
multichannel video programming and thus encourage broadband deployment.

A. The Current Operation of the Franchising Process Unreasonably 
Interferes With Competitive Entry

    19. Most communities in the United States lack cable competition, 
which would reduce cable rates and increase innovation and quality of 
service. Although LFAs adduced evidence that they have granted some 
competitive franchises, and competitors acknowledge that they have 
obtained some franchises, the record includes only a few hundred 
examples of competitive franchises, many of which were obtained after 
months of unnecessary delay. For example, Verizon has obtained 
franchises covering approximately 200 franchise areas. In the vast 
majority of communities, cable competition simply does not exist. For 
example, in Michigan, a number of LFAs have granted competitive 
franchises to local telecommunications companies. See Ada Township, et 
al., Comments at 18-26. Vermont has granted franchises to competitive 
operators in Burlington, Newport, Berlin, Duxbury, Stowe, and Moretown. 
VPSB Comments at 5. Mt. Hood Regulatory Commission (``MHRC''), a 
consolidated regulatory authority for six Oregon localities, has 
negotiated franchises with cable overbuilders, although those companies 
ultimately were unable to deploy service. Similarly, the City of Los 
Angeles has granted two competitive franchises, but each of the 
competitors went out of business shortly after negotiating the 
franchise. City of Los Miami-Dade has granted 11 franchises to six 
providers, and currently is considering the application of another 
potential entrant. New Jersey has granted five competitive franchises, 
but only two ultimately provided service to customers.
    20. The dearth of competition is due, at least in part, to the 
franchising process. The record demonstrates that the current operation 
of the franchising process unreasonably prevents or, at a minimum, 
unduly delays potential cable competitors from entering the MVPD 
market. Numerous commenters have adduced evidence that the current 
operation of the franchising process constitutes an unreasonable 
barrier to entry. Regulatory restrictions and conditions on entry 
shield incumbents from competition and are associated with various 
economic inefficiencies, such as reduced innovation and distorted 
consumer choices. We recognize that some LFAs have made reasonable 
efforts to facilitate competitive entry into the video programming 
market. We also recognize that recent State level reforms have the 
potential to streamline the process to a noteworthy degree. We find, 
though, that the current operation of the local franchising process 
often is a roadblock to achievement of the statutory goals of enhancing 
cable competition and broadband deployment.
    21. Commenters have identified six factors that stand in the way of 
competitive entry. They are: (1) Unreasonable delays by LFAs in acting 
on franchise applications; (2) unreasonable build-out requirements 
imposed by LFAs; (3) LFA demands unrelated to the franchising process; 
(4) confusion concerning the meaning and scope of franchise fee 
obligations; (5) unreasonable LFA demands for PEG channel capacity and 
construction of I-Nets; and (6) level-playing-field

[[Page 13194]]

requirements set by LFAs. We address each factor below.
    22. LFA Delays in Acting on Franchise Applications. The record 
demonstrates that unreasonable delays in the franchising process have 
obstructed and, in some cases, completely derailed attempts to deploy 
competitive video services. Many new entrants have been subjected to 
lengthy, costly, drawn-out negotiations that, in many cases, are still 
ongoing. The FTTH Council cited a report by an investment firm that, on 
average, the franchising process, as it currently operates, delays 
entry by 8-18 months. The record generally supports that estimate. For 
example, Verizon had 113 franchise negotiations underway as of the end 
of March 2005. By the end of March 2006, LFAs had granted only 10 of 
those franchises. In other words, more than 90% of the negotiations 
were not completed within one year. Verizon noted that delays are often 
caused by mandatory waiting periods. BellSouth explained that 
negotiations took an average of 10 months for each of its 20 cable 
franchise agreements, and that in one case, the negotiations took 
nearly three years. AT&T claims that anti-competitive conditions, such 
as level-playing-field constraints and LFA demands regarding build-out, 
not only delay entry but can prevent it altogether. BellSouth notes 
that absent such demands (in Georgia, for example), the company's 
applications were granted quickly. Most of Ameritech's franchise 
negotiations likewise took a number of years. New entrants other than 
the large incumbent local exchange carriers (``LECs'') also have 
experienced delays in the franchising process. NTCA provided an example 
of a small, competitive IPTV provider that is in ongoing negotiations 
that began more than one year ago. The term ``local exchange carrier'' 
means any person that is engaged in the provision of telephone exchange 
service or exchange access. 47 U.S.C. 153(26). For the purposes of 
Section 251 of the Communications Act, ``the term `incumbent local 
exchange carrier' means, with respect to an area, the local exchange 
carrier that (A) On the date of enactment of the Telecommunications Act 
of 1996, provided telephone exchange service in such area; and (B)(i) 
On such date of enactment, was deemed to be a member of the exchange 
carrier association * * *; or (B)(ii) is a person or entity that, on or 
after such date of enactment, became a successor or assign of a member 
[of the exchange carrier association].'' 47 U.S.C. 251(h)(1). A 
competitive LEC is any LEC other than an incumbent LEC. A LEC will be 
treated as an ILEC if ``(A) Such carrier occupies a position in the 
market for telephone exchange service within an area that is comparable 
to the position occupied by a carrier described in paragraph 
[251(h)](1); (B) such carrier has substantially replaced an incumbent 
local exchange carrier described in paragraph [251(h)](1); and (C) such 
treatment is consistent with the public interest, convenience, and 
necessity and the purposes of this section.'' 47 U.S.C. 251(h)(2).
