IV. When Applicants Can/Must Apply for a State Video Franchise
Section III of our General Order addresses when an applicant can or must apply for a state video franchise. Topics addressed in this portion of the General Order include the following: the Commission's role in processing applications; eligibility conditions for obtaining a franchise; the franchise effectiveness date; terms of service offered; the effect of a new competitor's entry into a video market; and the exception for a party to a stipulation and consent judgment approved by a federal district court.
Most provisions found in Section III of the General Order are undisputed. But to the extent that provisions are debated, we divide our discussion of these parts between applicants for new franchises and applicants with existing franchises. The Commission's role as the sole franchising authority is reviewed in Section III above.
A. Applicants for New Franchises
Parties raise potential issues with two determinations regarding applicants for new franchises: (i) the definition of "incumbent" and (ii) eligibility to abrogate a local franchise. We discuss and assess parties' comments on these issues below.
Seeking to determine the earliest possible effective date for a state video franchise, CCTA and SureWest request clarification that an incumbent cable provider is not considered an incumbent in an area for which it does not possess an expired or effective local franchise.33 DIVCA does not allow an incumbent cable operator to operate under a state video franchise in its existing video service areas prior to January 2, 2008.34 Thus, this clarification would allow companies that are incumbent cable operators in some localities to seek a state video franchise for other areas prior to January 2, 2008.
In addition, SureWest objects to our substitution of the term "service area" for "jurisdiction" when describing circumstances under which an existing franchise may be abrogated. The corresponding provision in DIVCA used the term "jurisdiction."35 SureWest argues that our inadvertent use of the term "service area" instead is important, because this language inappropriately limits the incumbent cable operators' opportunities to abrogate their local franchises. Under DIVCA, an incumbent cable operator may abrogate a local franchise whenever a competitor receives a state video franchise to serve an area within the jurisdiction of the governing local licensing authority - which may encompass a region greater than the incumbent's service area.36
We modify the General Order to clarify that an incumbent cable operator is not considered an incumbent in areas outside of its franchise service areas as of January 1, 2007. Like CCTA and SureWest, we find that this result is consistent with the definition of "incumbent cable operator" found in DIVCA. Public Utilities Code § 5830(j) defines "incumbent cable operator" as "a cable operator . . . serving subscribers under a franchise in a particular city, county, or city and county franchise area on January 1, 2007." Moreover, it would be contrary to the Legislative intent for DIVCA if we prevented an incumbent cable operator in one service area from operating under a state video franchise in a new area. An express purpose of DIVCA is to "[p]romote the widespread access to the most technologically advanced cable and video services to all California communities."37
As requested by SureWest, we also amend the language in Section III.C.1 of the General Order to replace "service area" with "jurisdiction." We find that this modification makes the General Order consistent with the plain language of Public Utilities Code § 5840(n). Section 5840(n) requires a state video franchise holder to "notify the local entity that the video service provider will provide video service in the local entity's jurisdiction."38
B. Applicants with Existing Franchises
The OIR tentatively concluded that incumbent cable providers whose local franchises expire prior to January 2, 2008 shall have the option of renewing their local franchises or seeking a state video franchise, and that incumbent cable providers opting to seek a state franchise shall have their existing local franchises extended until January 2, 2008. Parties debate whether an expired local franchise may be automatically extended, or whether an extension only is at the discretion of the local entity.
