SR-501-002 (7)
e
e
50/-002
)I-D
1ft 2 3 1985
CA: R~1t'1: rmcab Ie
CIty CouncIl MeetIng 4-23-85
Santa MonIca, CalIfornIa
STAFF REPORT
TO:
Mayor and CIty CouncIl
FROM:
CIty Attorney and City Manager
SUBJECT:
Recomme~datlons ConcernIng Cable TeleVISIon
INTRODUCTION
ThIS Staff Report has four purposes:
1.
To present
the City Attorney's
legal analYSIS of
constItutIonal
and legIslatIve restrIctIons WhIch may Impact
CIty actIons In the cable area.
2. To describe the procedural optIons avaIlable to the
City
In purSUIng
renewal
of the ex 1St Ing cab Ie operator' 5
franchIse or
In conSIdering franchIse agreements WIth other
cable operators.
3. To present a legal analySIS of the major substantive
recommendatIons of the Cable CommunIcatIons Task Force.
4. To recommend steps the CIty must take In the future.
ThIS Staff Report represents the first component In the
development
of a program regarding cable franchISIng In the
City of Santa Monica.
ThIS InItIal Staff Report prOVIdes the
necese-ary
legal analYSIS as a baselIne for developIng a cable
franchISIng action plan.
Subsequent reports Will recommend to
1
II-D
APR 2 3 \985
e
e
the
CIty CouncIl speCIfIC procedures
and polIcy Issues to be
pursued.
BACKGROUND
I. OrI9Inal FranchISIng
In 1967} the CIty adopted a master ordInance, OrdInance
Number 734 leeS), whIch governs the terms and condItIons for
grantlng cable franchIses. In the same year, the CIty entered
Into Its fIrst cable franchIse agreement WIth Theta Cable of
CalIfornIa, OrdInance Number 7?6 (CeS), Incorporatlng the
terms and condItIons of the master ordInance. On December 13,
1977,
the
CIty CounCIl
renewed the
nonexclUSIve franchIse
agreement WIth Theta Cable of CalIfornIa by adoptIng OrdInance
Number 1074 (CeS) on essentIally the same terms as the prIor
ordInance.
II. Current FranchIse Sta~u5.
Subsequent
to
Its
1977
franchIse
renewa I ,
Theta
T~ese
underwent a serIes of acqUISItIons and reorganIzatIons.
Included corporate takeovers begInnIng In 1981 and culmInated
In the merger of Theta and ItS parent company, Teleprompter
CorporatIon, WIth WestInghouse BroadcastIng Company. The
result of thIS process was the formatIon of Group W Cable.
On
February
3,
1982, pursuant to SectIon 7(d)
CIty, Theta requested approval
of Its
franchl'5e
l,.Jlth the
of the
mergers
as the fInal step In Its corporate transactions.
The
2
e
e
, .
earlier steps In thIS process}
however, had occurred wIthout
approval or proper notIfIcatIon to the CIty. Theta's request
that the CIty approve Its mergers prompted conSideration as to
whether Theta had prevIously breached the terms of ItS
franchise.
In a Staff Report transmItted to the CIty CouncIl on
June 1} 1982, the City Attorney concluded that the acqUIsItIon
of Teleprompter CorporatIon and ItS subsIdIary, Theta Cable of
CalIfornIa, by WestInghouse BroadcastIng Company} constItuted
a
transfer or
aSSIgnment
of the
franchIse under OrdInance
Number 734 (CCS), SectIon 7td). As such} the CIty Attorney
further concluded that Theta Cable had breached the terms of
Its
franchIse
WIth the CIty by fallIng to obtaIn consent of
the CIty CouncIl prIor to the transfer.
It was pOInted out that approprIate
remedIes for the
breach of the franchIse agreement mIght Include termInatIon of
the franchIse or rejectIon of Theta's request for approval of
the merger. The CIty Attorney's offIce recommended that the
CIty CounCIl schedule a subsequent hearIng to determIne: (1)
whether Theta had breached Its franchIse agreement} and If so~
the
approprIate
remedy;
and
(2) whether
to approve
the
formatlon of Group W Cable.
In re~pon5e to the CIty Attorney's recommendatIon, Group
W submItted
a statement of Its pOSitIon WIth regard to the
questIon of whether a breach of
franchIse had occurred.
In
additIon to settIng forth ItS pOSItIon that there had been no
breach, Group W representatIves stated theIr belIef that It
3
e
e
., .
was
unnecessary for the CIty to
hold publIc hearIngs on thIS
me t t e r .
In a wrItten communIcatIon to the CIty CouncIl, Group
W stated;
However,
If
the
C I t Y wo u I d
lIke to
propose
In
wrItIng
any mutually
advantageous
modIfIcatIon
In
the
WIll
franchIse,
any such proposal
promptly be given every conSIderatIon.
Representatives of Group W, Inc. are
ready to meet wIth you In the near
future to dISCUSS these matters.
At
ItS June
1 ,
1982 meetIng, the CIty CounCil
motIons: (11 to schedule a publIc
unanlmou51y
app ro~;ed
two
hearIng
regarding
the
Theta-Group
W merger and
breach of
franchIse
Issue; and (2) to dIrect the CIty Manager to review
pOSSIble
adjustments
In
the franchIse,
IncludIng Increased
serVIces,
and to report back to the CIty CounCIl on a process
whIch would assure both expert adVIce and the partICIpatIon of
CIty reSIdents and neIghborhood groups In deCISIons regardIng
any modIfications of the cable system.
Pr lor
to the scheduled
publIC hearIng, representatn'es
of Theta contacted CIty Staff to dISCUSS the 51tuatlon. Theta
proposed that the merger approval and conSIderatIon of the
pOSSIble franchIse breach be deferred pendIng broad-rangIng
d15cuS5Ions
Including franchIse extenSIon.
Subsequently, the
CIty agreed to defer actIon on the legal Issues raIsed and to
conSider
the
Issue
of franchIse extenSIon
....;Hsed by Theta.
4
e
e
, .
Further
consIderatIon of the Cltv Attor~ey's Staff Report was
suspended, a~d the scheduled publIC hearing was postponed.
The CIty Manager's offIce took responsIbIlIty for developIng a
cable POlICY Framework for the City.
I I 1.
t1P'p-Olntment
of
the
Cable CommunIcations
Tasl--
Force.
It
was wIthIn the above-described
context that on July
27, 1982, the City Council approved the formatIon of a cItIzen
task force charged wIth studYIng the Issues and potentIal
servIces to be offered by the CIty'S cable system. On
September 28, 1982, the CIty CouncIl appOInted fIFteen members
to
the Cable CommunicatIons Task Force.
A telecommunIcatIons
cansu I tan t ,
Walter
Slembab,
was hIred
to prOVIde technical
ass 1St ance tot he Task Fa rce and to ad',n se the C I t Y f1anage r on
cable Issues.
The
report
of
the
Task
Force,
entItled
"Cable
CommunIcatIons
In Santa MonIca," 'Nas
dIstrIbuted to the CIty
CounCIl
and
made avaIlable to the
publIc In July, 1984.
It
contaIns
detaIled
recommendatIons
about
the type
of cable
system the
suggestIons
CI ty
should
seek
to
have
and prelImInary
cable uses. Its
about
commun 1 t Y
.:ind munICIpal
recommendatIons
.:ire
based
on
commISSIoned research
and on
Input
from opganlzatlons
In
the
CI ty I.>Jh lch
have begun to
assess theIr needs With regard to the cable system.
Between
the months of October, 1984 and February, lQ85,
the
remaInIng
funds
from
the 1983-84
Cable CommunIcatIons
5
e
e
Enterpr u~e Fund
were
used
to support
a
publIC outreach
program.
ThIS program Introduced
the recommendatIons of the
Task Force to Interested Indlvlduals and organIzatIons In the
Clly.
On October
11} 1984, subsequen t
to transmIttal of the
Task
Force
recommendatIons
to
the CIty CounCIl, Congress
passed
the Cable CommunIcatIons POlICY Act of
1984.
The
effectIve date of the Act was December 29} 1984.
Before
its February 20, 1985 meetIng} the Clty Councll
held a Study SeSSIon on the subJect of cable.
At the Counc 1 1
meet lng,
the
Tas.k
Force
forma lly
presented
Its
recommendatlons,
and publIC comment was receIved.
After some
dlScusslon} at Its February 26, 1985 meetIng, the Clty CounCIl
dIrected
the CIty Attorney to analyze the recommendatIons of
the
Task Force
In
lIght of recent
federal legl5latlon and
other applIcable law.
At the same tIme} It requested that the
CIty Manager evaluate
the
framework
proposed by the Task
Force.
The CIty CounCIl agendlzed thes.e reports tor Its AprIl
23 meetlng.
BNALYSIS
A. Cdble and Comoetlna SerVIce PrOVIders.
~ -
A legal analY~ls of cable issues must be Informed by an
understandlng of
the market wlthln whIch the cable industry
eXIsts,
gIven that the volatIlity of that market 15 a drlvlng
6
e
e
force
behInd
recent and contInuIng changes
In cable law and
regulatIon.
The
maIn
source
of
revenue to cable TV operators IS
entertaInment serVIces. Cable's
subscrIptIon
entertaInment
fees
for home
serVIce
package
IS attractIve
to subscrIbers
p r 1 md r 1 I Y
because
of
Improved receptIon
of over-the-aIr TV
SIgnals
chOIces
and
expanded
programmIng
chOIces.
These expanded
Include
dIstant
broadcast
SIgnals
(e.g. )
l..lTBS
(Atlanta), speCIalIzed baSIC programmIng (e.g.) ESPN sports
channel), and pay mOVIe and speCIal events channels (e.g., H8G
and Showt Ime) .
Cable
operators
are faCIng
Increased competItIon from
a I t ern a t 1 ve
sources
of
home entertaInment
serVIces.
~1a J 0 r
competItors
to cable Include satellite master antenna systems
serVIng
multIple
unIt
bUIldIngs}
subscrIptIon
teleVISIon
systems
rental
such a
ON-TV and SelecTU} home VIdeotape sales and
multIchannel multIpOInt dIstrIbutIon systems
serVIces,
(MDS)
whIch
are
SImIlar to subscrIptIon
TV but can prOVIde
several
dIrect
channels
broadcast
of
programmIng
ove r ml c rowave
lInks, and
satellItes WhICh aIm programmIng to small}
InexpenSIve home receIVIng dIshes prImarIly In rural areas
AddItIonal market areas are technologIcally available to
cable systems (although regulatory constraInts may Intervene)}
Including
data
and
VOIce
transmISSIon.
EstablIshed
competItors already occupy and are
potential cable markets. CompetItors
expand I ng In
In thIS arena
these
Include
7
e
e
cellular
radIO and dIgital termInation serVIce provIders and,
most SIgnIficantly, local telephone companIes.
Potential (and a few actual cases of) cable competItion
WIth local telephone corrpanles has resulted In a great deal of
federal
and
state
legIslatIon,
regulatory and
JudICial
attentIon.
Concern over pOSSIble
competItIon WIth telephone
companIes
of AT&T,
telephone
has Increased as a result of the recent dIvestIture
whIch has contraIned the
fInanCial health of
companies
by
The
redUCIng subSidy flows
follOWIng analYSIS of
from
the
local
long
legal
dIstance
services.
context of
cable
explores
speCIfiC
In the
legal
local
and regulatory
communications
responses
to competition
marketplace.
8. Regulatory Frdmework.
PrIor to passage of the Cable CommunIcatIons PoliCY Act
In December, 1984. cable regulatIon was somewhat haphazard and
affected at multIple levels of government under an Ill-defined
diVISIon
reguleted
of Jurisdictional
by the FCC, anCIllary
responSibilities. Cable was
to Its authorIty to regulate
broadcast teleVISion, to a lesser extent by the states, and by
muniCIpalIties pursuant to theIr authorIty to grant franchises
to use local publIC rIghts-of-way.
