Telecommunications: Preemption and How it Impacts You!

1. Telecommunications: Preemption and How it Impacts You!

2. Overview • Cable Franchising • Background • Third Report and Order • Cable-related in-kind are franchise fees • Mixed-Use Rule • State and Local Preemption • Next Steps • Small Cells • The Order(s) • Next Steps

3. FCC’s Changes to Cable Franchising

4. Cable Franchising: Background • Montgomery County, et al. v. FCC, 863 F.3d 485 (6th Cir. 2017) • Challenge to FCC Second Report and Order and Order on Reconsideration • Issues on remand from Sixth Circuit: • Whether cable-related in-kind contributions to a Local Franchise Authority may be treated as a franchise fee subject to the five percent statutory cap • Whether a Local Franchise Authority can be prohibited from using its regulatory authority to regulate mixed-use networks of non-common carrier incumbent operators

5. Third Report and Order MB Docket No. 05-311; FCC 19-80 • Effective Date: September 26, 2019 • Areas Covered: • Cable-related in-kind contributions as franchise fees • Valuation of in-kind contributions and the status of existing franchise agreements • The mixed-use rule and its implications • State franchising, preemption, and miscellaneous provisions

6. Cable-Related In-Kind Contributions • Cable-related in-kind contributions are franchise fees subject to a five percent statutory cap • “In-kind” is defined as “any nonmonetary contributions related to the provision of cable services provided by cable operators as a condition or requirement of a local franchise agreement, including but not limited to free or discounted cable services and the use of cable facilities or equipment” • Note: 5% statutory cap on franchise fees may only be taken from revenue obtained from cable services, not non-cable services (e.g. broadband) (¶ 89)

7. Cable-Related In-Kind Contributions • Implications? • Monetary value must now be assigned to contributions from cable providers/operators • How is value determined? Fair Market Value or Cost of Service • What valuation is “reasonable”? Depends on whether the product is on the market • Once the Order is effective, cable operators may credit the fair market value of in-kind contributions against the cable franchise fee • Existing cable franchise agreements must be renegotiated within a “reasonable time” (i.e. 120 days). Unmodified conflicting provisions will be preempted

8. Examples of In-Kind Contributions • Service to public buildings • Institutional Networks (I-Nets) • Video on demand • Discounted enterprise services • PEG costs except for capital costs • Installation of transport facilities = capital cost • Maintenance of such facilities = operating cost

9. Cable In-Kind Expressed as a Formula (Franchise Fees + PEG Grants) + Full Market Value of In-Kind Contributions MINUS (PEG Capital costs + Cost of complying with build out, incidentals, customer service, etc.) MUST BE LESS THAN OR EQUAL TO 5% of Gross Revenue from Cable Services** **Note: 5% of Gross Revenue is the Cable Act’s definition and may be higher than what your state provides for as a franchise fee. Some state laws only capture subscriber revenue, but Federal law captures both subscriber and ancillary revenue

10. Mixed-Use Rule & Preemption • Mixed-Use Rule • Local franchise authorities are prohibited from regulating non-cable services offered over cable systems, except for channel capacity on institutional networks which may be regulated • Preemption • The FCC specifically preempts: • Imposition of any fees on franchised cable operators or affiliates using the same facilities that exceeds the cap • Requirements that a franchised cable operator obtain an additional franchise or authorization to provide non-cable services over its cable system • Rules that apply to local governments in cable franchising now also apply to the states

11. Recommended Next Steps • Review your existing franchise agreements • What are you existing in-kind contributions? • What is the fair market value of those contributions? Have a consulting firm or law firm conduct a study so you have evidence on both the cost-based price and the fair market value BEFORE you need to negotiate • Consider whether services will need to be cut to avoid budget problems. Which services will you cut? • Determine which provisions will be preempted • If you have provisions that will be preempted, you MUST renegotiate with the cable operators within a “reasonable period” i.e. 120 days after enactment or face preemption. • Take Legal Action • Appeal – available until Oct. 28, 2019 • Intervene

12. Small Cells in the Right of Way

13. What is a Small Wireless Facility? • Facilities that are: • Mounted on structures 50 feet or less in height including their antennas; OR • Mounted on structures no more than 10% taller than other adjacent structures; OR • Do not extend existing structures on which they are located to a height of more than 50 feet or by more than 10%, whichever is greater • Each antenna associated with the deployment is no more than 3 cubic feet in volume, excluding associated antenna equipment • All other wireless equipment associated with the structure, including wireless equipment associated with the antenna and any pre-existing associated equipment on the structure is no more than 28 cubic feet in volume

14. Source: http://wireless.blog.law/2017/04/25/two-apperances-28-cubic-foot-frame/

19. Aesthetic Requirements • Aesthetic requirements are preempted for small cell facilities UNLESS they are • Reasonable • No more burdensome than those applied to other types of infrastructure deployments • Objective; AND • Published in advance • Some undergrounding requirements are preempted

20. Shot Clocks • Shot Clocks for Small Cells • Collocation on an existing structure = 60 days • Construction of a new pole with a small cell = 90 days • Batched applications are allowed • Time period can be tolled by mutual agreement, or reset by notice from the locality that the application is complete within 10 – 30 days of filing • Shot clocks apply to every authorization a local government requires for deployment

21. Fees • Fees restricted to “a reasonable approximation of the state or local governments’ actual and reasonable costs” • The FCC’s Presumptively “Reasonable” Fees • Recurring Fees  $270 per small cell facility annually • Non-Recurring Fees  $500 for up to 5 small cell facilities with $100 per additional small cell facility; OR $1,000 per pole to support small cell facilities • Can you charge more? YES!

22. Misc. • Moratoria • A local government may not impose a moratoria on cell siting applications • Allegations of moratoria are brought to the FCC • Preemption • Existing agreements, state small cell bills or other state laws may be preempted to the extent that they conflict with the Order • Remedy • Litigation within 30 days of any action or inaction

23. Recommended Next Steps • Track the ongoing litigation • Consult your legal counsel as to how you will preserve your authority should the order be vacated or modified • Review your state’s requirements for: • Conflicting provisions between state and federal law • Stringent requirements imposed at the state level that is not included in the federal rules • All other applicable laws • Conduct a cost study/analysis • Develop aesthetic requirements (must be in writing) • Keep a detailed record in the event your requirements, authority, or process is challenged • Train your staff and maintain interdepartmental communication

24. Negheen H. Sanjar Director of Legal Research International Municipal Lawyers Association 51 Monroe Street, Suite 404 Rockville, MD 20850 Phone: (202) 466-5424 ext. 7105 Cell: (202) 246-5275 Email: nsanjar@imla.org