Epstein & August, LLP
Municipal Cable & Telecommunications Law Update©
May 20, 2019
To Clients, Municipal Officials and Interested Persons:
The past year has witnessed very significant developments in municipal cable television franchising law and regulation and in municipal regulation of wireless providers. These developments are impacting municipal cable and telecom regulation in substantial ways. Epstein & August, LLP has outlined some of the key points to assist municipal officials in understanding and navigating through these rapidly evolving and increasingly important issues.[1]
Important Cable Updates
- Breakthrough on High Definition PEG Access Channels
In July 2018, Peter Epstein of Epstein & August, LLP negotiated the first-ever Massachusetts Comcast renewal license providing for an HD PEG (Public, Educational and Governmental) Access Channel in Revere, Massachusetts (dated June 1, 2018), followed by his negotiation of the second such HD PEG Access Channel in Brockton, Massachusetts (dated October 1, 2018). Although Verizon had been offering Massachusetts cities and towns at least one high definition PEG Access channel, Comcast’s agreement to deploy HD PEG in Revere and Brockton means that many more Massachusetts municipal Issuing Authorities will finally have the opportunity to garner the benefits of an HD PEG Access Channel. Post-Brockton, Comcast’s HD commitments have evolved, mostly in the direction of Comcast insisting on not less than 3 years, or sometimes longer, to deploy HD PEG channels. Municipal officials and cable advisory committees in or approaching the renewal process are advised to stay abreast of PEG HD trends in light of the importance and evolving nature of local channel allocations in the renewal negotiations.
Ÿ (2) DOR: Effective July 1, 2019, PEG Access and Cable-related Funds Must Go Through a Town Meeting or City Council Appropriation Process.
The Division of Local Services of the Massachusetts Department of Revenue (DOR) has interpreted new Massachusetts municipal finance laws (MGL c. 44, §53F1/2 and MGL c. 44, §53F3/4) to require Town Meeting appropriations in towns, and City Council appropriations in cities, to authorize cable license franchise fee payments and capital grants, as explained in DOR Informational Guidance Release (IGR) No. 16-102. The DOR Guidance requires Town Meeting approval and local appropriation of license-mandated PEG Access and municipal cable-related funding through either an Enterprise Fund, Special Revenue Account or the General Fund. With a July 1, 2019 effective date for the cable appropriations requirements, municipal officials involved in cable regulation and licensing are advised to consult Town accountants, Finance Committees and legal counsel to stay up to date on, and in compliance with, the DOR’s new municipal finance framework for cable. A sample warrant article is available from the DOR in IGR No. 16-102.
Ÿ (3) New FCC Cable Franchise Fee ‘In-kind Benefit’ Rulemaking –
Ÿ The FCC has determined, in a recent and pending rulemaking, that the intent of the Cable Act has always been to count the value of Institutional Networks (“I-Nets”), PEG Access channels, free school drops and other ‘in-kind’ license benefits as part of the monetary franchise fee payable to municipalities under a cable franchise. Under the FCC’s pending proposals, cable operators will be able to offset the value of I-Nets, I-Net maintenance, PEG channels and other in-kind benefits against the monetary payments otherwise due to a municipality if the combined value of the monetary payments and the in-kind benefits exceeds 5% of gross annual revenues. To make matters worse, the FCC is proposing that cable operators value the in-kind benefit offsets at market value, not cost, which could create offsets at values far greater than cost. See In the Matter of Section 621(a)(1) of the Cable Communications Policy Act of 1984, Second Further Notice of Proposed Rulemaking, MB Docket No. 05-311 (September 24, 2018). The foregoing, if adopted, would result in major legal and financial changes in cable franchising ground rules and renewal negotiations. Municipal officials are advised to stay informed about, and evaluate how, the proposed rules, if adopted, will transform the cable television franchising landscape.
Ÿ (4) Potentially Changing Nature of Nonprofit Access Corporations
Ÿ In a pending case, Halleck v. Manhattan Community Access Corporation, the U.S. Supreme Court is reviewing a U.S. Court of Appeals ruling that a nonprofit access corporation set up as a ‘public forum’ is really a quasi-governmental body engaging in ‘state action’ despite the ‘private’ form of the corporate entity. This decision could transform the identity and operations of some nonprofit access corporations that may be deemed governmental and not private, potentially subjecting the entity to certain requirements applicable to government bodies, such as constitutional Due Process and First Amendment rules applicable to government entities. Municipal officials are advised to review local access corporation policies to confirm and clarify the private nature of these entities under applicable law if the intent of the municipality is to maintain a private nonprofit for PEG Access management purposes. This means, for example, municipalities and access centers should consider the pros and cons of avoiding and desisting from use of language about access centers operating on a ‘first come first serve’ basis as such language creates public forum status, and the Court of Appeals equated public forum status with governmental functionality triggering potentially burdensome due process compliance requirements.
Ÿ (5) FCC Changed the Rules on Municipal Regulation of Wireless Installations - The Federal Communications Commission (FCC) significantly tightened the rules governing municipal regulation of ‘small cell wireless facilities” to remove so-called barriers to entry to the roll-out of 5G wireless in the United States. See In the Matter of Accelerating Wireless Broadband Deployment by Removing Barriers to Infrastructure Investment Declaratory Ruling and Third Report and Order, FCC WT Docket Nos. 17-79; WC Docket 17-84 (released September 27, 2018). Municipal officials are not happy with the following key components of the ‘Small Cell Wireless Order’. Municipal regulation cannot ‘materially inhibit’ deployments. State and local fees for installations in the public way must be cost-based and not set as revenue raising rentals of the public way. Presumptively permissible fees should not exceed $500 for up to five sites, and $100 per site for each site thereafter. Recurring fees for small cells in the public way or on public property, to be ‘presumptively valid’, should not exceed $270 per site, per year. Significantly, as of April 15, 2019, municipalities must have adopted objective, non-discretionary, aesthetic and non-cost standards in a policy, regulation or bylaw in order to enforce local standards. A very tight regulatory timetable (“shot clocks”) was imposed by the FCC: 60 days for reviewing application for attachments to existing utility poles and other existing structures and 90 days for the review of attachments using a new structure.
Peter Epstein and Bill August represent municipalities in numerous cable television, telecommunications and right-of-way management regulatory and licensing matters. Bill August has also very effectively represented municipalities in utility law regulatory matters pertaining to electric, gas and water companies. We are proud to report that Bill has again been invited by Massachusetts Continuing Legal Education, Inc. (MCLE) to author a chapter in an MCLE publication on municipal law. Please feel free to contact Epstein & August at 617-951-9909 (Ext. 1 for Peter Epstein and Ext. 2 for Bill August) or via our mobile numbers: 617-233-9905 for Peter and 617-548-3735 for Bill.
[1] Readers are advised that this update is for general information purposes only and should not be applied to individual situations without the advice of legal counsel as may be needed.
© Epstein & August, LLP 2019
