The proponents of the Telecommunications Act of 1996 proclaim that competition is its virtue. The theory, of course, is that competition results in lower consumer prices. Though the new law will bring competition in time, the immediate results for customers and municipalities may be confusion and uncertainty.

The Act provides that local phone companies like Ameritech may begin providing long-distance services as well as cable television. Likewise, long distance phone companies such as AT&T, MCI and Sprint may enter the local phone and cable television markets. Cable companies may also begin to provide telephone services.

What does this possible competition mean for municipalities? First, it means that new franchise agreements will need to be negotiated and approved. Ameritech Corporation, through its subsidiary Ameritech New Media Enterprises, is already entering the cable television market with franchises in Glendale Heights and Naperville. A franchise for this service must be negotiated and granted by each municipality in compliance with State and Federal statutes and regulations related to the issuance of a second cable television franchise. In addition, new franchises may be required for the long distance companies if they seek to enter the local telephone or cable television markets.

The Act includes many other provisions which effect municipalities. Cable Television rate regulation is effectively eliminated. Only local zoning regulations which do not "unreasonably discriminate" among providers of similar services or preclude cellular service from the community can be enforced. Direct Broadcast Satellite service providers are exempt from having to collect and remit taxes or fees imposed by local governments for direct-to-home satellite service. Additionally, telephone companies, without the need for a franchise, may provide video services over an "Open Video System" (OVS) which is the new name for Video Dial Tone. To operate an OVS, a telephone company must make at least two-thirds of the programming capacity of its system available to independent programmers. While no franchise will be required, the FCC will require some public, educational and governmental access and may require payment of a fee in lieu of a franchise fee.

Most importantly, the Act protects local government's ability to manage public rights-of-way and to be compensated for their use. It is important to note, however, that though the battle was won at the Federal level, the telecommunication companies are busy in Springfield pushing to remove municipalities' rights to control and be compensated for private use of the public rights-of-way.

As if this were not enough for local government officials to consider, existing cable television franchises in many communities are expiring and negotiations are moving forward on a renewed franchise. The changes in technology and consolidations in the cable television industry have left many communities dealing with brand new cable companies and ongoing construction of updated systems. In addition, other types of communications providers are seeking to put equipment on water towers and light poles.

The immediate effect of this new legislation on municipalities may be overwhelming. In order for competition to exist, municipalities may be inundated with requests for license and franchise agreements to construct and operate telecommunications equipment within municipal rights-of-way and on municipally owned structures. Consumers want competition and access now, however, the best approach for municipalities will probably involve careful consideration and a healthy dose of skepticism when considering the promises and wonders that flow from competition. •

Mark A. Balkin serves as the primary attorney for the five community Northern DuPage Cable Television Consortium ("NORDCAT") and serves as the telecommunications and cable counsel for the Villages of Schaumburg and Decrfield. He also advises his firm's regular municipal clients regarding telecommunications and cable television issues.

May 1996 / Illinois Municipal Review / Page 21