The new federal Cable Communlcatlons PoliCY Hct of 1984
15 the product of negotiations between the cable Industry and
the National League of CItIes. One of Its goals was to
expressly delIneate the regulatory authority of the Federal,
8
e
e
state
and local governments over
cable systems.
Al though 1 t
recognIzes the need for CItIes to taIlor cable systems to meet
theIr
partIcular
CIrcumstances) thIS Act
for the fIrst tIme
Imposes
process.
In
unIform
Federal
standards
upon
the
franchISIng
so
dOIng) It grants
the FCC exclUSIve JurIsdIctIon
over "cable ser-vIce}" "per::.ons engaged
In prOVIdIng such
serVIce)" and the faCIlItIes used to prOVIde cable serVIce as
prOVIded In the Act. Where the FCC's powers are lImIted,
states
and munICIpalItIes have been granted authorIty, courts
are
Ie ft
to
res 0 I '...e
d u:.putes}
or
the
area
has
been
deregulated.
Under
the
old
scheme) states
and munICIpalItIes were
permItted to regulate
subscrIbers for "baSIC
rates charged by cable systems to
serVIce" (then defIned by the FCC to
conSIst
of
the
lOI,oJest
programmIng
tIer that
Included all
"must-carry"
channels).
"Pay cable" channels (e.g.) HBD} and
tIers of satel lIte-delIvered dIstant SIgnals) were not subject
to rate regulatIon.
Subject to a two year grandfatherlng of eXIstIng state
and munICIpal rate regulation not lnconslsent WIth the
preVIously eXIstIng framework, the new
law no longer permits
state or munlcIpal rate regulatIon except where allowed by the
FCC}
and
the
FCC
Itself
IS
granted only very Ilmlted
Pursuant to SectIon 623 of
JurIsdIctIon over rate regulatIon.
the
FCC
Cable
CommunIcatIons Pollcy Act, by AprIl 11, 198?} the
15 dIrected to conduct
a rulemaklng to defIne "effect Ive
9
e
e
competition"
for
purpose-s
of
IdentifYing
circumstances In
which
local
Jurisdictions
may continue
to
regulate cable
rates ).
The FCC IS granted continuing regulatory authority In
areas includIng the followIng: telephone company prOVIsIon of
communications serVices, promulgation of rules governing
cross-ownershIp
at mass
medIa
communications
with
cable
systems, content regulations (e.g., must-carry rules), and
technical standards for cable system faCilities and equipment.
The majority of causes of action under the Act appear to
be directed to the state or district courts, rather than to
the FCC.
ThIS creates the potentIal for multiple Inconsistent
Interpretations
of
the
the
Cable
CommunicatIons PoliCY Act of
1984.
Therefore,
trend
toward
piecemeal
JudiCIal
resolution
of
cable Is'SUes that has
been set In motion over-
the past several years IS
of the new law.
likely to continue despite passage
State
and
municipal
governments
control
over
the
FranchiSing
process,
are granted primary
subject to certain
constraInts. State5 are also expliCitly granted the authority
to reqUIre Informational tarlffs on the prOVISion of non-cable
serVices
Within the state.
As a practlcal matter, thIS means
that
the
California
puc
rnay have
the
rlght
to regulate
prOVISion
of
certaIn
communIcations
services
(e. g. ,
data
transmiSSion) by cable operators.
In
general}
eX15tlng
state
or
local
laws
that are
InconSistent
WIth the Cable Act
are preempted.
Laws such as
10
e
e
CalIfornIa's rate deregulatIon law remaIn valId for a two year
perIod.
States
are
explIcItly permItted
to
enact
EEO,
prIvacy, and theft of serVIce laws whIch are strIcter than the
prOVISIons
of
the
Act.
States
are
nat
prohIbIted
from
adoptIng certaIn restrIctIons on franchIse fees.
For the most part, the Act does not affect the terms of
eXIstlng franchIses. ExceptIons are dIscussed below. CItIes
are
explIcItly granted the authorIty
to negotIate franchIse
agreements
WIth cable operators, and to reqUIre the prOVISIon
of certaIn serVIces, faCIlItIes, and equ1pment.
C. Pendlng State LegIslatIon.
Several
LegIslature
bIlls
have
been
Introduced
In
the
State
which
could
affect
the
Clty'S
franchlsing
authorIty.
Assembly Member Moore and
State Senator Montoya
have each Introduced bllls pertalnIng to franchIse fees.
Currently, the state does not regulate Cities' use of
franchIse fees. The new Cable Act sets a celllng on local
franchIse
fees
at &)% of the
operator's gross revenues.
The
Moore
Bd l,
A.B.
1372, would Impose
a state-mandated local
program In the follOWIng manner. It would create a Foundatlon
for Cable CommunIcatIons. The bIll would then reqUIre that
each
local
franchl50r expend
telecommunIcatIon
1% of Its franchIse
fee to support
plannlng
actIvIties
and
rem It
an
addItIonal
1%
to the Foundatlon
for Cable Communlcatlons to
support the foundatIon and Its actlvltles.
11
e
e
Senator
Montoya's
blll,
5 B.
683,
would
create
a
requIre
CommunIty SerVIce Cable TelevIsIon.
that each cable televISIon franchIsor
It too
Founda t Ion fa r
would
remIt a
portIon
of ItS franchI~e fee
to thIs foundatIon.
The amount
to
be
earmarked
for
support
of
the
foundatIon
15
not
specIfIed.
These
bIlls
are
expected
to
be
conSIdered
by
the
respectIve legIslatIve houses thIS SprIng. LegIslatIve
observers, however, suggest that neIther bIll 15 lIkely to be
enacted thIS year.
Assembly Member Moore has also
Introduced a bIll whIch
would, In effect, prohIbIt telecommunIcatIons serVIces that
bypass the local telephone system. It would reqUIre anyone
who constructs or operates a telecommunIcatIons system that
would
these
prOVIde serVIces to customers
who are already prOVIded
serVIces by a telephone company to obtaIn a permIt from
the
PublIC UtIlItIes CommISSIon.
The PUC would be authorIzed
to Issue such a permIt only If the permIttee agreed to pay the
local telephone company an amount equal to the revenues whIch
It would otherWIse have receIved, were It not bypassed.
The goal of thIS bIll IS to protect the abIlIty of local
telephone
companIes to prOVIde unIversal telephone serVlce In
the
wake
of
federal
deregulatIon
of
the
long
dIstance
telephone
ma r k e t ,
whIch has shlfted
the fInanCIal burden of
local
telephone
serVIce
to
local resldentlal
and buslness
telephone
consumers.
If enacted, thIS bIll would effectIvely
prohIbIt
cable
systems from prOVIdIng
serVIces that compete
12
e
It
"
WI th
the
telephone
company,
such
a5
vOice
and
data
tran5mls.slon.
Howeve r ,
chances of pas.sage
of this bill are
considered slim at thiS time.
Senator
J'1on t oya
also
plans to
Introduce another bill
whIch
would,
In effect, prevent
CitIes from obtaining cable
systems through eminent domain proceedings.
D. Recent Relevant Case Law.
1. First Amendment Concerns.
In Preferred Communications, Inc. v. City of Los
Angeles, No. 84-5541, deCided on March 1, 198?, the Ninth
Circuit Court of Appeal found that based upon the facts as set
forth In plaintiff's complaint, the cable franchiSIng process
f 0 1 1 0 we d
by
the
City of
Los
Angeles
VIolates
the First
Amendment rights of cable operators Wishing to offer services.
The City has an auction process pursuant to which It grants an
exclUSive franchise to the operator who best meets the City's
speCifications} de5plte the fact that publiC utility
faCilities necessary to InstallatIon and operation of a cable
5)!.s tern
5)-'5 t em
are phY51cally capable of
COn the facts of thiS
accommodating more than one
case,
however} Preferred
Communications
did
not even submit a
bid durlng the auction
process. )
The
Court's
ru I I ng
represents a
dramatic change from
pr lor
Court
FIrst Amendment rulings In cable teleVISion cases.
The
In thiS case conSiders utilIty poles, on which cable 15
strung,
to
be
a
"publiC
forum"
and
assumes
that
the
13
e
e
Construction
and
operation
of
the
....., Ire
constitutes,
In
essence, a speech functIon that 15 therefore protected by the
First Amendment. Furthermore, It apparently adopted the cable
operator's argument that cable systems are like electronIc
newspapers, and therefore entItled to the same protections as
print medIa.
Procedural]y~
the
Cou r t
upheld- the
lower
court's
dismissal
of the cable operator's antitrust claim agaInst the
City but
overturned
the
Court
ruling granting
the CIty'S
motIon to dismiss plaintiff's FIrst Amendment claim, remanding
the case to the lower court for further proceedIngs consistent
With Its ruling. The City has filed a petition for rehearing
With the Court.
Although It may be several years before thiS case IS
finally deCided, It 15 One of a number of SimIlar legal
challenges being brought In CalIfornIa and elsewhere In the
natiOn. If upheld, It could have far-reaching effects On
cable franchiSing. At Its worst, the deCISion could be read
to Invalidate a number of the prOVISions of the recently
enacted Cable Communications POllCY Act of 1984.
It could, at
the
~)e ry
least, restrict cltles'
(Including Santa Monica's)
abIlity
to
requlre
or
enforce
certain
prOVISions
In ItS
franchise agreement, e.g., those relating to PEG access
channel and facIlltles requlrements and franchise fees.
While the future effects of Preferred Communications and
other
S Iml lar
pending cases are unknown,
It would appear to
14
e
e
"
have no applIcabIlIty to Santa Monica at thIS time, due to the
nonexcluslvlty of the CIty'S cable franchIsIng process.
Wh 1 1 e
2. AntItrust Concerns.
Community CommunIcatIons
Company
v.
Clty of
Boulder,
",+5'5
u.s.
40
(1'?82), created
considerable concern
among
munICIpalitIes
regardIng
antitrust
ImmunIty and
11ablldy
when
1 t
was
Issued,
the
recent
Preferred
Both cases
CommunicatIons case, spea~s to thIS Issue as well.
reqUIre
conSIderatIon here SInce
the antlcompetltlve condu~t
alleged
agaInst
Boulder
and
Los
Angeles,
respectIvely,
concerned theIr cable franchises.
In
the
Boulder case,
the
CIty had
entered
Into
a
non-exclUSIve
cable
franchise
SImilar
In many
respects to
Santa
MonIca's.
The franchIsee had
not fully explOited the
terms
of Its franchIse and was prOVIding only partial serVIce
to the CIty. When It became apparent that the cable company
was plannIng to begIn expanSIon of Its serVIce, Boulder
Imposed a moratorIum prohIbitIng the company from expandIng
Its bUSiness Into other areas of the City for a period durIng
which
the
City CounCil would accept
bIds from competltore.
the
eXIsting
cable company would
the Coune II's concern that
have an unfair competItIve
The
moratorIum had resulted from
edge In the new areas through Its expanSIon.
The Supreme Court ruled that Boulder was not exempt from
the
federal
antltrust
statutes
under
the
state
actIon
exemp t Ion
because
of Its status as
a "home rule" CIty.
Nor
1'5
e
e
the
the CIty exempt pursuant
5 tat e 1 aw was "po 11 cy
to an express state grant, Since
was
neutral."
However,
the Court
expressed
Bou 1 de r .
Ad d i t ion all y ,
no
opInIon
on
the
me r its
of
the
case agaInst
Inasmuch
as
the
Boulder case
prOVIdes
cause for concern, the antItrust portIon of the Court's
holdIng In Preferred CommunIcatIons would seem to imply the
OppOSIte
alleged
conclUSIon.
In that
case, Preferred CommunIcations
Violated antItrust laws In that
that Los Angeles had
it 5
auctIon process, In effect,
prOVIded for the grantIng of
an
exclUSIve franchIse.
Like CommunIty CommunicatIons, Inc.,
Preferred
proscrIbed
alleged
VIolatIons
of
the
Sherman
Act,
which
monopolIes
and attempts
at monopolIzatIon, among
other thIngs.