    23. These delays are particularly unreasonable when, as is often 
the case, the applicant already has access to rights-of-way. One of the 
primary justifications for cable franchising is the LFA's need to 
regulate and receive compensation for the use of public rights-of-way. 
We note that certain franchising authorities may have existing 
authority to regulate LECs through State and local rights-of-way 
statutes and ordinances. However, when considering a franchise 
application from an entity that already has rights-of-way access, such 
as an incumbent LEC, an LFA need not and should not devote substantial 
attention to issues of rights-of-way management. Recognizing this 
distinction, some States have enacted or proposed streamlined 
franchising procedures specifically tailored to entities with existing 
access to public rights-of-way. Moreover, in obtaining a certificate 
for public convenience and necessity from a State, a facilities-based 
provider generally has demonstrated its legal, technical, and financial 
fitness to be a provider of telecommunications services. Thus, an LFA 
need not spend a significant amount of time considering the fitness of 
such applicants to access public rights-of-way.
    24. Delays in acting on franchise applications are especially 
onerous because franchise applications are rarely denied outright, 
which would enable applicants to seek judicial review under Section 
635. Rather, negotiations are often drawn out over an extended period 
of time. As a result, the record shows that numerous new entrants have 
accepted franchise terms they considered unreasonable in order to avoid 
further delay. Others have filed lawsuits seeking a court order 
compelling the LFA to act, which entails additional delay, legal 
uncertainty, and great expense. For example, in Maryland, Verizon filed 
suit against Montgomery County, seeking to invalidate some of the 
County's franchise rules, and requesting that the County be required to 
negotiate a franchise agreement, after the parties unsuccessfully 
attempted to negotiate a franchise beginning in May 2005. 
Alternatively, some prospective entrants have walked away from unduly 
prolonged negotiations. Moreover, delays provide the incumbent cable 
operator the opportunity to launch targeted marketing campaigns before 
the competitor's rollout, thus undermining a competitor's prospects for 
success.
    25. Despite this evidence, incumbent cable operators and LFAs 
nevertheless assert that new entrants can obtain and are obtaining 
franchises in a timely fashion, and that delays are largely due to 
unreasonable behavior on the part of franchise applicants, not LFAs. 
The incumbent cable operators accuse Verizon of making unreasonable 
demands through its model franchise. Verizon asserts that it submits a 
model franchise to begin negotiations because uniformity is necessary 
for its nationwide service deployment. Verizon states that it is 
willing to negotiate and tailor the model franchise to each locality's 
needs. For example, Minnesota LFAs claim that they can grant a 
franchise in as little as eight weeks. The record, however, shows that 
expeditious grants of competitive franchises are atypical. Most LFAs 
lack any temporal limits for consideration of franchise applications, 
and of those that have such limits, many set forth lengthy time frames. 
In localities without a time limit or with an unreasonable time limit, 
the delays caused by the current operation of the franchising process 
present a significant barrier to entry. We recognize that some 
franchising authorities move quickly, as a matter of law or policy. The 
record indicates that some LFAs have stated that they welcome 
competition to the incumbent cable operator, and actively facilitate 
such competition. For example, a consolidated franchising authority in 
Oregon negotiated and approved competitive franchises within 90 days. 
