Franchise Bills Move Forward in Louisiana and California

Published July 1, 2006

Telephone companies, which have begun to deploy cable TV-like multichannel video services over their local networks, are seeking new rules that would allow them immediate permission to offer video service across an entire state. As of early June, Indiana, Kansas, and Texas had adopted such statewide franchising bills.

In May, the Louisiana House of Representatives passed a statewide franchising measure, HB 699, by a 73-21 vote. In early June, the California Assembly passed a similar bill, AB 2987, 70-0. The respective bills are now being debated in the Senate chambers of both states.

In Louisiana, HB 699 standardizes and expedites franchise agreements by granting the Secretary of State authority to grant entrants the right to offer service anywhere in the state. It sets the terms as to what video services are subject to fees and grants some leeway to local authorities. The state has 10 days to respond to a franchise application or else the application is considered approved.

In one of the more innovative provisions of the Louisiana bill, local agencies cannot levy additional surcharges for use of right-of-way or any other reason. This clause effectively makes franchise fees less of a discriminatory tax because it calls on local agencies to apply franchise fee revenues to the real costs they incur to accommodate service providers. These include the use of right-of-way, the cost of tearing up streets for cable burial, and the cost of general maintenance.

Municipalities do not lose their public, educational, and government (PEG) channels. Neither does the bill demand specific build-out requirements, but it does create a means of redress. The bill recognizes new entrants will be deploying video services in a competitive environment and allows them the freedom to roll out service in phases. If a portion of the community feels it has been unfairly discriminated against, the bill establishes a path by which they can seek an investigation from the state attorney general.

The bill does not allow an incumbent cable TV provider to upgrade to a statewide franchise upon entry of a competitor. Incumbents must wait until their current franchise agreements expire. In this the bill differs from some (but not all) legislation in other states, as well as the draft reform bill in the U.S. House.

The California bill sets franchise fees at 5 percent of gross video revenues. PEG channels must be provided, and the statewide franchise holder cannot deny service to neighborhoods based on average income of residents.

Steven Titch ([email protected]) is senior fellow for IT and telecom policy and managing editor of IT&T News.