The
Court
dIstInguIshed the
SItuatIon from Boulder's,
concludIng
that
Los
the
Angeles
was
Immune
from antItrust
lIabIlity because
CalIfornIa
LegIslature
had "clearly
artIculated
and
a f f 1 rma t I ve 1 >' exp ressed ,. :5 tat e
pollcy WIth
regard to the franchISing process to be engaged In by CIties.
In other words, the Court found that the type of actIon, even
if antIcompetItive, was contemplated by the State LegIslature,
and therefore would not deprIve the City of antItrust
Immunity.
Presumably, Santa Monica's nonexclUSIve franchISIng
process
would be entitled to the same ImmunIty as was that of
Los Angeles.
Furthermore,
In
Town of HallIe v.
CIty of Eau ClaIre,
u.s. ____, S3 L.W. 4418
~198?J, a recent case lnvolving
16
e
e
municipal
regulation
of
waste
dIspo::;al} the
Supreme Court
reIterated
Its prior holdings that the test of a CIty'S claim
to antitrust Immunity hInges solely on the "clear articulation
and affIrmatIve expres5Ion" doctrIne.
AddItIonally, the Court
consIdered
the questIon of how clearly a state polICY must be
artIculated
for
a munICIpality to be
able to establIsh that
Its alleged antlcompetItlve actIvIty constItutes state actIon}
ru II ng
that the legIslature need not have expressly mentioned
the
antIcompetltIve
conduct
alleged
to hal.'e
occurred} but
rather
that
It
must
sImply have "contemplated
the kInd of
action
complaIned
t' "
o .
FIncllly,
the
Court
addressed
CI
questIon
that
had
been
left open
In Its Boulder deCISion}
namely,
whether,
In
order
to obtain
ant 1 t r U:5 t I mmu nIt y, a
munICIpalIty}
lIke
a
prIvate
party}
must
also
satisfy a
requIrement
that there be "actIve state superVISIon" over Its
action} holding that no such requirement applies.
To the extent case law does not put the CIty's potentIal
antItrust
questions
to
rest,
the
recently
enacted
Local
Government
Ant I t rlJst
Act
of
1984,
Pub llc Lal,&)
No. QS-1744}
Signed
by the PreSident on
October 2Q, 1984, prOVIdes CItIes
With
I rnmu nIt y
from
damages
for
prospectIve
antltrust
VIolatIons.
WhIle It does not expressly prOVide ImmunIty from
SUit
for
InjUnctIve
relIef,
It effectIvely elIminates the
prospect of damages award.
17
e
e
3. Tenants' RIght QL Access iQ ~9ble.
In Loretta v. Teleprompter, 4?8 U.S. 419 (1982), the
Supreme
Court
struck down a New
York state statute that was
Intended to faCIlItate tenant access to cable teleVISIon. The
statute
prOVIded that a landlord could not Interfere WIth the
Installation of cable faCIlItIes on hIS property and could not
demand
payment
from any subscrIbIng tenant
nor payment In
excess
of
any amount determIned to
be reasonable by a state
commISSIon.
The
Court
held
that
the
statute
was
unconstItutIonal on the grounds that there was no prOVISIon In
thIS statute adequate to ensure affected property owners Just
compensatIon for the use of theIr property.
Although earlIer verSIons of the Cable CommunIcatIons
PolICY Act of 1984 contaIned very explICIt prOVISIons
verSIon
of
the
law contains
only
cable, the adopted
follOWIng relevant
addreSSIng
tenants;
rIghts
of access to
the
reference.
SectIon
621
of the Cable CommunIcatIons POlICY Act of
1984
prOVIdes
that
cable
franchIses shall
be construed to
authorIze constructIon of a system over publ1c rIghts-of-way
and publiC easements whIch have been dedIcated to compatIble
uses.
In
constructIng
the
cable
system, the
operator 15
responSIble
for
ensur1ng
the
safety,
functIonIng
and
appearance of the affected property 8S well as the safety and
convenIence of persons 1n the area; for costs of 1nstallatlon,
constructIon,
operatIon
and
remova I 0 f
faCilItIes) and for
prOVIdIng
Just compensatIon to any property owner damaged by
18
e
e
constructIon.
Just compensatIon 15 not
detlned by the Cable
CommunIcatIons POlICY Act of 1984.
In order ta comply wIth the requIrements of the Court In
the Loretta deCISIon, and WIth the Cable CommunIcatIons POlICY
Act
the
of
1984, the CIty'S master ordInance should as~ure that
owner
of
E:lr"ly
affected
premIses
receIVes
"Just
compensatIon" from the cable operator.
SECTION BY SECTION ANALYSIS OF THE
r;::ABLE COIH'1UN i CA T I Ot~S POL I CY Hcr OF 1 ';>l 8..:+
The Cable CommunIcatIons POlICY Act
98-549, 98 Stat. 2779 ("the Act"), adds a new
CommunIcatIons Act of 1934 to prOVIde a
of 198..., P.L.
TIt Ie VI to the
natIonal polICY
regardIng cable teleVISIon. The overall purposes of the Act
are descrIbed In the Report of the House CommIttee on Energy
and Commerce (the IIHouse Report") as follows:
[The Act] establIshes a natIonal
po 11 cy
that
clarifles
the current
and Federal
sys t em 0 f
local, state,
regulatIon of cable teleVISIon.
ThI5
pollCY contInues relIance on the local
franchISIng process as
the prImary
means of teleVISIon regulatlon, while
defInIng and
lImItIng
the authorIty
that
a
franchlsIng authorIty may
exerCIse
through
the
franchl"5e
19
e
e
process.
franchIse
The
b III
establIshe$
procedures and standards to
encourage
the growth
and development
of
cable
systems,
and
assure
that
cable
needs
and
Intere.sts
of
the
to the
I aca 1
[The
systems
are responSIve
communItIes
they serve
Act]
of
WIll preSer".)e
the crItIcal role
munICIpal
governments
In
the
franchIse
process,
wh 1 1 e
prOVIdIng
approprIate
respects to
deregulatIon In certaIn
the prOVISIon of cable
:serVIce.
The
legIslatIon
also
contaIns
prOVISIons
to
assure
that
cable
system5
prOVIde
the WIdest pOSSIble
dIverSIty of InformatIon serVIces and
sources to the publIC, conSIstent WIth
the FIrst Amendment's goal of a robust
marketplace of ideas -- an enVIronment
of
"many
tongues
speakIng
rfle n).j
VOIces."
House Report at 19.
The
Hct
15
dIVided Into four parts}
each of whIch IS
descrIbed below.
2(J
e
e
Pa r t I.
General ProvIsIons.
SectIon
601.
Puroose.
ThIS sectIon
states SIX basIc
purposes
of
the
Act:
(1)
establIsh
a
natIon.!:!1
cable
communIcatIons
POlICY; (2) establIsh franchIse procedures and
standards
that
encourage
growth
the
of cable
S Y5 t ems wh lIe
Interests of the
assurIng
responSIveness to
needs and
federa I)
encourage
state,
(}) establIsh gUIdelInes for the exerCIse of
and local regulatIon of cable systems; ~4j
local
communIty;
cable communIcatIons to prOVIde the WIdest pOSSIble
dIverSIty of InformatIon sources and
serVIces to the publIC;
( ? )
(6 )
establIsh
an orderly process
for franchIse renewal; and
promote competItIon In
cable communIcatIons and mInImIze
unnecessary
regulatIon
that
would Impose
an undue economIC
burden on cable systems.
SectIon
602.
DefInItIons.
ThIS
sectIon
defInes 16
baSIC terms used In the Act.
Part
II.
Use
of
C.able Channels
and Cable OwnershIp
RestrIctIons.
SectIon
611.
Cable Channels for PublIC, ~ducatIons. or
Governmental
deSIgnated
Use.
A CIty may'
reqUIre that cable channels be
for
pUbIIC~
educatIonal,
or
governmental
use
("PEG"J.
PEG channels may be reqUired for both new franch15e5
and
franch15e
renewals;
CIties
may establIsh
rules
and
procedures for the use of the PEG channel capacity. A cable
operator may not exerCIse any editorIal control over PEG use
of
cable
channels.
CltI6S
may
also
require
that
21
e
e
"lnst1tutIonal
networks" l those ava 1lab Ie on ly to subscr Ibers
who
are
not res1dentIal subscrIbers)
desIgnate capacIty for
educat10nal or governmental use.
Section
612.
Cab~e Channels
for Commerclsl Use.
Th1s
sectIon
reqUIres
cable
operators
to set
aSide a specIfIed
percent of channels for commercIal use by persons unaffIlIated
wlth
the
operator.
Sect Ion
612
states
a
detaIled
and
comprehenSIve
scheme
for
thIrd-party access}
IncludIng
prOVISIons
permItting
court
determInatIon
of
the
reasonableness
of
charges.
Governments may not alter thIS
scheme by regulatIon or franchIse.
lhe House Report 1ndIcates that separation of editorial
control of a lImited number of channels from the ownershIp of
the cab Ie system "15 fundamental to the goal of prOVIdIng
subscrIbers WIth the dIverSIty of InformatIon sources Intended
by the FIrst H:mendment." House Report at 31.
SectIon
613.
OwnershlD
RestrIctIons.
ThIS
sectIon
lImIts
the ownership of cable systems by teleVISIon broadcast
statIons and telephone common carrler5.
States and CItIes may
not
prohIbit
ownershIp
of
cable
systems
because
ot
the
operator '5
ownership
permitted
of mass
communIcatIon medIa Interests.
CIties
are
to
Ol,..ln
or
hold
Interests
In cable
con t ro I
regardIng
They
the
may not
exerCise
any edltorli:d
systems.
content of any cable
serVIce on such a system
(except
through
F'EG channe Is)
"unless
such
control
1S
exercIsed
an
entIty separate from
the franchiSing authorIty."
22
e
e
Thus, a CIty may choose to operate Its own system, but must
establIsh a separate entIty to exerCIse edItorIal authorIty.
Part III.
FranchISIng and RegulatIon.
ITIay
award
one or
more
franchIses
RequIrements. A CIty
consIstent WIth the
SectIon
621.
General FranchIse
reVIse the
antItrust
laws,
I t
appears
does not explICItly
that the drafters
prOVISIons
of
the
Ac t .
Wh I Ie the Act
delIberately deSIgned language that would enable CItIes to
avoId JudICIal overrulIng of a deCISIon to award a SIngle
franchIse In a geographIC area:
The CommIttee 15 aware that the
Supreme
Court
has
held
that
munICIpalItIes may be subject to
antitrust Ilabtllty by VIrtue of theIr
actIons relatIng to the grant of a
cable
franchIse.
Commun 1 ty
455
u.s.
40
v. CIty of Boulder,
(1982). WhIle the
CommunIcatIons Co.
CommIttee does not, through thIS
statute, reVIse the Federal antItrust
law, the CommIttee Intends that TItle
UI be construed to establIsh a scheme
of
regulatIon for
cable franchISIng.
House Report at 59.
SectIon
franchISIng.
621
Imposes
some
expllcIty standards
on
A
franchlse
authorIzes the
constructIon of a
23
e
e
system
over
publIC rIghts-oF-way and publIc easements; the
15 responsIble for constructIon safety, cost of
cable operator
faCIlItIes,
the cable
and compensatIon to any property owner damaged by
constructIon. CItIes are requIred to prOhIbIt
of serVIce to potentIal resIdentIal subscrIbers
t~e Income of the resIdents In an area. Cable
"redIInlng"
because of
systems
may not be regulated as common carrIers or utllItle5;
that IS, theIr rates may not be based on a rate of return.
The
Act
does
not
lImIt
the
Eluthorlty of
states to
regulate communIcatIon serVICes other than cable serVIces.
SectIon
622.
FranchIse Fees.
