INFORMATION #4 12-03-2007 - Laserfiche WebLink

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In the Second Order, the FCC indicates that its conclusion regarding PEG capital support applies to incumbents. The FCC further clarified that in the First Order it found: .... payments made to support the operation of PEG access facilities are considered franchise fees and are subject to the 5 percent cap, unless they are capital costs, which are excluded from franchise fees under Section 622(g)(2)(C). Second Order, ¶ 11. This language appears to be intended to correct the First Order's overly narrow characterization of PEG capital support that is exempt from the franchise fee cap. The Second Order also indicates that the prior finding "that the non-capital costs of PEG requirements must be offset from the cable operator's franchise fee payments is applicable to incumbents because it was based upon our statutory interpretation of Section 622 of the Act." Second Order, ¶ 13. Unfortunately, the Second Order provides no clarity regarding how non- capital PEG costs are to be identified or how an "offset" would be implemented. More importantly, it is unclear whether an incumbent could seek offsets prior to franchise expiration if the franchise does not provide for such mechanism. The timeline for implementation of the Second Order is discussed below. Franchise Fee Issues The Second Order also concludes that the following findings from the First Order apply to incumbents: (1) a cable operator is not required to pay cable franchise fees on revenues from non- cable services; (2) the term "incidental" in 47 U.S.C. § 622(g)(2)(D), which excludes from franchise fees "charges incidental to the awarding or enforcing of a franchise," is limited to the list of incidentals in the statutory provision and other minor expenses. Other fees including "processing fees, consultant fees, and attorney fees," and "application or processing fees that exceed the reasonable cost of processing the application ... and in-kind payments" are not "incidental" and are subject to the 5% franchise fee cap; (3) any "municipal projects" requested by local authorities that are unrelated to the provision of cable services are subject to the 5% franchise fee cap unless they fall within the exempted categories in Section 622(g)(2). It appears that the FCC defines "municipal projects" to be any requests for in-kind services or support that is "unrelated to the provision of cable services." It is unclear whether in-kind support in the form of, for example, live feeds to municipal buildings, institutional data connectivity, or free services to institutions are "municipal projects." Timeline for Implementation In the First Order, the FCC tentatively concluded that the regulatory relief should only be extended to incumbents at the time of franchise renewal. Local governments agreed that the