League of Cities/SCAN NATOA lists three reasons for why a local franchise may be extended only at the discretion of the local entity. First, League of Cities/SCAN NATOA cites the Legislature's use of the word "may" in the statutory provision that "a local entity may extend [the expired] franchise on the same terms and conditions through January 2, 2008."39 League of Cities/SCAN NATOA contends that this use of "may" demonstrates the Legislature's intent to give the local entity sole authority to decide whether or not to extend an expired local franchise.40 Second, League of Cities/SCAN NATOA references contract law. League of Cities/SCAN NATOA declares that local franchises are negotiated contracts between a video service provider and a local entity, and that consent of both parties to the contract is required for the modification, extension, or renewal of the franchise.41 Third, League of Cities/SCAN NATOA points to the renewal procedures in the federal Cable Act.42 League of Cities/SCAN NATOA states that our allowing a video service provider to extend a local franchise unilaterally frustrates the bargaining ability of the local entity and arguably violates federal law.43
Oakland and the Los Angeles and Carlsbad Responders echo League of Cities/SCAN NATOA's arguments concerning legislative intent. According to Oakland, "[t]here is nothing in the language which gives the Commission the authority to grant such extensions, or make them automatic and mandatory upon application for a state franchise by an incumbent cable operator with an expired or expiring local franchise."44 The Los Angeles and Carlsbad Responders add that the Assembly Analysis cannot be used to support a Commission rule that conflicts with the plain language of DIVCA.45
The Joint Cities similarly protest expediting conversion of an expired local franchise to a statewide video franchise. The Joint Cities contend that unilateral extension of an expired franchise may represent illegal interference with a local entity's efforts to increase a video service provider's financial support for PEG access.46
In contrast, CCTA argues that DIVCA and the accompanying Assembly Analysis contemplate the automatic extension of a local franchise until the effective date of a state video franchise. CCTA cites the Assembly Analysis, which provides that an incumbent cable operator "can request a state franchise that begins on January 2, 2008, and its current local franchise will be extended until that date."47
Without an automatic extension of a local franchise, CCTA worries that its members may be exposed to accusations of operating without a franchise and subject to penalties.48 CCTA states that incumbent video service providers with expired or expiring local franchises will apply for state video franchises "at the earliest possible moment."49 Yet CCTA contends that local entities may use the threat of prosecution for illegal operation prior to effectiveness of a state video franchise to extract concessions, regardless of the fact that an incumbent cable operator intends to begin operating pursuant to a state video franchise.50
CCTA maintains that the potential disruption to incumbent cable operators and their customers is contrary to Legislature's intent to create a smooth transition period between the two regulatory regimes. In support of its position, CCTA points to the following Assembly Analysis text: "[W]hile the transition period leaves local franchises in place for a period of time, the transition period should not allow local governments to diminish the rights an incumbent cable operator has to occupy the public rights-of-way, any protections or rights provided under federal law, or to frustrate the Legislature's intention in enacting this division."51
CCTA adds that incumbent providers whose local franchises expire within sixty days of January 2, 2008 should be able to apply for a state video franchise prior to the local franchise's expiration.52 This allowance, explains CCTA, would ensure that an incumbent cable operator can attain a state video franchise that is effective on January 2, 2008.53
Public Utilities Code § 5930(b) directly addresses extension of a local video franchise. The statute declares that "[w]hen an incumbent cable operator is providing service under an expired franchise or a franchise that expires before January 2, 2008, the local entity may extend that franchise on the same terms and conditions through January 2, 2008."54
Without context, we recognize that the significance of the word "may" in the Public Utilities Code § 5930(b) text is debatable. On the one hand, use of the word "may" could indicate that the Legislature gives the local franchising authority discretion regarding extension of a local franchise. But on the other hand, use of the word "may" could indicate that the Legislature recognizes that an incumbent cable operator may not want to extend its local franchise. The word "may," under this conception, simply captures the uncertainty of the situation. If the Legislature instead replaced the word "may" with "shall," the statute would provide that "local entity shall extend [a] franchise" - even if the incumbent cable operator that is party to the franchise wants to cease offering video service. Forcing an incumbent cable operator to continue offering video service against its will would make little sense.
Additional statutory guidance is found in the express Legislative purposes for DIVCA. These provisions suggest that local franchise extensions should be automatic if requested by the incumbent cable operator. Most illuminating is the Legislature's declaration that DIVCA should "[c]reate a fair and level playing field for all market competitors that does not disadvantage or advantage one service provider or technology over another."55 To be consistent with this intent, a locality should not be able to force an incumbent cable operator to agree to extra concessions during the time prior to when an incumbent may operate under a state video franchise.