A cable operator may be
to exceed 5% of the gross
reqUIred
to pay a franchIse fee not
revenues
over a 12-month
perIod.
Generally, cable operators
may pass
through
Increases In fees
to subscrIbers and must
pass
through decreases In fees.
FranchIse fees Include only
monetary payments made by the operator; they do not Include
generally applIcable taxes, capItal costs assocIated WIth PEG
channels,
or
the cost of servIces
or faCIlItIes reqUIred by
the franchIse.
SectIon
623.
RegulatIon
of
Rates.
ThIS
sectIon
estab llshes
subscrIber
unIform
federal
po 11 cy
for
the
regulatIon of
In general, a
rates
by franchISIng authorItIes.
CIty may
CommISSIon
regulate
rates only If
the Federal CommunIcatIons
determInes that the cable system IS not subject to
e f f e c t 1 ve
competltlon~
pursuant to reguletlons
that must be
adopted by the FCC WIthIn 180 days after enactwent of the Act.
24
e
e
ilie
sectIon
does
not
prot-nbIt states
or cItIes from
prohIbItIng
dIscrImInatIon
among
customers
of
baSIC cable
serVIce or from reqUIrIng and regulatIng the InstallatIon or
rental of equIpment desIgned to facIlItate cable serVIce for
hearIng ImpaIred IndIvIduals.
SectIon
624.
RegulatIon of
SerVIces~ FacIlltles~ and
E_QU I Dmen t .
ThIS
see t Ion
Imposes
lImits
on
reqUIrements
related
reqUire
to serVIces} faCIlItIes, and eqUIpment. A CIty may
new franchIses and renewals to prOVIde cable related
f ac I 11 tIes
and eqiJ I pmen t .
It may not regulre an operator to
prOVIde
partIcular
VIdeo or other
InformatIon servIces.
I t
may not Impose new reqUIrements for serVIces, faCIlItIes, and
equipment that are not related to operation of a cable system.
A c I t Y may,
through the franchIse
process, prohIbIt or
condItIon
cable
serVIces that are
"obscene or are otherWise
unprotected
by the ConstItution of
the UnIted States."
ThIS
15
Intended
to
reflect
the
Supreme
Court's
obscen I t Y
formulatIon
stated
In
f'-1l1ler
v.
Ca 1 I for n 1 a, 413
U.3. 1'7
(973),
to
permIt restrIctIons dependIng
on local communIty
standards
and
to
accommodate
changIng
constItutIonal
InterpretatIons.
See House
Report at 69.
A cable operator
must 519 II or lease a "lock box" to a request Ing 5ub5cr Iber who
deSIres
to prevent chIldren from VIeWIng obscene or Indecent
materIal.
SectIon
62S.
ModIfIcatIon
of
FranchIse ObllQatlons.
ThIS sectIon permIts a cable operator to obtaIn a modIfIcatIon
of a reqUIrement for faCIlItIes and eqUIpment If It can show
2S'
e
e
that
the
el(U~tIng
contract
reqUIrement
15
"commerc Id lly
ImpractIcable,"
a term wh1ch 15 based on Section 2-615 of the
Uniform Commerc1al
Code.
The sect10n 15
Intended to allow
franchIse oblIgatIons to adapt to changes In market condItIons
and consumer demands. The ImpractIcabIlIty must result from a
change of condItIons beyond the control of the operator, the
non-occurrence of whIch was a baSIC assumptIon on whIch the
contract was based.
If the operator cannot negotIate a modIfIcatIon, It may
seek
JudiCIal redlef.
ModIfication of PEG serVIces cannot be
obtaIned under thIS sectIon.
SectIon
626.
Renews I _
ThIS
sectIon states standards
and procedures for the renewal of a franchIse.
The procedures
may be used by a CIty and shall be employed If requested by a
cable operator. The sectIon contemplates an assessment
process
to:
(1) IdentIfy the
future cable related communIty
needs
cable
and
Interests
and
(2) reVIew the
performance of the
operator
under
the
franchIse
durIng
the
current
franchIse
term.
The
renel..Ja 1
proce5s 15
dIscussed In more
detaIl later In thIS report.
SectIon
627.
CondItIons
of
Sale.
I f
a
franchIse
renewal
15
denIed
and
the
CIty acqUIres
ownershIp of the
system
or
effects
Its
transfer
to
another,
SectIon
627
reqUIres
eXIstIng
franchIse
that such transfer be a faIr market value, unless an
franchIse
agreement speCIfIes a
transfer prIce.
A
that IS revoked for
cause need only be transferred
26
e
e
"at
an
equItable
prIce"
unless
the
franchIse
specIfIes
otherWIse.
Part IV.
MIscellaneous PrOVISIons.
SectIon
631.
ProtectIon of
SubscrIber PrIvacy.
ThIS
section creates a natIonWIde standard for the prIvacy
protectIon of cable subscrIbers by regulatIng the collectIon?
USe
and
dIsclosure
by
cable
operators
of
personally
IdentIfIable Information regardIng subscrIbers. It prOVIdes
procedural safeguards to consumers for the protectIon of theIr
prIvacy Interests.
It does not regulate actIVItIes of persons
other than cable operators.
An
operator
must notIfy each
subscrIber In wrItIng of
the
nature
of
pe rsona 11 y
IdentIfIable
InformatIon
to
be
collected, the types of dIsclosure that may be made, the tImes
when the InformatIon WIll be maintaIned, the tImes and places
where the subscrlber may have access to the InformatIon, and
the
lunlts
and
rIghts
establIshed under
Sect Ion 631.
The
notIce
must be made upon InItIal subscrlptlon and once a year
thereafter.
A cable
operator
can
only use
the cable
system to
collect personal lnformatlon necessary to render cable service
or
to detect unauthorIzed
recept10n of cable communIcatIons,
unless
the
subscrIber has consented
In wrItIng.
DIsclosure
may also be reqUIred by court order for use by governmental
entItles In crImInal cases, upon notIce to the subscrlber and
speCIfIed
procedures.
The
sectIon
prOVIdes
for
consumer
27
e
e
access,
destructIon
of
unneeded
Information,
and
CIVil
~emedles for- wFongful use of Infor-matlon.
State
anf
local
privacy protectIon
measures
may be
adopted and enforced to the
With the Act.
extent they are not InconsIstent
SectIon 632.
Consume~ Protectl9n.
ThiS section permits
CitIes
to
provIde
for
enforcement
of
customer
serVIce
requirements
Elnd
construction related activities
as part of
franchises
o r r e n e wa Is .
SectIon 632
does not prevent CItIes
conSUmer protection laws
and
states
from enforCing eXisting
consistent WIth the Act.
The
House
Report
Identifies
customer
serVIce
reqUIrements
dl~connection,
as
IncludIng
Interruption
of
serVice,
rebates and credIts to consumers, deadlines to
respond
to
consumer
requests
or
complaints,
locatIon of
Consumer
service
offIces,
and
prOVISion of
InformatIon on
billing or service.
ThIS
Section
section
House Report at 79.
Unauthorized Reception
of Cable Service.
6,3.
prohibits
the
unauthorIzed
InterceptIon
or
receipt
of any communIcation or
serVIce over a cable sy~tem.
reception.
It also prohIbits aSSIstIng In unauthorized
Criminal and CIVil penalties are prOVided.
SectIon 634. Equal Employment
sectIon reqUIres all cable operators
Up p 0 r tun I t Y .
to afford
ThiS
equal
employment opportunIty and
program" to ensure equal
to adopt
employment
a "pOSitIve contInUIng
opportunity
In ever-y
aspect of Its employment polICies and practIces.
28
e
e
SectIon
635.
JudIcIal Pro~eedlngs.
A cable operator
adversely affected by a modIfIcation
or renewal deCISIon may
seek
relIef either !n tederal or state court.
Ac t Ion mu s t be
brought WIthin 120 days after notIce.
';ect Ion
036.
CoordInation of Federal~ State~ and Local
Au tho r I t:y.
The Act preempts all InconSistent state and local
laws
and InconSistent terms of eXIstIng franchises, except as
speCIfIed
In the Act.
The Hct
does not affect the authorIty
of states and CItIes to regulate the publIC health, safety,
and welfare or to regulate cable serVices to the extent
conSIstent With the express prOVISions of the Act.
SectIon
637.
EXIsting
Franchises.
The
Act does not
affect the terms of eXIstIng franchises or state laws relatIve
to deSIgnation, use,
publIC, educatIonal, or
or support
governmental
of channel
capaCIty for
use.
SectIon
638.
CrImInal
and CIVIl
klablllty.
The Act
does
not
relIeve
cable operators from
lIabIlIty for lIbel,
~.:dander, obscenIty, InCitement, InvaSIons of prIvacy, false or
mIsleadIng advertISing, or other SImIlar laws, except that
cable
operators shall not be
lIable For programs operated as
PEG channels or leased to third partIes under SectIon 612 (the
operators
cannot
control content and
therefore are shIelded
from l1abIl1ty).
SectIon
639.
Obscene ProorammIno.
ThIS section makes
1 t
a crIme to transmIt over
any cable system matter whIch 15
"obscene or otherWIse unprotected by
UnIted States."
the ConstItutIon of the
29
e
e
FRANCHISE RENEWAL
A. Renewal POlICV wIth Grouo W.
The newly enacted
formal process that may be
rederal
legIslatIon
e5tablIshes a
Invoked when determInIng whether to
reneJ.-J ex 1St Ing
cable
rranchI5es.
ThIS
process 15 Intended
p rIma r I 1 Y
operators.
to
protect
the
Interest5
of
eXIstIng
cable
CItIes
are
not requIred to
tollow thIs process
except where they choose to or upon formal request by the
cable operator. Thus, a CIty and Its cable operator can elect
to follow an Informal negotIatIon process If they 50 deSIre.
The formal renewal proces5 descrIbed by SectIon 626 of
the Cable CommunIcatIons PolICY Act of 1984 Involves a two-
and potentIally three-step procedure:
1.
Between
30
and
36
months
prIor
to
franchIse
eXpIratIon
(I.e., between January 13,
1985 and July 13, 1985
In Santa MonIca's case), the CIty may begIn formal proceedIngs
to IdentIfy future cable-related communIty needs and Interests
and reVIew the past performance of Its cable operator. ThIS
assessment may begIn If the CIty wants It, and It must begIn
If the operator requests It. The a55e5sment proceedIng must
allow the publlC advance notIce and the opportunIty to
partICIpate.
The law doe5 not
prescrIbe any tlme perIod for
completIon of thI5 aS5essment.
2.
In
the
four
months
follOWIng
completIon
oft he
CltY'5
assessment of communIty needs
and the operator's pa5t
performance, three thIngs occur:
30
e
e
The
C I t Y ma Y
requIre
or
the
operator may
submit on
a
Its
own inItIative a
franchise
b.
of
The CIty must
renewal proposal.
then decIde either
to renew the
the
eXisting
operator or
issue a prelIminary
assessment that the franchise should not be renewed.
c. If the City decides to renew, the process ends
here.
that
Howeve r ,
1 f
the CIty makes
a prelIminary assessment
the franchIse should not
renew, ~ formal admInIstrative
proceedIng must be commenced.
3.
If
the
admInistrative
proceeding
is
needed,
a
full-blown
adversary hearing must be
held durIng which full
due process rlghts must be accorded the operator and the City,
and detailed fIndIngs must be made. The CIty'S ultImate
renet"ja 1
or nonrenewal deCISion must be based on conSIderatIon
of four factors:
a.
Wh~ther
the
operator
has
substant ia 11y
comp lIed
WI th
the
material
terms
of
its
franchise
and
applIcable law.
b .
Whether
the qualIty of the operator's serVIce
meets
community
needs
(not
con5iderlng
the
miX
of
programming).
c.
Whether
abIlity
the operator has the legal, finanCIal
and
technical
to
deliver the promises
made In Its
p roposa 1 .
d.
The
reasonableness of the operator's proposal
to meet communIty cable-related needs, conSidering their cost.
