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Cable FCC Order Stay Motion Dii~~E ~~~ MEMORANDUM December 14, 2006 TO: The Honorable Mayor and City Council Members FROM: Michael C. Van Milligen, City Manager SUBJECT: Proposed FCC Order That Threatens Our Cable Franchise Cable TV Coordinator Craig Nowack is recommending that the City join a coalition of communities to prepare a stay motion and appeal before the FCC acts to adopt a rule that will most likely have a very negative effect on the Dubuque Cable Franchise. I concur with the recommendation and respectfully request Mayor and City Council approval. flLv1 L~~ f~0~ Michael C. Van Milligen MCVM/jh Attachment cc: Barry Lindahl, City Attorney Cindy Steinhauser, Assistant City Manager Craig Nowack, Cable TV Coordinator ';..; D~~~E ~<k~ MEMORANDUM TO: FROM: Michael C. Van Milligen, City Manager Craig Nowack, Cable TV Coordinator DATE: December 13, 2006 RE: Proposed FCC Order That Threatens Our Cable Franchise INTRODUCTION The purpose of this memorandum is to recommend the City of Dubuque join a coalition of communities to prepare the stay motion and appeal before the FCC acts to adopt a rule that will most likely have a very negative effect on our cable franchise. BACKGROUND A memorandum received today from the law firm of Miller & Van Eaton, a copy of which is attached, seeks to form a coalition of interested communities to prepare legal action in advance of a rule the FCC is considering that is at severe odds with our cable franchise. Although the text of the proposed rule is not public, the Miller & Van Eaton memorandum identifies, from published reports and other information, several areas of concern: o It eliminates public, educational, and governmental (PEG) access support in franchise agreements, including I-Nets and cable service to schools and municipal buildings, by counting these benefits against the 5% franchise fee cap. o It eliminates or restricts build-out requirements. o It limits the amount of time a local government has to negotiate a franchise to 90 days to an entity already in the rights-of-way and to six months to an entity not currently in the rights-of-way. o It limits local community oversight to cable service only, depriving municipalities of existing consumer protection or police power authority over cable modem service. o It possibly weighs in on AT&T's contention that its IPTV service is not a cable service. Today's memorandum also states that FCC Chairman Martin has said that he wishes to issue this order at the Commission's December 20 meeting. If so, Miller & Van Eaton expects telephone and cable companies to immediately claim it as a justification for refusing to pay for PEG and I-Net support, and build-out requirements. They recommend filing a stay motion at once, probably on Friday, December 22. In order to do that, preparation for the stay motion should begin immediately. RECOMMENDED ACTION I respectfully recommend City Council approval to join this coalition and contribute $5,000 from the Cable TV fund's cash balance in an attempt to prevent this proposed order from undermining our cable franchise agreement. MILLER & V A N P. L. L. C. EATON MATTHEW C. AMES KENNETH A. BRUNETTI* FREDERICK E. ELLROD III MARCI L. FRISCHKORN GAIL A. KARISH* WILLIAM L. LOWERY NICHOLAS P. MILLER MATTHEW K. SCHETTENHELM JOSEPH VAN EATON * Admitted to Practice in California Only 1155 CONNECTICUT AVENUE, N.W. SUITE 1000 WASHINGTON, D.C. 20036-4320 TELEPHONE (202) 785-0600 FAX (202)785-1234 OF COUNSEL: JAMES R. HOBSON GERARD L. LEDERER WILLIAM R. MALONE JOHN F. NOBLE NANNETTE M. WINTER t MILLER & VAN EATON, L.L.P. 400 MONTGOMERY STREET SUITE 501 SAN FRANCISCO, CALIFORNIA 94104-1215 TELEPHONE (415)477-3650 FAX (415) 477-3652 t Admitted to Practice in New Mexico Only WWW.MILLERVANEATON.COM PRIVILEGED AND CONFIDENTIAL ATTORNEY WORK PRODUCT ATTORNEY-CLIENT PRIVILEGE TO: Interested Communities FROM: Nicholas P. Miller Frederick E. Ellrod III DATE:December 13,2006 RE: Appeal of Pending FCC Order The Federal Communications Commission ("FCC" or "Commission") is considering new rules that may eliminate many of the benefits your community currently receives from cable franchising. News reports suggests the cost to local communities could be millions of dollars annually. The FCC may act at its December 20, 2006, meeting. It will be essential to seek a stay immediately and to appeal the order to the courts. Otherwise, cable companies will use the FCC order to immediately reduce payments and services to communities. We ask that you join a coalition of our client communities to prepare the stay motion and appeal before the Commission acts. The FCC Proposes to Eliminate or Sharply Reduce PEG Support, I-Nets, Build-Out Requirements, and Other Benefits. Based on published reports and other information (the text of the proposed order is not public), it appears the FCC's order would: , , MILLER & VAN EATON, P.L.L.C. - 2- PRIVILEGED AND CONFIDENTIAL ATTORNEY WORK PRODUCT ATTORNEY-CLIENT PRIVILEGE · Eliminate public, educational, and governmental (PEG) access support in franchise agreements, including