An advisory committee in Minnesota granted two competitive franchises 
in six months, after a statutorily imposed eight-week notice and 
hearing period. While we laud the prompt disposition of franchise 
applications in these particular areas, the record shows that these 
examples are atypical. For example, the cities of Chicago and 
Indianapolis acknowledged that, as currently operated, their 
franchising processes take one to three years, respectively. Miami-
Dade's cable ordinance permits the county to make a final decision on a 
cable franchise up to eight months after receiving a completed 
application, and the process may take longer if an applicant submits an 
incomplete application or amends its application.

[[Page 13195]]

    26. Incumbent cable operators and LFAs state that new entrants 
could gain rapid entry if the new entrants simply agreed to the same 
terms applied to incumbent cable franchisees. However, this is not a 
reasonable expectation generally, given that the circumstances 
surrounding competitive entry are considerably different than those in 
existence at the time incumbent cable operators obtained their 
franchises. Incumbent cable operators originally negotiated franchise 
agreements as a means of acquiring or maintaining a monopoly position. 
In most instances, imposing the incumbent cable operator's terms and 
conditions on a new entrant would make entry prohibitively costly 
because the entrant cannot assume that it will quickly--or ever--amass 
the same number or percentage of subscribers that the incumbent cable 
operator captured. The record demonstrates that requiring entry on the 
same terms as incumbent cable operators may thwart entry entirely or 
may threaten new entrants' chances of success once in the market.
    27. Incumbent cable operators also suggest that delay is 
attributable to competitors that are not really serious about entering 
the market, as demonstrated by their failure to file the thousands of 
franchise applications required for broad competitive entry. We reject 
this explanation as inconsistent with both the record as well as common 
sense. Given the complexity and time-consuming nature of the current 
franchising process, it is patently unreasonable to expect any 
competitive entrant to file several thousand applications and negotiate 
several thousand franchising processes at once. Moreover, the incumbent 
LECs have made their plans to enter the video services market 
abundantly clear, and the evidence in the record demonstrates their 
seriousness about doing so. For instance, they are investing billions 
of dollars to upgrade their networks to enable the provision of video 
services, expenditures that would make little sense if they were not 
planning to enter the video market. Finally, the record also 
demonstrates that the obstacles posed by the current operation of the 
franchising process are so great that some prospective entrants have 
shied away from the franchise process altogether.
    28. We also reject the argument by incumbent cable operators that 
delays in the franchising process are immaterial because competitive 
applicants are not ready to enter the market and frequently delay 
initiating service once they secure a franchise. We find that lack of 
competition in the video market is not attributable to inertia on the 
part of competitors. Given the financial risk, uncertainty, and delay 
new entrants face when they apply for a competitive franchise, it is 
not surprising that they wait until they get franchise approval before 
taking all steps necessary to provide service. The sooner a franchise 
is granted, the sooner an applicant can begin completing those steps. 
Consequently, shortening the franchising process will accelerate market 
entry. Moreover, the record shows that streamlining the franchising 
process can expedite market entry. For example, less than 30 days after 
Texas authorized statewide franchises, Verizon filed an application for 
a franchise with respect to 21 Texas communities and was able to launch 
services in most of those communities within 45 days.
    29. Incumbent cable operators offer evidence from their experience 
in the renewal and transfer processes as support for their contention 
that the vast majority of LFAs operate in a reasonable and timely 
manner. We find that incumbent cable operators' purported success in 
the franchising process is not a useful comparison in this case. 
Today's large MSOs obtained their current franchises by either renewing 
their preexisting agreements or by merging with and purchasing other 
incumbent cable franchisees with preexisting agreements. For two key 
reasons, their experiences in franchise transfers and renewals are not 
equivalent to those of new entrants seeking to obtain new franchises. 
First, in the transfer or renewal context, delays in LFA consideration 
do not result in a bar to market entry. Second, in the transfer or 
renewal context, the LFA has a vested interest in preserving continuity 
of service for subscribers, and will act accordingly.
    30. We also reject the claims by incumbent cable operators that the 
experiences of Ameritech, RCN, and other overbuilders demonstrate that 
new entrants can and do obtain competitive franchises in a timely 
manner. The term ``overbuild'' describes the situation in which a 
second cable operator enters a local market in direct competition with 
an incumbent cable operator. In these markets, the second operator, or 
``overbuilder,'' lays wires in the same area as the incumbent, 
``overbuilding'' the incumbent's plant, thereby giving consumers a 
choice between cable service providers. Charter claims that it secured 
franchises and upgraded its systems in a highly competitive market and 
that the incumbent LECs possess sufficient resources to do the same. 
