XVII. Modifications to a State Video Franchise

Section VI of the General Order addressed, among other items, transfer of and amendments to state video franchises. No parties commented on transfer of state video franchises. We find that our transfer provisions are reasonable and follow the statutory text, so we decline to alter them.

A number of parties commented on procedures a state video franchise holder must follow when amending its proposed video service area. Although we have express authority to adopt amendment procedures, many parties debated features of the specific amendment procedures proposed in the draft General Order.⁷⁵⁵

A. Size of the Proposed Video Service Area

Multiple parties ask the Commission to consider placing restrictions on (i) the size of the proposed video service area and (ii) when this area may be amended. We review and assess these comments below.

1. Position of Parties

CCTA urges the Commission to require applicants to include their entire contemplated video service areas in their initial franchise applications.⁷⁵⁶ CCTA adds that any amendments to a video service area should be limited to contiguous areas.⁷⁵⁷ CCTA argues that unwarranted and unnecessary tax consequences could result from our awarding multiple non-contiguous franchise service areas by amendment.⁷⁵⁸ It adds that its proposed clarifications would make it easier to assess a state video franchise holder's compliance with DIVCA.⁷⁵⁹

League of Cities/SCAN NATOA contends that "[m]ultiple amendments redefining the holder's service territory could be difficult to track, could cause confusion for local governments and the public, and could impose an unnecessary burden on the Commission's resources."⁷⁶⁰ It notes that regular changes to service territory boundaries "will be particularly burdensome to local governments."⁷⁶¹ Thus, League of Cities/SCAN NATOA urges the Commission to dictate that a video service area encompass "the entire service territory the provider contemplates servicing."⁷⁶² Any amendments to these areas would be "limited to circumstances not reasonably foreseeable to the applicant."⁷⁶³

Joint Cities maintains that statewide video franchises make it difficult for the Commission and/or local entities to monitor compliance with statutory obligations, such as PEG access, franchise fees, and customer service.⁷⁶⁴ Joint Cities, therefore, argues that state video franchise holders should be permitted to hold more than one franchise, and that franchise service areas should be limited to 750,000 households, with an allowance made for cities with more than 750,000 households.⁷⁶⁵ Joint Cities adds that initial state video franchise applications and amendments should specify the entire video service area the video service provider intends to serve within five years after submission of the application or amendment.⁷⁶⁶

2. Discussion

We decline to impose any new regulations that would restrict the size or modification of a video service area. It is unclear whether limiting the size of video service areas as suggested by Joint Cities would help or harm government efforts to monitor state video franchise holders' compliance with DIVCA. Local entities disagree about what is the optimal size for effective government monitoring.⁷⁶⁷ Moreover, we find that CCTA's caution concerning tax implications does not require Commission action.⁷⁶⁸ An applicant is best able to determine the tax consequences of its individual business plan, and, if preferable, an applicant is free to request a single state video franchise for the entire state of California. Affording this flexibility is consistent with the Legislature's intent that DIVCA "[c]reate a fair and level playing field for all market competitors . . . ."⁷⁶⁹

B. Process for Amending Video Service Areas

Two DIVCA provisions are central to parties' comments on our proposed process for amending video service areas. First, Public Utilities Code § 5840(f) gives the Commission general authority to "establish procedures for a holder of a state-issued franchise to amend its franchise to reflect changes in its service area." Second, Public Utilities Code § 5840(m) states that the Commission "shall require a holder to notify the commission and any applicable local entity within 14 business days of . . . a change in one or more of the service areas of division that would increase or decrease the territory within service area. The holder shall describe the new boundaries of the affected service areas after the proposed change is made." We consider the significance of these two statutes below in considering issues raised as to video service area amendment.

1. Position of the Parties

While admitting the Commission has authority to adopt amendment procedures, AT&T asserts that the Legislature "carefully circumscribe[ed] the permissible content" of any procedures for amending video service areas.⁷⁷⁰ AT&T argues that Section 5840(m)(6) provides that a state video franchise holder is only required to give notice of "new boundaries of the affected service areas after the proposed change is made."⁷⁷¹ According to AT&T, the Commission's proposed procedures, which require advance notice and submission of a supplemental application, conflict with Section 5840(m)(6), which only requires notice after the fact.

