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Understanding Cable Franchise Requests

Many townships in Michigan struggle with cable franchise requests, either as new requests for franchises or renewals of current franchises. Some of these requests come from cable service providers referencing federal laws and procedures, while others are referencing state laws and procedures. Even more confusing, the occasional cable service provider contacts a township asserting rights under both state and federal law. This interplay between state and federal cable franchise law can appear unclear and difficult, causing these requests to be ignored. This E-letter eliminates that confusion, explains how the state and federal laws work together, and arms townships with recommendations on how to address any franchise request and preserve township legal rights.

The Federal and State Cable Franchise Regulatory Landscape

Traditionally, providing telecommunication cable services to service areas within municipal boundaries was the result of negotiations between the cable television provider and each municipality. There were some minimal regulatory requirements imposed by the federal government under the Cable Communications Policy Act, 47 USC 521 et seq., (the “Federal Cable Act”). But, cable providers were eager to simplify the process and create a uniform system to reduce the costs of dealing with each municipal jurisdiction under separate terms. Turning to the state legislature, telecommunication service providers successfully lobbied Michigan to join other states in adopting a uniform process and a uniform service agreement that applied to all municipalities in the state. In 2006, the telecommunication providers’ effort resulted in a big win with the adoption of the Uniform Video Services Local Franchise Act, Public Act 480 of 2006, codified at MCL 484.3301 et seq. (“Michigan Uniform Franchise Act”).

The adoption of the Michigan Uniform Franchise Act now means municipalities and telecommunication service providers are subject to both federal and state regulation. To renew a cable franchise agreement, a state and federal procedure now exist. The interplay between the federal and state regulations has led to much confusion and argument for telecommunication providers and municipalities. Whether franchise requests and renewals are subject to the state process, the federal process, or some hybrid of both has been hotly contested. As this E-letter explores in more detail below, the best approach for a municipality is to assume both are controlling and maximize the advantages of both processes to the benefit of township residents.

The Federal Cable Act

Under the Federal Cable Act, a minimum level of requirements must be addressed in the franchise. These minimum levels are only the floor, however, and a municipality may negotiate for higher levels of service. This includes setting requirements for public, educational, and governmental access channels. At this time, many municipalities have current franchises in place that come up for renewal in 10, 20 or even 30 year periods. The Federal Cable Act provides the following franchise renewal procedure for expiring franchises:

  • In the first six months of the three year period preceding termination of the franchise, either the municipality or the cable operator may commence a “proceeding,” which is essentially a public forum on the cable operator’s performance. See 47 USC 546(a)(1). If the cable operator submits “a written renewal notice requesting the commencement of such a proceeding,” then the municipality must hold a public forum within six months after the notice is received. Some municipalities still receive these letters from large providers, so be prepared to respond accordingly when the federal renewal procedure has been triggered.
  • The goal of the proceeding is to identify cable needs and community interests in the current service and review the performance of the cable provider’s service.
  • If a public forum is provided, only after conclusion of the forum may the cable operator “submit a proposal for renewal,” which “shall contain such material as the franchising authority may require.” 47 USC 546(b)(1), (2).
  • Within four months of receipt of the proposal, the township must either renew the franchise or issue a preliminary assessment regarding denial.
  • The township is not bound by that proceeding, per se, but must “issue a written decision granting or denying the proposal for renewal based upon the record of such proceeding.” 47 USC 546(c)(3).

This allows the municipality, as franchising authority, to review the service and impose individualized requirements on the cable operator based on that community’s demands. Both parties may renew the franchise outside of these procedures if they can arrive at a mutual agreement. See 47 USC 546(h) (describing alternative renewal procedures).

It is important to note that this process begins very early—three years before the existing franchise is scheduled to end. As the Federal Cable Act provides more local control, as we will see momentarily, it may be advantageous for the township to put the cable operator on notice and initiate the meeting. This allows local leaders to address constituent concerns well ahead of the franchise deadline. This is valuable even if the franchise is later renewed under the Michigan Uniform Franchise Act.

The Michigan Uniform Franchise Act

Under the Michigan Uniform Franchise Act, the state regulatory scheme is more specific than the federal act and significantly less flexible. Certain time periods that require a municipal response clearly only favor the cable providers. Contrary to the Federal Cable Act, the Michigan Uniform Franchise Act appears to impose a uniform cable television franchise on all municipalities in the state, and frustrate the general negotiation process previously exercised under the Federal Cable Act to decrease costs for cable providers. To an unknowing or unprepared municipality, it effectively limits the local government controls over ensuring the service provided meets the residents’ needs. The scales can be balanced, however, as discussed in our next sections.

Generally, the process under the Michigan Uniform Franchise Act begins with the cable operator, who submits a franchise agreement to the municipality. This “agreement” is actually a standardized form. The form is made available by the Michigan Public Service Commission (“MPSC”). Click here: https://www.michigan.gov/documents/mpsc/videoact_staffcompiled_320479_7.pdf.

Within 15 business days of the provider “filing” the franchise agreement with the municipality, the municipality must notify the operator whether the agreement is complete. Although the Michigan Uniform Franchise Act does not specify who must receive the agreement, the form promulgated by the MPSC indicates the clock starts running once the clerk has possession. This is not necessarily consistent with other areas of municipal law where the clock does not start to run until the body has received a complete application. See MCL 125.3514 (timeline for approval of wireless communication equipment starts upon filing with body or official responsible for approval). The filing timelines have not yet been challenged in any court decisions, so the conservative approach is to assume it is when the provider “files” it with the township clerk’s office.