BellSouth notes, however, that Charter does not indicate a single 
instance in which it obtained a franchise through an initial 
negotiation, rather than a transfer. Comcast argues that it faces 
competition from cable overbuilders in several markets. The record is 
scant and inconsistent, however, with respect to overbuilder 
experiences in obtaining franchises, and thus does not provide reliable 
evidence. BellSouth also claims that, despite RCN's claims that the 
franchising process has worked in other proceedings, RCN previously has 
painted a less positive picture of the process and has called it a high 
barrier to entry. Given these facts, we do not believe that the 
experiences cited by incumbent cable operators shed any significant 
light on the current operation of the franchising process with respect 
to competitive entrants.
    31. Impact of Build-Out Requirements. The record shows that build-
out issues are one of the most contentious between LFAs and prospective 
new entrants, and that build-out requirements can greatly hinder the 
deployment of new video and broadband services. New and potential 
entrants commented extensively on the adverse impact of build-out 
requirements on their deployment plans. Large incumbent LECs, small and 
mid-sized incumbent LECs, competitive LECs and others view build-out 
requirements as the most significant obstacle to their plans to deploy 
competitive video and broadband services. Similarly, consumer groups 
and the U.S. Department of Justice, Antitrust Division, urge the 
Commission to address this aspect of the current franchising process in 
order to speed competitive entry.
    32. The record demonstrates that build-out requirements can 
substantially reduce competitive entry. Numerous commenters urge the 
Commission to prohibit LFAs from imposing any build-out requirements, 
and particularly universal build-out requirements. They argue that 
imposition of such mandates, rather than resulting in the increased 
service throughout the franchise area that LFAs desire, will cause 
potential new entrants to simply refrain from entering the market at 
all. They argue that even build-out provisions that do not require 
deployment throughout an entire franchise area may prevent a 
prospective new entrant from offering service.
    33. The record contains numerous examples of build-out requirements 
at the local level that resulted in delayed entry, no entry, or failed 
entry. A consortium of California communities demanded that Verizon 
build out to

[[Page 13196]]

every household in each community before Verizon would be allowed to 
offer service to any community, even though large parts of the 
communities fell outside of Verizon's telephone service area. 
Furthermore, Qwest has withdrawn franchise applications in eight 
communities due to build-out requirements. In each case, Qwest 
determined that entering into a franchise agreement that mandates 
universal build-out would not be economically feasible.
    34. In many instances, level-playing-field provisions in local laws 
or franchise agreements compel LFAs to impose on competitors the same 
build-out requirements that apply to the incumbent cable operator. 
Cable operators use threatened or actual litigation against LFAs to 
enforce level-playing-field requirements and have successfully delayed 
entry or driven would-be competitors out of town. Even in the absence 
of level-playing-field requirements, incumbent cable operators demand 
that LFAs impose comparable build-out requirements on competitors to 
increase the financial burden and risk for the new entrant.
    35. Build-out requirements can deter market entry because a new 
entrant generally must take customers from the incumbent cable 
operator, and thus must focus its efforts in areas where the take-rate 
will be sufficiently high to make economic sense. Because the second 
provider realistically cannot count on acquiring a share of the market 
similar to the incumbent's share, the second entrant cannot justify a 
large initial deployment. Rather, a new entrant must begin offering 
service within a smaller area to determine whether it can reasonably 
ensure a return on its investment before expanding. For example, 
Verizon has expressed significant concerns about deploying service in 
areas heavily populated with MDUs already under exclusive contract with 
another MVPD. Due to the risk associated with entering the video 
market, forcing new entrants to agree up front to build out an entire 
franchise area too quickly may be tantamount to forcing them out of--or 
precluding their entry into--the business.
    36. In many cases, build-out requirements also adversely affect 
consumer welfare. DOJ noted that imposing uneconomical build-out 
requirements results in less efficient competition and the potential 
for higher prices. Non-profit research organizations the Mercatus 
Center and the Phoenix Center argue that build-out requirements reduce 
consumer welfare. Each conclude that build-out requirements imposed on 
competitive cable entrants only benefit an incumbent cable operator. 
