A FORECAST FOR THE FUTURE:
CABLE SYSTEM RENEWALS

By ALAN G. KRAUS
President, Communications Service Group*

Frequently, when assisting municipalities with a particular issue or concern I am asked to evaluate and suggest methods of improving their cable oversight program. Inevitably, one of the first questions that I ask is: "How does your oversight program prepare your municipality for the renewal provisions of the Communications Policy Act of 1984?" The answer all too frequently is that little or no thought has been given to the renewal process, especially if it is 7-10 years in the future.

Yet based upon the language of the Act, legislative intent and recent litigation, there is not a more important element to be considered as part of the oversight process. Preparation for the renewal process should be the skeletal framework on which all local regulatory efforts are placed.

It is clear that the cable industry now enjoys a presumption of renewal. Renewals must now be based upon objective instead of subjective criteria. Municipalities will no longer have the latitude in selecting competing cable companies enjoyed by franchise authorities during the recent "franchise wars."

The regulatory and oversight process, therefore must become more objective and be based upon documentation that will stand the test of scrutiny in the courts. It now becomes encumbant upon regulators to gather and develop documentation as it is available and current. There are two important reasons I urge this action.

Under Section 626(d), the "notice and cure" provisions of the Communications Policy Act, a franchise authority may not base a denial of renewal upon a failure to comply with the renewal criteria, unless the operator has been given "notice and opportunity to cure." In the event that the municipality remains silent they will be considered to have "effectively acquiesed." Therefore, the events so important to evaluating a proposal for renewal will never be brought to consideration.

Secondly, records important to evaluating the activities of the operator may no longer be available as a substantial period of time passes. Few franchises call for the franchisee to keep operating and technical records for the term of the franchise. As the obligation is clearly for the municipality to be prepared for the renewal process there is no reason why the company should maintain information which is not being evaluated by the municipality, will not be utilized in the renewal process, and not necessary to its concerns.

We must also realize that the greatest incentive for an operator to negotiate a favorable franchise renewal will be the assessment that the municipality has the objective record from which a denial of franchise rights is possible. The cable franchise which provides access to the municipalities rights of way is a public trust and should not be provided to a commercial concern without just and appropriate compensation to the municipality. Municipalities should be negotiating from a position of strength and knowledge and only from that position will just compensation be received for the use of public rights of way.

For many municipalities the franchise renewal process will commence much sooner than they anticipate. Cable industry sources now indicate that municipalities will be approached to begin their renewal process 5 years before the expiration of the franchise. In any event, the franchise renewal process will likely commence 3 years before expiration of the franchise as required by the Act and initiated by either the operator or the municipality. Therefore, we can expect that franchises signed in the late 1970s and early 1980s will begin renewal discussions and proceedings within the next 3-5 years.

The forecast for the future for many municipalities is not positive. Based upon the judiciary review provisions of the Act, the lack of proper documentation on the part of a substantial number of municipalities, and current litigation challenging the right of municipalities to grant cable franchises, the stage is set for increased litigation and less than just compensation for the awarding of the cable franchise. We also must recognize the growing trend of increasing industry economic power and concentration of resources which can be brought to oppose municipalities.

The challenge is clear and urgent for cable regulators. For a municipality to conduct a successful oversight program in today's regulatory environment, municipalities must have accurate and ongoing data about the operating performance of their cable company. Without such documentation, municipalities will have little leverage at renewal time. Only with foresight, compliance with the provisions of the Act, and a recognition of the important public trust they hold, will municipalities be able to serve and protect their residents during the renewal process. •

January 1987 / Illinois Municipal Review / Page 23