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Michigan and FCC Take Up Franchise Reform

When it comes to franchise reform, telcos are proving there's more than one way to skin the cat. Having failed to get a bill passed on Capitol Hill, telcos have brought their persuasive powers to bear on the FCC, which has scheduled a franchise vote for Dec. 20.

Meanwhile, similar efforts continue on the state level; Michigan being the most recent to pass such a law. The bill there provides a standardized 10-year franchise agreement if a new video entrant can't reach an arrangement with a municipality within 30 days. Broadcasters in that state are on board because the bill prohibits signal degradation, something that hasn't gained beaucoup momentum on the federal level.

For the most part, it's telephone companies muscling to reform video franchising, which up to now has been handled by as many as 40,000 local governments. With telcos getting serious about doing TV and sinking billions into video infrastructures, the lobbying battles are but a pinch of capital outlay.

The cable industry has variously leaned for and against video franchise bills, depending on the details. In Michigan, for example, a source there said cable operators initially opposed the legislation until it allowed incumbents to opt out of municipal agreements and take the 10-year state deal. In addition to the down-rez ban, broadcasters in the state got behind the bill because it appears to support multicast must-carry, albeit in convoluted terms.

In one section, the bill states that "a station either shall be granted mandatory carriage or may request retransmission consent with the provider," while the previous paragraph requires the provider "to only carry digital broadcast signals to the extent that a broadcast television station has the right under federal law or regulation to demand carraige..."

"This is an example of some of the conflicting language in the bill," said Larry Crittenden, director of communications and legislation for the Michigan Association of Broadcasters. "Another section requires that providers carry the `signals' of broadcasters.

"Conflicting language notwithstanding, we think that AT&T wants to make the additional signals available as a business decision, rather than a statutory requirement. If they are offering local channels that cable systems refuse to carry, they'll advertise that fact," he said.

Other states also have passed video franchise legislation, but it appears that only Texas and Michigan prohibit signal degradation. Under the law, hi-def broadcast signals won't get stripped of bits by any pay TV provider that opts for a statewide franchise deal.

"A provider shall transmit, without degradation, the signals a local broadcast station delivers to the provider," the Michigan legislations states. In return, however, it also says broadcasters won't be compensated for their signals. "A provider is not required to provide a television station valuable consideration in exchange for carriage."

Crittenden said the association's primary goal was to foster more competition among providers.

"We believe this will improve our bargaining position on carriage agreements," he said. "Our colleagues in Texas report that they've seen a difference in those negotiations as AT&T and Verizon are beginning to roll out their new services."

In Washington, D.C., FCC Chairman Kevin Martin has stated his intent to streamline the video franchising process with a shot clock similar to one proposed in the telecom bill that stalled on Capitol Hill. Martin's plan would give municipalities 90 days to cut a deal with new franchisees. Martin also proposed a formula for franchise fees that has drawn opposition from cities and the cable industry, both of which may challenge the FCC's authority to impose franchise reform.