The Mercatus Center, citing data from the FCC and GAO indicating that 
customers with a choice of cable providers enjoy lower rates, argues 
that, to the extent that build-out requirements deter entry, they 
result in fewer customers having a choice of providers and a resulting 
reduction in rates. The Phoenix Center study contends that build-out 
requirements deter entry and conflict with Federal, State, and local 
government goals of rapid broadband deployment. Another research 
organization, the American Consumer Institute (ACI), concluded that 
build-out requirements are inefficient: if a cable competitor initially 
serves only one neighborhood in a community, and a few consumers in 
this neighborhood benefit from the competition, total welfare in the 
community improves because no consumer was made worse and some 
consumers (those who can subscribe to the competitive service) were 
made better. In comparison, requirements that deter competitive entry 
may make some consumers (those who would have been able to subscribe to 
the competitive service) worse off. In many instances, placing build-
out conditions on competitive entrants harms consumers and competition 
because it increases the cost of cable service. Qwest commented that, 
in those communities it has not entered due to build-out requirements, 
consumers have been deprived of the likely benefit of lower prices as 
the result of competition from a second cable provider. This claim is 
supported by the Commission's 2005 annual cable price survey, in which 
the Commission observed that average monthly cable rates varied 
markedly depending on the presence--and type--of MVPD competition in 
the local market. The greatest difference occurred where there was 
wireline overbuild competition, where average monthly cable rates were 
20.6 percent lower than the average for markets deemed noncompetitive. 
For these reasons, we disagree with LFAs and incumbent cable operators 
who argue that unlimited local flexibility to impose build-out 
requirements, including universal build-out of a franchise area, is 
essential to promote competition in the delivery of video programming 
and ensure a choice in providers for every household. In many cases, 
build-out requirements may have precisely the opposite effects--they 
deter competition and deny consumers a choice.
    37. Although incumbent LECs already have telecommunications 
facilities deployed over large areas, build-out requirements may 
nonetheless be a formidable barrier to entry for them for two reasons. 
First, incumbent LECs must upgrade their existing plant to enable the 
provision of video service, which often costs billions of dollars. 
Second, as the Commission stated in the Local Franchising NPRM, the 
boundaries of the areas served by facilities-based providers of 
telephone and/or broadband services frequently do not coincide with the 
boundaries of the areas under the jurisdiction of the relevant LFAs. In 
some cases, a potential new entrant's service area comprises only a 
portion of the area under the LFA's jurisdiction. When LECs are 
required to build out where they have no existing plant, the business 
case for market entry is significantly weakened because their 
deployment costs are substantially increased. In other cases, a 
potential new entrant's facilities may already cover most or all of the 
franchise area, but certain economic realities prevent or deter the 
provider from upgrading certain ``wire center service areas'' within 
its overall service area. For example, some wire center service areas 
may encompass a disproportionate level of business locations or multi-
dwelling units (``MDUs'') with MVPD exclusive contracts. New entrants 
also point out that some wire center service areas are low in 
population density (measured by homes per cable plant mile). The record 
suggests, however, that LFAs generally have not required franchisees to 
provide service in low-density areas. New entrants argue that the 
imposition of build-out requirements in either circumstance creates a 
disincentive for them to enter the marketplace.
    38. Incumbent cable operators assert that new entrants' claims are 
exaggerated, and that, in most cases, LEC facilities are coterminous 
with municipal boundaries. The evidence submitted by new entrants, 
however, convincingly shows that inconsistencies between the geographic 
boundaries of municipalities and the network footprints of telephone 
companies are commonplace. The cable industry has adduced no contrary 
evidence. The fact that few LFAs argued that non-coterminous boundaries 
are a problem is not sufficient to contradict the incumbent LECs' 
evidence.
    39. Based on the record as a whole, we find that build-out 
requirements imposed by LFAs can constitute unreasonable barriers to 
entry for competitive applicants. Indeed, the record indicates that 
because potential competitive entrants to the cable market may not be 
able to economically justify

[[Page 13197]]

build-out of an entire local franchising area immediately, these 
requirements can have the effect of granting de facto exclusive 
franchises, in direct contravention of Section 621(a)(1)'s prohibition 
of exclusive cable franchises.