31
e
e
I f
the
operator
15
denied renewal by
the City, such
denial
for th
must
be based on one or
more of the four factors set
above.
In
the
admInIstrative
hearIng,
the
C1 ty
apparently cannot use bids from other operators as a baSIS for
determInIng community needs.
It can, however, use alternative
proposals as eVIdence of the cost and avaIlability of serVIces
proposed by the FranchIsee.
An operator has the rIght of appeal
days of denIal. In the event that
to court WIthin 120
a final
deCISion 15
City's
findIngs
are not ~upported by
have to show that the
a preponderance of the
appealed
to court, the franchIsee WIll
eVidence
standard
In
the
record.
The tradItional
less restrictive
does not apply.
of
review
for muniCipal deCISIons
Courts can grant whatever relIef they find approprIate.
In an
Informal
meetIng
In MarCh, 1985 With
Cl ty was Informed that the
representatives
from Group W, the
operator
Intends
to
for me 1 1 Y
InItIate
the
forma 1 renewa 1
process
prOVided for by federal law.
The City must therefore
be prepared to do the prelIminary essessment of the operator's
past
performance
and
to
ident 1fy
future
ceble-related
Wh lIe the T ask
communIty needs
and
Interests as reqUired.
Force
report
Will be essentlel
to thiS process, opportunity
wlll have to be afforded to the publiC to partiCipate In the
IdentIfIcation of needs. The City should also take advantage
of the opportunity prOVided by the Act '5 gUioellnes for the
formal
renewal process to contInue and expand the work of the
.32
e
e
Task
Force
in establishlng a
documented record of community
need for cabie-related serVlces.
There
are
a number of ambiguities
1n the law1 some of
wh1ch wlII be addressed by the FCC in the coming months and
some of whIch WIll be resolved only through experIence or
court
cha 11 enges.
Santa
r-10n 1 ca
wlll
be one
of the first
citle~ to be confronted wlth renewal of its cable franchise in
the wake
therefore1
of passage of rederal legIslation. The CIty wil11
have to face some of the ambIgUities of the law
Without
the benefIt of any case
law or experience of others.
For example, the C1ty w1Il have to determ1ne what actions are
needed
and
adequate
to
a r I' i ve
at and
documen t "comroun i t Y
cable-related needs and interests" for purposes of evaluatIng
a franchIse renewal proposal, WIthout benefit of prior models.
B. CIty'S Ablllty to Pursue Agreements With Other Cable
Operator~.
A City may establish reqUirements for franchlse renewal
proposals and may consider proposals In additIon to that of
Its incumbent operator. The Clty'S consideration of proposals
from other
operators"
however}
cannot
become 8
baSIS for
denlal of Group W's renewal proposal.
Slnce
Group W currently possesses land will contlnue to
pOS5ess,
acceptlng
prOVISion
If renewed) a
nonexcluslve franchIse} sollcltIng or
proposals
from other flrms would
not vlolate any
In the eXIstIng franchIse agreement nor would It be
lnCQnSlstent
W 1 th
eIther
tederal
law or the
recent Ninth
33
e
e
CIrCUIt
deCISIon
In Preferred CommunicatIons
v. C 1 t Y CJ f La 5
~ngeles} No. 8~-5S41. The rIsk, however, In puttIng out a
Request For Proposals prior to making a determinatlon on Group
W's renewal proposal IS that no other cable operator mIght
subm 1 t
a
proposal,
SInce
to
do
50
mIght commIt
the new
operator to actIvely compete WIth Group W In Santa MonIca.
C. Legal AnalYSIS of Malor SubstantIve Recommendations
of the Cable CommunIcatIons Task Force.
Perhaps the best gUIdelIne for the CIty CounCIl to
follow can be gleaned from the follOWIng statement explaInIng
the purpose of federal legIslatIon:
Many franchIse
effect today speCIfy
agreements In
In great deted
the
type
of faCIlItIes
UHlt a cable
operator must construct (e.g.) channel
capaCIty, tow-way [SIC] capabIlIty,
and
"lnst I tut 10na I
loop"
to
11 nk
lIbrarIes
and hospItals),
as L~e 11 as
the
serVIces
that the
operator must
prOVIde
le . g. }
Cable
News
Ne t wo rk ,
HBO, The Health Channel).
The abilIty of
a
local
government
partIcular
entIty to
cable faCIlItIes
t'equIre
(and to
enforce
r e qUI r me n t SIn
the f ranch u:;e
to
prOVIde
thos.e
faCllltIes.)
IS
34
e e
essentIal 1 f cable 5YS t ems are to be
taIlored to the needs of each
communIty, and H.R. 4103 explIcIt ly
grants
thIs power
to the franchIsIng
authorIty. However, the CommIttee does
not belIeve It IS approprIate for
government offlClals
speclfIc programmIng
to
to
dIctate the
be provIded
over
a
cable
thIS
sys t ern, and
H.R. 4103
reflects
determlnatlon.
House
Report at 26.
Followlng the above gUldellne, It 15 clear that, WIth a
few exceptIons, the CIty can requlre that Group W's renewal
proposal (or that submItted by another operator) address most
of the Task Force recommendatlons} provlded the Clty Councll
agrees
W 1 t h
the
Task Force's assessment
of the communIty's
cable-related needs.
It 15 Important to bear In mlnd that the relevant legal
standard
franchIse
to be used In dete~mlnlng whether to renew Group W's
agreement Involves whether ItS proposal 15
to meet "the future cable-related communIty needs
suffICIent
and
Interests,"
takIng
Into
account
the
costs.
It
15
Important} In analYZlng the substantIve recommendatIons of the
Task Force} to understand the reasons Group W may be reluctant
or
reSistent to provldlng
certaln facll1tles.
These reasons
are prImarlly economIC.
37
e
e
The CIty CouncIl should be aware that most of the Items
recommended by the Task Force have been promIsed (and In some
ceses,
already delIvered) by Group W
to other CItIes.
I tiS
also critical to recognize that a new franchise agreement will
I I ke 1 y
remaIn
In
effect
for fifteen years.
deCISIons will have
Thus, the CIty
a long range
Counc 1 1 "s
cable-related
effect
on
the
abIlIty of
Santa
MonIca's
CItizens
and
InstItutions
to keep apace WIth the
rest of the country WIth
regard
needs.
to theIr entertaInment,
communIcatIon and InformatIon
The follOWing sections revIew the major recommendatIons
of the Task Force In relatIon to prevaIling law.
1.
Dual
r;::;able
System WIth
MInimum 92 Channel
CapacIt~ for Subscriber Netwqrk.
The
Task
Force has
recommended that the
CIty seek a
commitment from Group W to construct a dual trunk cable system
capable
of prOViding at least 92 channels.
It JustIfies thIS
number
of
channels
by streSSIng
the need
for 1 n for ma t Ion
diverSity and for a number of channels to be allocated for use
by pub II c
service
prOVIders,
e . g. ,
schools,
hea It h
care
IS the
provIsion
be
of
Important
about
cIty government.
thiS recommendatlon
(What
appears to
lnstltutlons, and
adequate channel capacIty -- not whether or not two cables are
prOVIded. If the technology IS such that a 51ngle cable can
prOVIde the necessary capacIty, thIS would appear to satlsfy
the Intent of the recommendatIon.)
36
e
SectIon
024 of the Cable
1984 provIdes that the Cdy may, In
proposal,
eqUIpment ,"
operatIon
estdbllsh
the
to
of
a
modIfIcatIons
" co rome r CIa 1 1 Y
requIrements.
if
reqUIrements
extent related to
cable
system,
the
operator
ImpractIcable"
The
Cable
CommunIcatIons
defIne
the
to
Report,
WhICh
phrase "faCIlItIes and
House
Act' :5
leglslatI'...e
eqUIpment reqUIrements may Include:
whIch relate
reqUIrements
capaCIty;
capaCIty.,
subscrIber
e
CommunIcatIons POlICY Act of
Its request for a renewal
for "faCIlItIes and
the establIshment and
and
subject
later
to
demonstrates
that
15
It
comply
wIth
partIcular
Po I ICY Ac t 0 f
1984 does not
equIpment."
Howeve r, the
has been offICIally deSIgnated as the
hIstory, speCIfIes that faCIlIty and
to channel
system confIguratIon
and
IncludIng InstItutlo~al and
and
networks; headends
hubs; two-way
addres~abIllty; trunk
cabie; and
eqUIpment
related
any
other
capabIlIty i
and fee:de r
faclllty or
whIch
15
reqUIrement,
to
the
establIshment
and
operatIon of a cable system, IncludIng
microwave
satellIte
studIOS
vans
and
faCilitles,
earth
statIons,
and
productIon
cameras
for
37
an t enr,ae }
uplInks,
faCIlltles1
PEG
[publIC.
e
e
edUCqtIonal
and
governmental]
l,lse.
House Report at 68 (em~hasIs added).
The
ciear
purpose of SectIon
624 was to prospectIvely
prohIbIt
cItIes from extractIng promIses from cable operators
to
provIde
serVIces
completely
unrelated
to
cable
communIcatIons
(e. g. ,
constructIon
of
a
fIre
stat Ion) In
underlIes
the
recommendatIons
No
for
exchange for the rIght
such prohIbIted Intent
to use
the publIc rIghts-of-way.
Increased
channel capacIty.
may requIre that
to
Therefore, It seems clear that
Its operator provIde the channel
necessary to meet Its future
the City
capac I ty
determIned
be
cable-related needs.
2. Two-Wav or InteractIve CaoabIlItIes.
The
Task
Force has
recommended
that
the
system be
confIgured so as to offer the capabIlIty for vIdeo and/or data
sIgnals to be transmItted In two dIrectIons at the same time
on
the
cable.
In order for
thIS to occur, adequate headend
(SWItchIng)
eqUIpment
and
adequate upstream and downstream
channel capaCity should be prOVided on both the subscrIber and
InstItutIonal
network.
It IS also
recommended that both the
subscrIber
and InstitutIonal networks be one-way addressable.
(Add ressab I 1 It Y
permIts
the
cable
operator
to
deSIgnate
preCIsely whIch subscrIbers may receIve
any gIven program or
serVIce at any gIven tIme.)
The CIty clearly has the authorIty} as descrIbed In the
above
sectIon on channel capaCIty,
to reqUire the faCIlItIes
38
e
e
and equIpment neces5ary to provIde an InteractIve system of
the 50rt recommended by the Task Force. Group W may obJect to
constructIng an Interactive system and ImplementIng two-way
serVIces, SInce prOVISIon of such services could subject the
operator to regulatIon by the CalIfornIa PUC.
The
Cable
CommunI,-atlons PoliCy Act
of 1984 defInes a
"cable operator" as a person or group which 15 responsIble for
serVices"
over
that system.
It defines
prOVISIon of "cable
"cable system" as a
the
operatIon of
a
"cable system" and
faCIlIty that is deSIgned to prOVIde "cable serVIce WhIch
Includes VIdeo programmIng "A common carrier faCIlIty
(I.e., telephone company faCIlIty) IS not defIned as a cable
system except to the extent that such faCilIty transmIts Video
programmIng dIrectly to subscrIbers.
Finally,
"cable
serVIce"
15
detIned to
mean one-way
transmISSIon
to
subscrIbers
of
VIdeo programmIng
or other
programmIng
serVIce
and
subscrIber
InteractIon
whIch
15
reqUIred
for
the
selectIon of such
programmIng.
The House
Report
explaIns
that the dIstInctIon
between cable serVices
and
other-
serVIces
offered over- cable
systems IS not based
upon the technologIcal capabIlItles of the system, but r-ather,
IS
based
based upon the nature
of the serVIce prOVIded
In
general, serVIces that prOVIde subscrIbers With the abllIty to
engage
In
transactIons
or
to
store,
transform,
forward,
manIpulate, or otherWise process informatIon or data would not
be
claSSIfied
as
cable
serVIces.