institutional networks ("I-Nets") and/or cable service to schools and municipal buildings, by counting these benefits against the 5% franchise fee cap. Reports differ as to whether all in-kind benefits would be affected, or only certain categories. This could preempt state laws that ensure PEG support (such as the one percent PEG fee in Texas), as well as local agreements and ordinances. · Eliminate or restrict build-out requirements. Some reports indicate that build-out requirements would be limited to what is proposed by the applicant; others suggest that a new entrant could not be required to build out more quickly than the incumbent cable operator did. The order may include a list of economic factors that limit local authority to require build-outs. Here, again, state-law build-out requirements such as those in the 2006 Virginia law might be preempted. · Limit the amount of time a local government has to negotiate a cable franchise: ninety days with an entity already in the rights-of-way (such as an incumbent telephone company), six months with those that do not have such a pre-existing right. Failing to get a franchise within ninety days, a telephone company could go ahead and provide cable service until the parties reached an agreement, the terms of which would then be retroactive. In other words, the telephone company would not have to negotiate in good faith. · Limit local cornmunity oversight to cable service only. This could deprive local governments of existing consumer protection or police power authority, such as authority to establish customer service rules regarding cable modem service. · Possibly address AT&T's contention that its "IPTV" service is not a "cable service" (although it fits the federal definition) and hence does not require a cable franchise. The proposed order may be either retroactive and affect existing franchise agreements, or purely prospective, affecting future negotiations. In either case, any communities subject to "level playing field" terms either in their own franchises or in state law could be affected in the same way as if the rules were expressly retroactive. An Immediate Appeal and Motion for Stay Will Be Necessary. Chairman Martin of the FCC has stated that he wishes to issue this order at the Commission's December 20 meeting. He may be able to muster the two additional votes necessary to do so. If the FCC issues the kind of order described above, telephone companies and cable companies will immediately claim it as a justification for refusing to pay for existing PEG requirements, build-out requirements, and the like. They will also demand action on new I MILLER & VAN EATON, P.L.L.C. - 3 - PRIVILEGED AND CONFIDENTIAL ATTORNEY WORK PRODUCT ATTORNEY-CLIENT PRIVILEGE franchises according to the deadlines set by the FCC. Thus, the FCC order would have an immediate effect on current negotiations. Any withheld payments or stoppage of institutional networks, closing of studios, or the like, will be immediate and severe. A stay motion should be filed at once, to attempt, if possible, to delay the effectiveness of the FCC order while an appeal is pending. Federal rules state that a stay must be sought from the FCC before a stay motion can be filed with a court. Thus, the first action would be to file a motion for stay with the Commission - probably on Friday, December 22. Wide Support from Local Communities Will Be Needed. We expect any legal action on the anticipated FCC order will be coordinated with the national organizations - the National Association of Counties, the U.S. Conference of Mayors, the National League of Cities, NATOA, and others. But a wide base of support will be necessary. The normal budgets of the national organizations provide only limited resources for major litigation. The FCC order in question, however, would so fundamentally impair the rights and benefits of local govemments that failure to mount a full-scale effort could have grave consequences for communities nationwide. We are thus urging as many communities as possible to commit both their names, and their funds, to this effort. Only those communities (or groups) that were parties to the FCC's rulemaking will be directly eligible to bring an appeal. Those who did not participate in the rulemaking, however, may enter the proceeding as intervenors. The number of local communities will affect how the court sees the case. (In the 1994 rate regulation appeal, one judge actually asked at oral argument why more cities and counties were not among the appellants.) The more supporters, the less financial support will be needed from anyone community. We are thus requesting that as many local communities as possible agree to act as parties or intervenors in the appeal, and commit $1,000, $5,000, or $10,000, depending on size, to the coalition of MVE clients. Please contact Nick Miller or Rick Ellrod as soon as possible (202- 785-0600, fellrod@millervaneaton.com, nmiller@millervaneaton.com) to let us know whether you can participate. Please feel free, of course, to contact us also with any questions or comments. /.] " -- lJ( .