    40. Besides thwarting potential new entrants' deployment of video 
services and depriving consumers of reduced prices and increased 
choice, build-out mandates imposed by LFAs also may directly contravene 
the goals of Section 706 of the Telecommunications Act of 1996, which 
requires the Commission to ``remov[e] barriers to infrastructure 
investment'' to encourage the deployment of broadband services ``on a 
reasonable and timely basis.'' We agree with AT&T that Section 706, in 
conjunction with Section 621(a)(1), requires us to prevent LFAs from 
adversely affecting the deployment of broadband services through cable 
regulation.
    41. We do not find persuasive incumbent cable operators' claims 
that build-out should necessarily be required for new entrants into the 
video market because of certain obligations faced by cable operators in 
their deployment of voice services. To the extent cable operators 
believe they face undue regulatory obstacles to providing voice 
services, they should make that point in other proceedings, not here. 
In any event, commenters generally agree that the record indicates that 
the investment that a competitive cable provider must make to deploy 
video in a particular geographic area far outweighs the cost of the 
additional facilities that a cable operator must install to deploy 
voice service.
    42. LFA Demands Unrelated to the Provision of Video Services. Many 
commenters recounted franchise negotiation experiences in which LFAs 
made unreasonable demands unrelated to the provision of video services. 
Verizon, for example, described several communities that made 
unreasonable requests, such as the purchase of street lights, wiring 
for all houses of worship, the installation of cell phone towers, cell 
phone subsidies for town employees, library parking at Verizon's 
facilities, connection of 220 traffic signals with fiber optics, and 
provision of free wireless broadband service in an area in which 
Verizon's subsidiary does not offer such service; the Wall Street 
Journal reported that Verizon also faced a request for a video hookup 
for Christmas celebrations and video cameras to record a math-tutoring 
program. In Maryland, some localities conditioned a franchise upon 
Verizon's agreement to make its data services subject to local customer 
service regulation. AT&T provided examples of impediments that 
Ameritech New Media faced when it entered the market, including a 
request for a new recreation center and pool. FTTH Council highlighted 
Grande Communications' experience in San Antonio, which required that 
Grande Communications make an up-front, $1 million franchise fee 
payment and fund a $50,000 scholarship with additional annual 
contributions of $7,200. The record demonstrates that LFA demands 
unrelated to cable service typically are not counted toward the 
statutory 5 percent cap on franchise fees, but rather imposed on 
franchisees in addition to assessed franchise fees. Based on this 
record evidence, we are convinced that LFA requests for unreasonable 
concessions are not isolated, and that these requests impose undue 
burdens upon potential cable providers.
    43. Assessment of Franchise Fees. The record establishes that 
unreasonable demands over franchise fee issues also contribute to delay 
in franchise negotiations at the local level and hinder competitive 
entry. Fee issues include not only which franchise-related costs 
imposed on providers should be included within the 5 percent statutory 
franchise fee cap established in Section 622(b), but also the proper 
calculation of franchise fees (i.e., the revenue base from which the 5 
percent is calculated). In Virginia, municipalities have requested 
large ``acceptance fees'' upon grant of a franchise, in addition to 
franchise fees. Other LFAs have requested consultant and attorneys' 
fees. Several Pennsylvania localities have requested franchise fees 
based on cable and non-cable revenues. Some commenters assert that an 
obligation to provide anything of value, including PEG costs, should 
apply toward the franchise fee obligation.
    44. The parties indicate that the lack of clarity with respect to 
assessment of franchise fees impedes deployment of new video 
programming facilities and services for three reasons. First, some LFAs 
make unreasonable demands regarding franchise fees as a condition of 
awarding a competitive franchise. Second, new entrants cannot 
reasonably determine the costs of entry in any particular community. 
Accordingly, they may delay or refrain from entering a market because 
the cost of entry is unclear and market viability cannot be projected. 
Third, a new entrant must negotiate these terms prior to obtaining a 
franchise, which can take a considerable amount of time. Thus, 
unreasonable demands by some LFAs effectively creates an unreasonable 
barrier to entry.
    45. PEG and I-Net Requirements. Negotiations over PEG and I-Nets 
also contribute to delays in the franchising process. In response to 
the Local Franchising NPRM, we received numerous comments asking for 
clarification of what requirements LFAs reasonably may impose on 
franchisees to support PEG and I-Nets. We also received comments 
suggesting that some LFAs are making unreasonable demands regarding PEG 
and I-Net support as a condition of awarding competitive franchises. 