In
other
words, cable
services
probably do
not
Include such
serVices as at-home
39
e
e
shoppIng or bankIng.
Nor would they Include data transmISSIon
between
subscrIbers,
data prOCes.sIng,
vIdeo conferencIng or
any
VOIce
communIcatIons.
The type
of Interact Ion Inc luded
WIthIn
the
definition of a Hcable
service" 15 that requIred
for
the
selectIon
of Video programmIng
or the retrieval of
Information from among a speCIfic number of optIons delIneated
by
the
cable
operator
and
a~)a Ilab Ie
to
a 11
subscrIbers
genera lly.
As the
House
Report states, however,
the term "cable
systemH
15 not lImIted to a faCIlIty that prOVIdes only cable
which Includes VIdeo programmIng. In fact, the House
service
Report states:
QUIte the contrary, many cable systems
prOVide a Wide varIety of cable
services
and
other
communIcations
serVIces as well.
A faCIlIty would be
a cable system If It were deSigned to
Include
the
prOVISIon
of
cable
serVIces tlncludlng VIdeo programmIng)
along
other
WI th
than
communIcatIons
serVIces
cable
serVIce.
HCJu'5e
Report at 44 lemphasIs added).
The
delIneate
purpose
of
the
defInItIons of these
terms IS to
the
boundary between
those
services
WhlCh,
1 f
provlded
carrlsr
by a cable operator, would
regulatlon under Sectlon
be exempted from common
62U c) ,
and
other
40
e
e
communicatIons
services
whICh,
1 f
provIded
o~'e r
a
cable
system, may not ultImately be exempt.
The Import of these definitIons, In other words, IS that
the
prOVISIon of serVIces WhIch
are not "cable serVIces" but
are
nevertheless
offered
by a cable operator
on Its cable
sys t em
te.g. ,
any of a number
of InteractIve serVIces that
mIght be prOVided) could subject Group W, whIch 15 otherWIse
rate deregulated pursuant to federal law, to regulatIon by
either
the FCC or the
CalIfornIa PublIC UtIlitIes CommISSIon
( PUC ) .
SectIon 621(d)(1) of the Cable CommunIcations PoliCY Act
of 1984 prOVIdes for the filing of InformatIonal tarIffs WIth
the
State for any
Intrastate communications serVIce prOVIded
by a cable system, If the State would have JurIsdIctIon over a
permItted
to
reqUIre
fIll ng
of
Informatlor>al
The FCC 15
tarIffs for
common
carrIer's
prOVISion
of
such a serVIce.
serVIces
that are JurISdIctIonally Interstate when offered by
carrIer. Although the Hct does not go beyond
a common
allOWIng for
HOU5e Report
the fIlIng
of Informat lanaI
tarIffs, and the
expre5s1y
denIes Its IntentIon
to address the
questIon
of
regulatory
JurIsdIction
over
non-cable
communIcatIons
serVIces
prOVIded
over
cable
systems, such
questIons
are
the
subject
of
pendIng
Federal
and
state
proceedIngs.
Cable operator5 are concern~d about offering any
serVIce
that
may create a greater likelIhood
that all or a
portIon
of
the services that they offer may subject them to
41
e
e
common
carrIer
status
end
consequent
rate
and
other
regulatIon.
Imply
that
15 clear 15 that the legIslatIon 15 not Intended to
a CIty cannot reqUIre Its operator to bUIld an
cable system. It merely lImIts the regulatory
of the Cable CommunIcatIons POlICY Hct of 1984 to
What
InteractIve
protect.lons
the prOVISIon of certaIn types of serVIces. The approach, as
art ICU lated by the House Report, 15 deSIgned to reserve I' for
state and Federal offICIals the authorIty they need to address
the Issue of competItIon between telephone and cable companIes
and the need to preserve unIversal telephone 5ervIce."
ThIS
3. Instttutlonal Network.
recommendatIon essentIally reqUIres prOVISIon of a
separate
network.
cable
from
those
whIch constItute
the subscrIber
ThIS cable would serve
areas such as the downtown,
CIVIC center, Santa MonIca BUSIness Park, commerCIal corrIdors
and
hotel
areas.
ThIS
InstItutIonal cable
15 Intended to
enable
VIdeo
and
data
communIcatIons
to take
place among
InstItutIons and organIzatIons WIthIn the CIty.
The same dISCUSSIon set forth under "Two-way/Interactlve
Capab III t Ie5"
constructIon
applIes
to
the
CIty'S
abll1ty
to
reqUIre
of an InstItutional network.
WhIle some of the
communIcatIons
serVices
that an
InstitutIonal ~etwork mIght
prOVIde
would
undoubtedly be defIned
ae non-cable serVIces,
t tns
does
not
mean
that the Clty cannot reqUIre Its cable
operator to construct such a network.
42
e
e
If
Section
624,
which authorIzes the
CIty to reqUIre
"faCILItIes
and
eqUIpment" related to
the establIshment and
operation
of
a cable system is
read In conjUnction WIth the
defInItIon
of "cable system" contaIned
In Sect Ion 602 (6), as
amplifIed by the House Report, It becomes clear that the CIty
may reqUIre prOVISIon of lnstltutlunal network faCIlItIes.
Ad d I t Ion a I 1 y ,
SectIon
61l(b)
expressly states
as
part
of
that a
cable
franchISIng
authorIty
rnay
require
a
operator's
proposal
for
renewal
that "channel
capacIty on
Inst I tut lona I
ne t ""JO rks
be
deSIgnated
tor
educatIonal
or
governmental
use
"
SectIon 611(f)
states that "the
term
'InstItutIonal
network'
means a
communIcatIon network
whIch
WhICh
IS
constructed or operated by
the cable operator, and
I S 9 e n era I I y a ~ Jd I 1 a b 1 eon 1 y
to subscrIbers who are not
res Ide n t 1 a I 5 U b 5 C rIb e r s . .,
The
dISCUSSIon
contaIned
In
the House
Report should
alleViate any doubt about the legIslatIve Intent In thIS area:
The
Committee
Intends
that
whIch
an
InstItutIonal
network
15
deSIgned
to
provlde
cable
serVIce
whIch Includes VIdeo programmIng would
be a cable svstem.
House Report at 44
(emphaSIS added).
4. InterconnectIon.
InterconnectIon} whIch has been recommended by the Cable
Task Force, Involves a lInkage between dIfferent cable systems
43
e
e
whIch
allow~ 51gnals to be 5ent from each 5yetem to the other
or
shared
between
the
5).'5tems.
There
are
a
number
of
technologIcal
alternatives
to achIeve
Interconnection} each
haVIng
different
coste and
performance characterlstlce.
An
1nterconnect
can be modest or extensive, provIdIng many lInks
or JU5t a few.
Federal
(See Task Force Report at 1-17 to 1-24.)
law 15 s11ent on
the matter of Interconnection
falls
however,
wlthln
the
CIty'S
requlrement
for
per
~.
Arguably}
Interconnectlon
the rubl~lc
of "faclilt les and
eqUIpment}" given that In order to satisFy an Interconnec.t
requirement, the franchlsee would be equipping the system With
certaln transmiSSion and recept10n deVices. The House Report
explICItly
enumerates
lImlcrowave
faCIlities,
antennae,
satellite
earth stat Ions, uplInks" In
the lIst of FaCIlitIes
and eqUIpment requirements It contemplates, and such
facllltles and eqUIpment are among those that could be used to
construct an Interconnect.
EnForcement
of
an
Interconnection reqUirement
on the
part
of
the
Cl ty
IS
somel/Jha t
problematical
given
that
non-performance
could
be
based on
CIrcumstances beyond the
franchIsee's control. That 15, the operator of a neIghborIng
system might refuse to prOVIde the cooperatlon Inherently
necessary
for
Interconnection.
ThIS
problem
15
50mewhat
mlt 19ated
by
the
have
fact
that
VIrtually all
neIghboring
JurIsdIctIons
Included
some
requirement
for
InterconnectIon In thelr cable franchl5es. Los Angeles CIty,
for example, has 14 cable systems; all current franchises wlth
44
e
e
the Clty state that each system must be able to Interconnect
In
50me
way wlth Its nelghbor.
The County 15 also purSUIng
Interconnect prospects.
? ReauIrement of 715% PenetratIon.
Pr lor
to passage of the Cable Communlcatlons POIICY Act
""
OT
1984,
states
and
munlClpallt les
were empowered
to set
lImIts
on
rates charged by cable
systems to subscrIbers for
"baSIc
serVIce"
(WhICh
has conSIsted of
the lowest tIer of
programming
that
Included
,. mus t -ca r ry"
broadcast 51gnals).
Cal1fornla,
however,
had
1nstltuted what was,
1n effect, a
program of
total
rate deregulation, even
of baslc servlce,
under speclfied Circumstances.
Pursuant to state law, Group W
had
unIlaterally de-regulated Its rates
1n Santa Monlca and
elsewhere In Callfornia.
(Government Code Sectlon 53066.1.)
SectIon
623 of the new Cable Commun1catlons ?ollcy Act
of
1984 establIshes
a
unIform federal
scheme for eventual
deregulatlon of all subscrIber rates.
It bars rate regulatIon
by states
and
munIc1palltIes for all
new franchlses unless
Clrcumstanc.es eXIst In whlch a cable system 15 "not subject to
e f f e c t 1 ve
competItIon."
In Its rulemak1ng to be completed by
AprIl
26, 198?, the FCC WIll deflne "effectIve cornpetltlCm,"
but the deflnltlon to be adopted WIll almost certalnly have no
effect on Santa MonIca's abilIty to regulate rates~ even after
the 2 year perIod durIng WhlCh the CalIfornIa deregulation law
IS
allo\.o.led
to
r e ma 1 n
In
effect
lThe
standard
beIng
4'?
e
e
consIdered
hI~ge5 prImarIly on the
avaIlabIlIty of a certaIn
number of over-the-aIr broadcast statIons In a market area.)
The
Tas.k
Force
has
recommended that the
CIty seeK a
co mm I t me n t
from
Its cable operator
to achIeve a penetratIon
rate
of
75% ~Ithln two years
of system rebUIld.
The pub IIC
po 11 cy goa 1
of
thIS
recommendatIon 15 to
assure access to
publIC serVIce
possIble. The
InformatIon and channels for as many persons as
legal Issue raised
by thIS recommendatIon 15
whether
thIS
approach represents a
thInly veIled attempt to
regulate rates.
However,
the
company has,
at
ItS
dIsposal, varIOUS
t echn I qlJes
for meetIng a ta(get pe~etratlon rate, only one of
whIch
15
adjustment
of rates per
se.
Others mIght Inc lude
development
or
prOViSIon
of
new
attractIve
serVIces,
1 n n 0 vat I ve
packagIng
or tierIng of
serVIces, and aggressIve
marketing.
Ob'.'lously
It IS to an operator's advantage to achIeve a
high penetratIon rate. Therefore, a contractual agreement to
dIlIgently attempt to obtaIn a goal of 7~% penetratIon wIthln
two years of system rebUild should benefIt both the CIty and
the operator and appears to fall wlthln the SpirIt of federal
law.
A more deflnltlve legal opInlon WIll have to be (endered
at a later date.
46
e
e
6. CommunIty CommunIcatIons Network/ProvISIon of
PEG Access Channel~.
The
Task
Force has recommended that
the CIty create a
"Commun 1 ty
CommunIcatIons
Ne t wo rk , "
to
faCIlItate
and
dIstrIbute
local programmIng.
It IS
recommended that such a
net l.vO r k
be
admInIstered
by
a non-protIt
corporatIon to be
estab i Ished
by
the CIty CounCIl.
l~ee Task Force Report at
11-8 to 11-23.)
Related
recommendatIons
Include
s e '.Ie r a 1
facIlIty and
equIpment
Implement
productIon
productIon
requests
that
the Task Force
deems necessary to
the communIty
net 1..010 r k : ( 1 )
a
central
VIdeo
facIlIty;
(2 )
an uns-pecIfIed
l3J a speCIfIed
whIch total
number of portable
number of channels
StudIOS; and
tupstream
and downstream)
up
to
25% of the
capaCIty of the system.
