Governor Signs Bill to Create Statewide Franchising for Video Service Providers

The Governor signed into law the Digital Infrastructure and Video Competition Act of 2006 (AB 2987), which becomes effective January 1, 2007. The law establishes a statewide franchising procedure for video service providers to be administered by the California Public Utilities Commission (CPUC), and preempts local government franchising authority. The law also allows cable companies with existing local franchises to, when a state franchise holder enters the jurisdiction, to opt out of those local franchises and into a state franchise.

The main provisions of the Act include:

• Application Process: Applications must be filed with the CPUC, which must begin accepting such applications by April 1, 2007. Applications must, among several other items, include a description of the “video service area footprint” that the applicant proposes to serve.
• Franchise Fees: State franchise holders must pay the local entity 5 percent of gross revenues or the incumbent cable operator’s percentage, whichever is less. Where a state franchise holder provides bundled-service packages to subscribers, the franchise fee only applies to the gross revenue attributable to video service.
• Discrimination and Build-Out Provisions: The Act provides that a state franchise holder may not discriminate against or deny access to service to any group of residential subscribers based on income, and includes several service requirements to implement this provision. The Act provides for additional build out requirements for state franchise holders or their affiliates with more than 1,000,000 telephone customers in California.
• PEG:  The Act requires state franchise holders to provide the same number of public, educational, and government (PEG) channels as the incumbent cable operator has activated. The Act preserves the PEG capital support requirements contained in existing local franchises, and, if there are no existing unsatisfied PEG obligations, allows the local entity to establish a fee to support PEG channel facilities in an amount not to exceed 1 percent of the state franchise holder’s gross revenue.

If you have questions on the Act or other telecommunications matters, please contact John Bakker, the co-chair of Meyers Nave's Public Power and Telecommunications Practice Group, at jbakker@meyersnave.com.

To read the text of the Act, click here.