LFAs have demanded funding for PEG programming and facilities that 
exceeds their needs, and will not provide an accounting of where the 
money goes. For example, one municipality in Florida requested $6 
million for PEG facilities, and a Massachusetts community requested 10 
PEG channels, when the incumbent cable operator only provides two. 
Several commenters argued that it is unreasonable for an LFA to request 
a number of PEG channels from a new entrant that is greater than the 
number of channels that the community is using at the time the new 
entrant submits its franchise application. The record indicates that 
LFAs also have made what commenters view as unreasonable institutional 
network requests, such as free cell phones for employees, fiber optic 
service for traffic signals, and redundant fiber networks for public 
buildings.
    46. Level-Playing-Field Provisions. The record demonstrates that, 
in considering franchise applications, some LFAs are constrained by so-
called ``level-playing-field'' provisions in local laws or incumbent 
cable operator franchise agreements. Such provisions typically impose 
upon new entrants terms and conditions that are neither ``more 
favorable'' nor ``less burdensome'' than those to which existing 
franchisees are subject. Some LFAs impose level-playing-field 
requirements on new entrants even without a statutory, regulatory, or 
contractual obligation to do so. Minnesota's process allows incumbent 
cable operators to be active in a competitor's negotiation, and 
incumbent cable operators have challenged franchise grants when those 
incumbent cable operators believed that the LFA did not follow correct 
procedure. According to BellSouth, the length of time for approval of 
its franchises was tied directly to level-playing-field constraints; 
absent such demands (in Georgia, for example), the company's 
applications were granted quickly. NATOA contends, however, that

[[Page 13198]]

although level-playing-field provisions sometimes can complicate the 
franchising process, they do not present unreasonable barriers to 
entry. NATOA and LFAs argue that level-playing-field provisions serve 
important policy goals, such as ensuring a competitive environment and 
providing for an equitable distribution of services and obligations 
among all operators.
    47. The record demonstrates that local level-playing-field mandates 
can impose unreasonable and unnecessary requirements on competitive 
applicants. As noted above, level-playing-field provisions enable 
incumbent cable operators to delay or prevent new entry by threatening 
to challenge any franchise that an LFA grants. Comcast asserts that 
MSOs have not threatened litigation to delay franchise approvals, but 
to insist that their legal and contractual rights are honored in the 
grant of a subsequent franchise. The record demonstrates, however, that 
local level-playing-field requirements may require LFAs to impose 
obligations on new entrants that directly contravene Section 
621(a)(1)'s prohibition on unreasonable refusals to award a competitive 
franchise. In most cases, incumbent cable operators entered into their 
franchise agreements in exchange for a monopoly over the provision of 
cable service. Build-out requirements and other terms and conditions 
that may have been sensible under those circumstances can be 
unreasonable when applied to competitive entrants. NATOA's argument 
that level-playing-field requirements always serve to ensure a 
competitive environment and provide for an equitable distribution of 
services and obligations ignores that incumbent and competitive 
operators are not on the same footing. LFAs do not afford competitive 
providers the monopoly power and privileges that incumbents received 
when they agreed to their franchises, something that investors 
recognize.
    48. Moreover, competitive operators should not bear the 
consequences of an incumbent cable operator's choice to agree to any 
unreasonable franchise terms that an LFA may demand. And while the 
record is mixed as to whether level-playing-field mandates ``assure 
that cable systems are responsive to the needs and interests of the 
local community,'' the more compelling evidence indicates that they do 
not because they prevent competition. Local level-playing-field 
provisions impose costs and risks sufficient to undermine the business 
plan for profitable entry in a given community, thereby undercutting 
the possibility of competition.
    49. Benefits of Cable Competition. We further agree with new 
entrants that reform of the operation of the franchise process is 
necessary and appropriate to achieve increased video competition and 
broadband deployment. The record demonstrates that new cable 
competition reduces rates far more than competition from DBS. 
Specifically, the presence of a second cable operator in a market 
results in rates approximately 15 percent lower than in areas without 
competition--about $5 per month. The magnitude of the rate decreases 
caused by wireline cable competition is corroborated by the rates 
charged in Keller, Texas, where the price for Verizon's ``Everything'' 
package is 13 percent below that of the incumbent cable operator, and 
in Pinellas County, Florida, where Knology is the overbuilder and the 
incumbent cable operator's rates are $10-15 lower than in neighb