SectIon
1984 governs
611
of the Cab Ie
COITII')UnIcatlons PolICY Act of
the
prOVISIon
of
cable channels
for publIc,
ThIS sectIon
educatIonal and governmental use
("PEG" access).
expressly
grants
to
the
CIty authorIty
to
estabilsh
reqUIrements in a franchise WIth respect to the deslg~atIon or
use
of channel capacity fo~ PEG access.
The CIty may reqUIre
that
a
certaLn
number
of channels be set
aSide and It may
reqUIre rules and procedures for the use of these channels.
In
recognItIon of the fact
that the CIty may prudently
reqUIre
greater channel capaCIty than
It 1S ImmedIately able
to
use, the law reqUIres that
In Its rules an procedures for
PEG channels,
proV1SIon
must be made
under whIch the cable
47
e
e
operator
channels
15
permItted
to
provIde
other
serVIces
on
the
that are not beIng used for desIgnated PEG purposes.
These
rules must also assure that
as demand for use of those
channels deSIgnated for PEG purposes
use of those channels shall
Increases, cabie operator
cease
accordIngly.
ThI&
r~qulrement should address any complaInts by the operator that
the CIty IS seekIng too many channels for PEG access.
W 1 t h
regard to eqUIpment reqUIrements recommended, once
agaIn, "studIOS and productIon faCilItIes, vans and cameras
for PEG use" were expressly ~ontemplated by the House
Committee responsIble for draftIng federal legIslatIon (Page
68). Furthermore, SectIon 611 makes explICIt that the CIty's
authorIty
to
reqUIre
channel
capaCIty
for'
PEG use
also
Includes the authorIty to enforce prOVISIons for serVIces,
faCIlItIes, or eqUIpment whIch relate to such use, "whether or
not reqUIred by the franchISIng authorIty. The
ImplIcatIon hereIn IS that franchIse conceSSIons pertaInIng to
PEG acceS5 faCIlIties and eqUIpment agreed to by the operator,
over and above those reqUIred by the CIty pursuant to SectIon
62~(b), are enforceable. In other words, "voluntary"
commItments,
whether
payment
InvolvlI,g
prOVISIon of
fac 1 11 tIes and
eqUIpment
or
of
related
costs,
e. g. ,
costs
for
admInIstratIon
of the non-proflt corporatIon, may be obtaIned
from the franchIsee and subsequently enforced by the CIty.
FInally, the recommendatIon that the CIty CounCIl create
a
non-proflt
corporatIon
raIses
pOSSIble
F 1 1'5 t
Amendment
concerns,
although
to
a
certaIn
degree such
concerns are
48
e
e
IndIst InguIshable
from polltlccd
concerns.
The
potential
First
the
Amendment
problems arise prImarily at two levels: (1)
relationship
be t '-<leen
programmers
and
the
Board
of
DIrectors of the corporation, and (2) the relationship between
the CIty CounCil and the
concern at both levels IS
Board of Directors.
The overrIding
to
control
programming
that the government not be allowed
content or to slant programmIng
chOices.
Wit h
regard
to the fIrst
level of concern, non-profit
accE"ss
corporations
which
eXist
throughout
the
country
ordinarily address the problem by adopting rules whIch prOVide
for nondiscriminatory fIrst-come, fIrst-served channel usoge.
Rules regardIng the content of programming prOVide that the
Board or Its staff essentially cannot edit content.
In order to address the second level of concern, several
mechanisms
for
InsulatIon
oft he
corporatIon from Improper
Influence by the CounCil mIght be conSidered. If the CounCil
chooses to follow the ThIrd Street 110911 CorporatIon model,
where
the Board of D1rectors IS
selected by the C1ty CounCil
and
the
corporatIon
15
actually a
creature of
the Cd).',
safeguards
can
be
Incorporated
1nto
the
artlcles
of
Incorporat1on and by-laws. For example, the Board or
Directors could be appOinted to staggered terms to aVOId too
much Influence by any partIcular City CouncIl. Second, the
City CounCil could conSider the opt1on of des1gnatlng certa1n
slots
on
the
Board
to
be
filled by appointments made by
outSide
groups, e.g., an appointment
by the School Board, an
~9
e
e
appoIntment
made
JOIntly by the Board
chaIrper~ons of each
hOspItal
In
the elt)!, etc., along
with a mInorIty number of
at-large slots
to
be
f 111 ed
by CIty CouncIl appoIntment.
Another
charge-=-
optIon
the
City CouncIl has to
shIeld Itself from
of polItIcal Influence would Involve appoIntment of a
group
of convenors WIth representatIon from varIOUS communIty
InstItutIons who would, In turn, select or recommend the Board
of DIrectors.
FIrst
Amendment problems could ar1se to the extent that
members
of the CIty CounCIl are able to exerCIse control over
the access corporatIon's fund1ng or remove Board members In an
attempt
to
Influence programmIng
content.
These problems
could be prevented by adoptIng corporate by-law provI5Ions
that would ensure that fundIng changes or removal of members
or
offIcers
could
not
become
means
for
FIrst
Amendment
Interference.
AlternatIvely,
the CIty Councd
could contract out the
responSIbIlIty over the communIty communIcatIons network to an
Independent
corporatIon,
USIng
the
Commun1ty CorporatIon
mIght be funded by the
mode I .
In
thIS way, the corporatIon
CIty but not dIrectly controlled by the CIty.
The les5 dlrect
the Clty'S Influence, the less the chance that the CIty could
Incur
any FIrst
Amendment lIabIlIty.
The argument agaInst
thlS
optIon IS that It would den).' the Clty CounCIl the direct
opportunIty
balance of
to create
a corporatIon
Interests. It
that
also
truly reflects a
commun 1 t Y
m1ght
have the
undeSIred effect of creatIng competItIon among Interest groups
50
e
e
who
would theoretIcally have worked
together under the other
mode 1 .
7. ~eased Access Channels.
The Task Force has recommended a detaIled leased access
pollcy desIgned
to
encourage dIverse
programmlng from both
commercIal and non-profIt program supplIers. While the POlICY
goals of federal law are not In contradIctlon to those of the
Task Force, SectIon 612 of the Cable CommunIcatIons POlICY Act
of 1984 essentlally establIshes a scheme WhICh prohIbIts the
CI ty
from reqUIrIng an operator to adopt any partIcular rules
pertaInIng
to
commerCIal
or leased access
and from settIng
aSIde a partIcuiar number of leased channels.
The law Itself, however, reqUIres that a cable operator
set aSIde a certaIn amount of channel capaCIty for leased
access, to be determIned accordIng to a formula WhICh depends
on
the
o ve r a I I
"actIvated" channel capaCIty
oft he eys t em.
For a 7?-100 channel system, 1?% of the channels not subJect
to
FCC bur-dens
must be deSIgnated for
leased access.
As a
presct lca I
matter, If a 92 channel
system were bu 11 t ln Santa
MonIca,
federal
In
accordance
I...n th
the Task
Force recommendatIon,
law
would
reqUIre
that
the
operator
set
aSIde
approxImately 9 channels for leased access.
Beyond
settIng
aSIde channels, the
law authorIzes the
operator to set Its own rates, terms and condItIons "WhlCh are
at
least
suffIClent to assure that
such [leased access] use
l.<Jl I 1
not adversely affect the operatIon, fInanCIal condItion,
151
e
It
or
market
development of the
cable s.ystem."
This. prOVl51on
effectIvely rules out the possIbIlity of the CIty reqUIrIng
the pOliCIes. suggested by the Task Force.
The House Report, In effect, encourages cable operators
to develop rates, terms and condItIons that would meet the
goals underlYing by the Task Force's leased aCcess
recommendatIons,
Ie.
that
natIonal
pay serVIces
not
otherWIse
offered
by
Group
w,
varIOUS
types
of
advertIser-supported
channels and non-profIt organIzatIons as
well as more tradItIonal commerCIal access lessees be afforded
access
to the
of the
system. In that veIn, It 15 clear that thIS
law contemplates establIshment of rates, terms
sectIon
and condItIons whIch are dIscrLmInatory:
[8Jy
establIShIng one
rate for
a 11 leased access users, a pr lce mIght
be
set
whlch
for
would
render
It
of
ImpOSSIble
certaln
classes
cable
serVIces, such as those offered
by
not-far-proflt
entItles,
to have
ar,y
reasonable
expectation
of
obtaInIng
system.
It 15 the~efore approprIate for
leased
access
to
a cable
the
cable
operator
In
e5tabll~hlng
reasonable prIce, terms and condItIon5
pursuant
to thIS sectIon
to do so on
the
baSIS of the
nature of the cable
S2
e
e
serVIce
beIng
provIded.
A
pt'emIum
mOVIe serVIce WIll obvIously warrant a
very
different
and}
in
all
probab III ty}
a
higher
prIce
than ,:,
nel.\Js
or
publIC afFaIrs
serVice} and
both
of these would
pose a different
prICIng
SItuatIon from an educatIonal
or
InstructIonal
service.
House
Report at 71.
Hd d I t Ion a I 1 Y }
In
lIght
of
the
CIty'S
InabIllt>-'
to
reqUIre
leased access to meet certain of the needs IdentIfIed
by
the Task Force tsee Task Force
Report at 11-26 to 11-28),
could
thIS
Force
be
should be gIven to
on the PEG channels
whether some of those needs
conSIderatIon
met
that the CIty reqUIre. If
added support to the Task
reqUIre a SIzeable number
IS
pOSSIble, It would render
recommendatIon that the CIty
of channels for the Community CommunIcatIons Network.
8. Franch l?e Fee and J t s Us~.
The
Tabk
Force
re("ommended
that
the
CIty obtaIn a
franchIse
fee
In
the
amount of '?%
of Its operator's gr055
re~)enUe5 .
It further recommended that
In the event that the
CIty 15 unable to obtaIn funding for the admInIstratIon of the
proposed
community communicatIons network
from the operator,
the
CIty shouid
allocate
a
portIon
of 1 ts
franchIse fee
revenues
aqua I to 2% of the
operator's gross revenues to the
non-prDflt
corporatIon tor a perIod
o fat I e as t t h r e e ye a r s .
53
ThIS
three
e
e
year
funded
Intended
allOtJ the
perIod
IS
to
In
corporatIon tIme to establIsh Its own fundIng base.
the Task Force
use
much
as
franchIse
de'"Je 1 opmen t
uses
of
programmIng
InformatIon,
meetIngs),
addItIon,
recommended that the CIty
as IS necessary to assure
of the franchIse fee
camp 11 ance
adequate consumer
and
protect lon, tor
the
of polIcles and procedures to govern munICIpal
subscrIber network, for productIon of munICIpal
(e.g., del Ivery of publIc serVIces and
cablecastlng of CIty CounCIl and other publIC
and for plannIng and development of the
PrIor
InstItutIonal network.
enactment of the
Cable CommunIcatIons POlICY
Act of 1984,
collect Ion of
revenue,
could
to
FCC rules go~'ernIng
a fee In excess of
franchIse fees prohIbIted
3% of an operator's gross
unless a waIver was obtaIned from the FCC.
A waIver
only be obtaIned where the
ItS cable serVIce and the
Increase
CI ty
operator could show that an
In
fees would not ImpaIr
could show that an Increase was "approprIate In lIght of
The
the planned local regulatory program."
fee
of
?% of
constItutIng
Act prOVIdes for coilectlon
of a maXImum franchIse
gross
revenues tor each
twelve month perIod
the operator's accountIng
ye a r .
No waIver need
be obtaIned and the FCC cannot regulate the uses to WhICh the
funds collected by a CIty are put. An operator IS free to
pass
does
through to 5ubscrlbers any
not e~plIcltly bar states
a 10 we r
Increase
In fees.