The Assembly Analysis reaffirms this assessment.56 If an incumbent cable operator's franchise expires before January 2, 2008, the Assembly Analysis declares that the incumbent "can request a state franchise that begins on January 2, 2008, and its current local franchise will be extended until that date."57 The Assembly Analysis adds that this "transition period should not allow local government . . . to frustrate the Legislature's intention in enacting this division."58
Furthermore, statutory provisions permitting unilateral abrogation of local franchises contradict the argument that the local franchise, as a negotiated contract, requires both parties' consent prior to any extension. DIVCA establishes that franchise abrogation may only require action by one party. For example, when a competitor provides notice of intent to offer service in all or part of a jurisdiction, an incumbent cable operator in the jurisdiction may opt out of its local franchise without the consent of the local franchising authority. Similarly, when a competitor begins serving a jurisdiction, the local franchising authority may require all incumbent cable operators to seek state video franchises in its jurisdiction even if the incumbents otherwise would not choose to opt into a state franchise.59
In this context, invocation of federal Cable Act renewal provisions is not persuasive. With respect to League of Cities/SCAN NATOA's argument that "allowing the video service provider to unilaterally extend the franchise frustrates the bargaining ability of the local entity and arguably violates federal law,"60 we observe that incumbent cable operators that request an extension of a local franchise are planning to opt out of a local franchise, rather than renew it. The federal Cable Act's requirements pertaining to franchise renewals, therefore, are inapplicable.61
We conclude that it is necessary and reasonable to require automatic extension of state video franchises that are held by incumbent cable operators planning to seek state video franchises. We find that this statutory interpretation is most consistent with DIVCA and the Assembly Analysis, and does not contradict state or federal law.
We also hold that we will permit incumbent cable operators to apply for state video franchises before expiration of their local franchises. As pointed out by CCTA, failure to allow state video franchise applications in advance of expiration of local franchises would place incumbent cable operators in legal limbo during the time between expiration of their local franchises and issuance of their state franchises. Consequently, applicants could be forced to choose between competing perils of unlawful operation or discontinuation of their video services. We fail to see how either alternative serves consumer interests.
33 CCTA Opening Comments at 3, n.2; SureWest Opening Comments at 8.
34 See Cal. Pub. Util. Code § 5930(b).
35 Id. at § 5840(o).
36 See SureWest Opening Comments at 10 (describing how this language would affect its operations in Sacramento County).
37 Cal. Pub. Util. Code § 5810(2)(B).
38 Id. at § 5840(n) (emphasis added).
39 League of Cities/SCAN NATOA Opening Comments at 13 (citing to Public Utilities Code § 5930(b)).
40 Id. at 13.
41 Id. at 13; League of Cities/SCAN NATOA Reply Comments at 9.
42 See 47 U.S.C. 546 (establishing federal video franchise renewal standards).
43 League of Cities/SCAN NATOA Opening Comments at 13.
44 Oakland Opening Comments at 8.
45 Los Angeles Reply Comments at 3 (citation omitted).
46 Joint Cities Opening Comments at 5-6.
47 CCTA Opening Comments at 5.
48 Id. at 4.
49 Id.
50 Id.
51 Id. at 5 (citations omitted).
52 Id.
53 Id.
54 Cal. Pub. Util. Code § 5930(b).
55 Id. at § 5810(a)(2)(A).
56 Assembly Floor Analysis (Aug. 28, 2006).
57 Id. at 11.
58 Id.
59 Cal. Pub. Util. Code §§ 5840(o)(3), 5930(c).
60 League of Cities/SCAN NATOA Opening Comments at 13 (citation omitted).
61 See 47 U.S.C. 546 (establishing federal video franchise renewal procedures).