Largely echoing AT&T's arguments, Verizon proposes a means of harmonizing Section 5840(f) with Section 5840(m)(6).⁷⁷² The amendment process, under Verizon's proposal, would be a "ministerial process to conform an existing franchise to service territory changes that have already occurred" (emphasis in original).⁷⁷³ Verizon argues this amendment process is necessary, because unlike other changes listed in Section 5840(m)(6), "service area changes are not simple ones that the Commission can implement itself by appending information to the franchise (e.g., as with a name change or transfer). Rather the holder must submit either a new `electronic template' or a new GIS boundary in digital format on a CD."⁷⁷⁴

League of Cities/SCAN NATOA argues that nothing in Public Utilities Code § 5840(m)(6) limits the authority granted to the Commission to adopt procedures for service area amendments.⁷⁷⁵ League of Cities/SCAN NATOA characterizes the notice requirements in Section 5840(m)(6) as a floor, not a ceiling, for Commission authority.⁷⁷⁶

DRA maintains that Public Utilities Code 5840(m)(6), when read in context of Section 5840 in its entirety, "demonstrates that the Commission's proposed procedures set forth in draft GO at VI.B.2 are wholly within the scope of the legislation."⁷⁷⁷

2. Discussion

We determine that Public Utilities Code §§ 5840(f) and 5840(m)(6) are not in conflict and do not limit the Commission's authority. We, therefore, decline to modify our amendment process.

When read in the context of DIVCA as a whole, we find that the notice contemplated by Public Utilities Code § 5840(m)(6) refers to a change in the geographic service area independent of a state video franchise holder's decision to increase or decrease its own footprint in the service area. This conclusion is informed by the plain language of the statue and the manner in which DIVCA establishes other procedures. As an example, we can foresee that a new residential subdivision is built just outside a video franchise holder's existing service area, and that the local entity will want the holder to extend its geographic service area to cover this new subdivision.

As an initial matter, Section 5840(m)(6) requires state video franchise holders to give notice of "[a] change in one or more of the service areas of this division that would increase or decrease the territory within the service area."⁷⁷⁸ It is inconsistent with the organization of DIVCA to presume that the Legislature would give the Commission the authority to "establish procedures for a holder of a state-issued franchise to amend its franchise to reflect changes in its service area,"⁷⁷⁹ and then establish the procedures itself and include the procedures in a list of changes unrelated to the increase or decrease of a service area. For example, with respect to the application process for a state franchise, the Legislature did not include a broad provision giving the Commission authority to establish application procedures, and then establish application procedures itself. Instead, the Legislature simply established the procedures and directed the Commission to follow them. Thus, the Legislature gave the Commission the authority to establish procedures for a holder to change its service area boundaries, and was not seeking to do so itself in Section 5840(m)(6).

In its proposal to "harmonize" Sections 5840(f) and 5840(m), Verizon observes that "unlike the other changes enumerated in section 5840(m), service area changes are not simple ones that the Commission can implement itself by appending information to the franchise (e.g., as with a name change or transfer)."⁷⁸⁰ Although Verizon offers this argument in support of its harmonization proposal, the Commission regards the distinction between service territory changes and the other changes enumerated in Section 5840(m)(6) as further support that the Legislature did not intend that Section 5840(m)(6) would permit video service providers to notify the Commission after the fact of an increase or decrease in their service territory.

Because we conclude that Public Utilities Code § 5840(m)(6) refers to a change in the service territory independent of a video service provider's decision to amend its footprint within the territory, there is no need for the Commission to alter its procedures for holders that seek to amend the service territory in their state franchises. The amendment procedures proposed in the OIR afford flexibility to state video franchise holders, while ensuring that the Commission and local entities remain fully informed of changes to video service areas.

Nevertheless, we modify the General Order to assure there is no confusion regarding these amendment procedures. The revised General Order clarifies that the Commission's supplemental application process tracks the state video franchise application process.

⁷⁵⁵ See id. at § 5840(f) (expressly granting the Commission the authority to "establish procedures for a holder of a state-issued franchise to amend its franchise to reflect changes in its service area").

⁷⁵⁶ CCTA Opening Comments at 11.

⁷⁵⁷ Id. at 11-12.

⁷⁵⁸ Id.

⁷⁵⁹ Id. at 11.

⁷⁶⁰ League of Cities/SCAN NATOA Opening Comments at 16.

⁷⁶¹ Id.

⁷⁶² Id.

⁷⁶³ Id.

⁷⁶⁴ Joint Cities Opening Comments at 18-19.

⁷⁶⁵ Id. at 19.

⁷⁶⁶ Id.

⁷⁶⁷ Compare League of Cities/SCAN NATOA at 16 (arguing that government monitoring will be optimized if a proposed video service area encompassed all areas an applicant contemplates serving), with Joint Cities Opening Comments at 19 (contending that monitoring will be optimized if a proposed video service area is capped at 750,000 households).