The Ac t
franchIse fee cap or from regulatIng the use of fee5.
from speCIfYIng
154
e
e
The 1100re and ~1ontoya bIlls would reqUIre expendIture of
a portIon of the CIty'S franchIse fee for support of an access
foundatIon and For local telecommunIcatIons planning.
Although
unlIkely,
passage
of
such
restrIctIons
thIS
term appears
the
pOSSIbIlIty of adoptIon
of such restrIctIons
WIll
eXIst
Into
the
future.
Thus,
the
CIty'S franchIse
agreement
and master ordInance should antICIpate the need for
modIfIcatIons conSIstent WIth any such changes.
There
are
several other SIgnIfIcant
prOVISIons of the
new
law concernIng
franchIse
fees.
SectIon
622 redefInes
"franchIse
fees"
that
fall
\AnthIn
the
?% cap
to Include
payment
of any kInd whIch 15 Imposed on the cable operator or
subscrIber
because of theIr status as operator or subscrIber.
It explICItly defInes
agaInst
payments
the I?% l1mIt.
payments that need not be counted
For the CIty'S purposes, the relevant
are:
(1)
taxes
or fees
of general applIcabIlIty
(such
a5
entertaInment
or utIlIty user
taxes); (2) capItal
costs
for
PEG access
faCIlItIes
(WhICh
does
not Include
5upport of ongOIng access channel use); and (3)
InCidental to the award or enforcement of a franchl5e.
costs
ReqUIrements
wholly unrelated
for cash contrIbutIons or other faCIlItIes
to cable 5erVlce
are unenforceable.
(ThI5
prOVISIon
seems to be a response to the FCC's recent deCISIon
In CItv of Mlaml~ FlorIda, CSR-2326, 56 RR 2d 4158 (rei. June
29, 1984), In whIch cash contrlbutlon5 to MIamI'S access
corporatIon
'Ate r e
found
to
be
chargeable
agaInst
trlB
S9i,
franchIse fee.)
t)~
e
e
In
adoption
light
of
these
new
rederal
proVISlon'5,
barrIng
of mandatory rules by the state, the City is free to
adopt
the
Task
Force
franchIse
fee
recommendations.
r-or
purposes of negotiating a new franchIse agreement, there 15 no
bar
to
collectIon of the recommended
S%.
The allocatIon of
franchIse
fee revenues is a ma t t e r
left to the discretIon of
the
CIty under the Cabie Communications
POlICY Act of li84.
Whether to dedIcate a portion of those revenues to the access
corporatIon as recommended by the Task Force is, therefore, a
polICY deCiSion to be made by the City CounCIl.
9. Consumer ProtectIons and SubscrIber Prlvocy.
The
Task
Force
recommended that the
CIty deSIgnate a
staff
person
to be
responSIble
camp I lance
monitorIng
and other
for performIng
cable-related
franchIse
regulatory
responSIbIlItIes.
The Task Force further recommended that the
CltylS new master cable ordInance includIng the follOWIng:
perIodIC evaluatIon reqUIrements, sanctIons for serVIce
faIlure,
government and non-profIt
corporatIon access to the
operator's
Information
blll1ng
envelope
f Cl r
prOViSlon
of
consumer
and
program
schedules,
and
most
I mp 0 r tan t 1 y )
prlvacy protectlona.
WIt h
respect
to
privacy protectIons, the
Ta~k Force
recommended
voluntary
a
number
of
speCIfIC
mechanl~ms
subscrIber
consent
to
co llect ion
of
IncludIng
personal
InformatIon; establIshment of tIme lImits for the retentIon of
such
Information; reqUIrements that
InformatIon only be used
56
e
e
For
the
purpose
for wh 1 ChI t
was collected; IImItatlons on
Intra-corporate
transfers of personal dala; and cable company
l1ablllty
for errors In personal
data, non-consensual use or
mIsuse of personal
SectIon 631
data by third parties.
ot the Cable CommunIcations POlICY Act of
1984 creates certain uniform standards for prIvacy protectIon.
The
sectIon
governs
the
InformatIon
pr<3ctlces
of
cable
operators
only; it doe5 not
regulate the actIVities of thIrd
parties
banks.
who
prOVide
serVices
over the
cable system, e.g.,
The
Act contains certain
notice reqUirements which are
deSigned to Inform subscribers of
being collected and the Intended use
the kInd of InFormatIon
of such information by
the operator; the kinds of partIes to whom disclosure WIll be
made;
how
long
the
operator
WIll
ma inta Ir.
particular
InformatIon; the
time and
access
place
to that
where the
subscriber can
obtain
placed
reasonable
Information; limitations
on
the
operator's
collectIon
and
disclosure of
InformatIon and subscriber rights of enforcement.
The operator IS prohIbited from uSing It5 cable system
to
collect
or
disclose
personely
Identifiable information
Without
the
prIor
"wr 1 t ten
or electronic" conse-nt
oft he
subscriber.
prohibitIon:
Howeve r ,
there
are
exceptions
to
II)
wt-re r e
disclosure
is
necessary
to
thiS
the
rendering
of
cdble
or other serVices
by the c~ble operator
(e.g., data transmission) or where necessary to the conduct of
legItimate bUSiness related to such serVices (e.g., disclosure
7/
.
.
to a
collectIon
agency
regardIng
debts owed
to the cable
operator';
(2 )
names
and
addresses
of :subscrlbers
can be
dl~closed to another "cable or other serlve" pro~Jlded that the
subscrlber
disclosure
15
9 l'ven
prOVIded
the
oppertun 1 ty
to
prohIbIt
such
and
the dlsclosure does
net r e ve a 1 the
extent
or
nature
of the subscrIber's use
of the serVIce or
transactlons
over
it.
Addlt lonally} the
cable operator 15
allowed
to dIsclose Information under
a court order acquIred
by a
governmental
ent lty.
The Act
creates CIVIl causes of
actIon for vlolatlon.
Hothlng
franchIslng
In
thls
sectlon
prohlblts
any state
or
authorl+Y
from
enactIng
or
enforCIng
1 a 1.015
conSIstent
With thIS section.
The legIslatlve hIstory shows
that
Congress clearly dld not Intend to preempt addItIonal or
more
strIngent state and local laws.
Thus, 1 f the CIty deems
I t
necessary}
requlrements beyond those
prOVIded by the Act
may be Incorporated lnto the master ordInance.
The extent to whIch prIvacy becomes a real conc~rn IS a
functlon
of
the
sophIstIcatIon
of
the
system
that
15
constructed.
SubscrIber prIvacy wDuld be a maJDr concern} for
example}
In.
a
system whIch
offer
InteractIve
or two-way
serVIces such as consumer pollIng, transactIons IncludI~g
banklng and shoppIng, or IndIVIdual program by program chOIces
whIch create valuable marketIng InformatIon. UntIl the
speCIfICS
of
the
system are
known} the
e~tent of prIvacy
and state law are
concerns
unclear.
beyond
those prOVIded by federal
58
e e
10. Sys\em OwnershIp.
The
Task
Force recommended that In
the event that the
CIty 15 unable to obtaIn a franchIse agreement wIth Group W or
another
operator or some
combInatIon thereof} that satIsfIes
the communIty's cable-related needs, the CIty should consIder
alternatIve ownershIp scenarIOS accordIng to whIch It mIght
buy
O'.J t
the
eXIstIng
operator's
system, or
enter a JOInt
venture or lease-purchase arrangement wIth a prIvate company.
ThIS
recommendatIon need not be consIdered In detaIl at
It IS not reievant If the CIty renews Its eXIstIng
thIS tIme.
operator.
However,
If
the
CI toy makes
a
prelImInary
determInatIon
to
deny Group
W'S
rene~-Jal, staff
should be
dIrected
to explore all possIble optIons, IncludIng munICIpal
Act
NothIng In the
of 1984 prohIbIts
Cable
Cable
OI,o,lnerShlp
Involvement.
CommunIcatIons
Po 11 cy
the CIty from
ownIng or operatIng Its own cable system, 50 long as program
content deCISIons are Insulated from CIty control.
Furthermore,
SectIon 627(a) of the Cable Communlcat1on5
PolICY Act of 1984 prOVIdes the CIty wlth the authority to buy
out
or
effect a mandatory transfer of
the system to a t~I~d
party, In the case of non-renewal.
The Act does not appear to
prohibIt local exerCIse at emlrlent domaIn In acqu1r1ng a cable
system.
SectIon 627 speclfles the
terms whIch WIll apply to
rnu n I c 1 pal
acquIs1tIan of a cable system, but such terms apply
only whe....e
franch1se.
thIS
SItuatIon
15 not addressed
In an eXIstIng
159
.
e
WhIle nothIng In thI5 sectIon requIres a munICIpalIty to
prIce
would
trlerefore
be arrIved at
to decIde to do so, the
In accordance wIth the
buy back
a system, If the CIty were
terms set forth In SectIon 8(a) of OrdInance Number 734 (eeS),
whIch
essentIally provIde for acquIsItIon through purchase or
the
exerCIse
of
emInent domaIn, at ~a
FaIr and Just value,
whIch shall not Include any amount far the franchIse
for any of the rIghts or prIVIleges granted
Itself
or
II
RECOMMENDATIONS
In
summary}
the
r enel,.Ja 1
procedures contaIned
In the
Cable
CommunIcatIons Act of 1984
reqUIre that the CIty begIn
the formal
process
of
Ident dYIng
Interests and
future
cable-related
commun 1 t Y
needs and
re~"'I ew 1 n9
the
past
performance of Its cable operator by July!>, 198?, upon the
operator's request prIor to that date. FollOWIng conclUSIon
of such assessment} the CIty WIll have a four month perIod In
whIch It WIll have to evaluate any proposal submItted by Group
Wand make determInatIon as to whether the CIty WIll renew the
franchIse
or make a prellmlnary aS~eg5ment that the franchlse
WIll not be renewed.
It
IS
respec t fu I I Y
recommended that
the CI ty Counc 11
take the follOWIng actIons:
1 . Up 0 nth ere que s t () f G r a u p W , the C 1 t y, pur sua n t t 0
SectIon 626(a) of the C~ble Communlcatlons POlICY Act of 1984,
commence proceedIngs
whIch
afford
the pub lIC
and the Cl ty
approprIate
notIce
and
partiCIpatIon
for
the
purpose
of
60
e
e
identifYIng
the
future
cable
related
cOlomun I t Y need5 and
Interests and revIewIng the performance of Group W under the
franchIse durIng Its current franchl~e term. The fIrst step
In these proceedIngs shall be for the CIty Manager to present
to the CIty CouncIl a work program for IdentIfYIng the future
cable
related communIty needs and Interests and reVIewIng the
performance of Group W under Its current franchIse.
program shall:
The wo rl<
A. Ident 1 fy
based
upon, but
Issues to be pursued In the proceedIngs,
not lImIted to, the reports of the Cable
CommunIcatIon Task Force and the experIence of other CItIes In
thIS area.
B. IdentIfy
the
future
cable
the steps WhICh WIll
related communIty
be taken to IdentIfy
needs
and
Interests.
SpeCIfIcally} the work plan WIll IdentIfy the procedure by
WhICh the communIty needs and Interests eXIst for the cable
Task Force recommendatlo~s.
C.
IdentIfy
the
process
by l..Jh 1 ch Group
W's current
performance under the franchIse WIll be evaluated.
O. Identify the procedure by WhICh communIty notIce ~nd
partICipatIon WIll be ensured
E.
IdentIfy
the
procedure
by v.JhICh
the outstandIng
franchIse transfer dIspute WIll be resolved.
61
.
e
2.
DIrect
the CIty Attorney to commence preparatIon Ot
a new master ordInance to govern the CIty'S cable franchIse.
PREPARED BY:
Robert M. Myers, CIty Attorney
Stephen S. Stark, ASSIstant CIty Attorney
John Jallll, CIty Manager
Lynne Barrette, Deputy CIty Manager
62