Local Governments No Longer Authorized to Issue Franchises
Pursuant to a bill enacted May 23, 2006, counties and municipalities (“Local Governments”) in South Carolina no longer have the authority to issue cable franchises. New franchise applications must now be directed to the Secretary of State.
Local Governments may continue to enforce existing franchise agreements until their expiration. Incumbent franchise holders will likewise remain subject to their existing franchise agreements and cannot avail themselves of a state-issued certificate of franchise authority in areas subject to a Local Government franchise until expiration of such current agreements. That said, the new law does permit incumbents to opt out of such franchises at any time on or after the date that the holder of a state-issued certificate of franchise authority provides notice of service commencement. Additionally, incumbent cable operators may seek authority under the new law to provide services in areas where they are not subject to a current franchise agreement.
Applications for a state-issued certificate of franchise authority must be accompanied by an affidavit and signed by an officer or general partner of the applicant containing the following:
(1) affirmation that the applicant agrees to comply with all applicable federal and state laws and regulations;
(2) a written description of the municipalities and unincorporated areas of counties to be served, in whole or in part, by the applicant, which must be amended by the applicant before the provision of cable service within an area not described in a previous application or amendment; and
(3) the location of the principal place of business and the names of the principal executive officers of the applicant. Holders of a state-issued certificate of franchise authority seeking to expand into new service areas must file amended applications with the Secretary of State identifying the new service areas to be served.
Procedure
The Secretary of State must notify each affected Local Government of its receipt of the application or amended application within five days of its receipt. The notification will request the franchise fee rate to which the incumbent cable operator is subject, the number of activated PEG access channels and whether it consents to the grant. There does not appear to be any requirement that notice be provided to the incumbent cable operator.
Local Governments then have 65 days to respond and must provide an explanation if they seek to deny consent. Where a Local Government responds and does not object, a franchisee must be issued a certificate of franchise authority within 80 days of the request for information with the same franchise fee and PEG access obligations as the incumbent.
Where Local Governments fail to provide the requested franchise fee rate and PEG access information, the statute automatically imposes a franchise fee rate of 2% of gross revenue and absolves the applicant of any requirement to provide PEG access.
If a Local Government denies consent or does not timely provide its unconditional consent, the application will be denied. The only remedy from such a denial is to seek relief under state or federal law in state or federal court.
No Build-Out Requirements
Service under a state-issued certificate of franchise authority must begin to be deployed in each of the areas described in an application within one year of the date of the issuance of the certificate or the certificate becomes null and void.
The statute specifically provides, however, that the foregoing service commencement requirement “shall not be construed to require deployment of service throughout the municipalities or the unincorporated areas of the counties described in [the application]” and later specifically prohibits the imposition of build-out requirements. Accordingly, the statute lacks any build-out requirements.
The statute does, however, prohibit state certificated franchisee’s from denying access to service to any group of potential residential subscribers “because of the income of the residents in the local area in which the group resides.” The statute further provides that “cost, density, distance and technological or commercial limitations must be taken into account” in determining whether a violation of the redlining prohibition has occurred. State issued certificate holders are granted “a reasonable time to deploy … service.” Those who believe they have been denied access to services may file a complaint with the Secretary of State.
Conclusion
While the statute does contain franchise, requirements, PEG requirements and customer service requirements – it requires compliance “with all applicable federal customer service requirements” – the statute does not speak to a number of issues common to franchise agreements. For example, the statute makes no provision for bonding requirements or institutional networks.
Additionally, state-issued certificates of franchise authority are also “fully transferable.” Other than the requirement to submit a notice of transfer with the Secretary of State and the affected Local Governments within ten days of the completion of the transfer, there is no obligation to obtain consent to the transfer. In fact, the statute provides that “the Secretary of State is neither required nor authorized to act on the notice.”
State-issued certificates appear to have the potential to relieve incumbent operators from a number of obligations to which they are currently subject. For that reason, strong consideration should be given to seeking state issued certificates as the opportunities present themselves.
http://www.commlaw.com/default.asp?id=118&objId=166