A second significant timeline is imposed regarding the time to approve or reject a uniform franchise. The Act only grants the municipality 30 days to reject a cable operator’s application, in contrast to the 36 months to negotiate a franchise under the Federal Cable Act. MCL 484.3303(3). Significantly, the 15-day time period to determinate an application is complete is counted by “business days.” The 30-day period for approval or rejection following the determination that an application is complete does not have this limitation.

If the municipality does not respond to the provider within 30 days (including noting that the application is incomplete), then the agreement is considered complete and approved. Id. Franchise license terms are 10 years with the potential for a 10 year renewal. MCL 484.3303(7). Although the standardized form may not be altered, the statute allows for a “voluntary franchise agreement” between the service provider and the municipality that may contain different terms and conditions than those in the uniform agreement. MCL 484.3313.

The Current Situation

With the unclarity in the legal landscape, townships may wonder what procedure to follow. In 2010, litigation between the City of Detroit and Comcast would have helped answer this question for all municipalities, including townships. See City of Detroit v Comcast of Detroit, Inc, 879 F Supp 2d 680 (ED Mich, 2012) (“Comcast”). Unfortunately, the case itself was later dismissed by stipulation of the parties. This vacated the federal court’s previous ruling—meaning it no longer has any force or effect. City of Detroit v Comcast of Detroit, Inc, unpublished order of the Sixth Circuit entered October 15, 2014.

Even so, that decision was milestone in interpreting the conflict between the Michigan Uniform Franchise Act and the Federal Cable Act. Although neither state nor federal courts will be obligated to follow the decision, we find it instructive in understanding how the state and federal regulations could work together and possible arguments that can arise under both statutory schemes.

In that case, Detroit filed the complaint against Comcast. The city hoped to proceed under the Federal Cable Act because it was perceived as offering more local control via the negotiation provisions. Comcast proposed a uniform agreement under the state procedure. Detroit rejected the written agreement finding it failed to address key service issues that the parties had been currently negotiating under the Federal Cable Act. Those issues included consumer protections, anti-discrimination, and public, educational, and government (PEG) channels, which Detroit argued were controlled by the Federal Cable Act.

According to Detroit, the two laws were in conflict, and thus the Federal Cable Act would control the process of renewal, modification, and enforcement of cable franchises. Id. at 690. Comcast argued there was no constitutional violation and no conflict between the Michigan Uniform Franchise Act and the Federal Cable Act since the federal renewal process was not mandatory. Id. at 692. This would mean that the state scheme was permissible under the Federal Cable Act.

With respect to the renewal process, the Federal District Court held that the renewal provision of the Michigan Uniform Franchise Act did not conflict with the renewal provisions of the Federal Cable Act because the federal renewal scheme was permissive and thus allowed states to offer alternative renewal procedures. This holding would allow Michigan to promulgate its own general procedures, which it had done. Comcast could comply with the mandatory provisions of the Federal Cable Act and Michigan Uniform Franchise Act, and thus, to some extent, both acts could operate side-by-side. Not all aspects of Michigan Uniform Franchise Act were found consistent with the Federal Cable Act, including the attempt to unilaterally modify all existing franchises and details regarding PEG channels. Under this holding, those state law procedures were preempted by the federal law.

Although the intent of the Michigan Uniform Franchise Act is to make renewals formulaic, and less burdensome for townships, the court found that a city or township retained the ability to reject the standard renewal application under the Michigan Uniform Franchise Act process. Id. at 698. For example, MCL 484.3303(3) empowers townships to approve (and thus implicitly also reject) the agreement and MCL 484.3313 allows the parties to negotiate additional terms. Not addressed by the Michigan Uniform Franchise Act is what happens when the township responds with a rejection of that franchise agreement. The court concluded that such a rejection allows the cable provider and the municipality to “work toward achieving a voluntary agreement under [Michigan Uniform Franchise Act].” Comcast, 879 F Supp 2d at 698. Therefore, although the streamlined procedures of Michigan Uniform Franchise Act generally limit the authority of municipalities to negotiate items of local concern, the court found that municipalities had the right to reject the uniform agreement and negotiate with the cable provider.

Strategy for Addressing Cable Franchise Renewals

Regardless of the service provided by a cable provider or the satisfaction of residents, it is imperative that any requests, applications, or correspondence from cable providers be reviewed immediately to determine whether the mailing triggers obligations under either the federal or state process. Otherwise, a township may forfeit its right to reject an incomplete or unfavorable franchise agreement. In either case, we recommend a multipart strategy moving forward that will allow townships to be prepared for the renewal process under either procedure:

Multi-Point Strategy

  • Review the current telecom agreements and franchises within your township.
  1. Who has a franchise?
  2. What procedures for renewal or initial requests have they used (Federal, State, or combination)?
  3. When do they expire?

(This information will allow township officials to act proactively when renewal periods arrive, rather than simply reacting to moves by the cable provider.)

  • Review the Uniform Video Service Local Franchise Agreement.
  1. Determine if the fees, PEG services, and other terms are sufficient for your area.
  2. If not, what issues would you object to if presented with the agreement?
  3. Step three can help develop these possible objections.
  • Hold public forums or other methods to gain information from your constituents regarding their experiences with the cable provider.
  1. This allows the township to gather information ahead of the formal renewal process.
  2. Officials may consider creating an online survey for residents or including a survey with resident tax bills.
  3. This information should be gathered well ahead of the three-year renewal window under the federal process to allow sufficient thought by township officials.
  • If sufficient issues are raised that will not be acceptable under the state uniform agreement, then the township should consider initiating the federal process. Alternatively, once the provisions are pinpointed that are not acceptable, a township can wait for a provider to trigger the state renewal process and timely reject the franchise.
  • When receiving franchise applications, review them closely to determine that they are complete. In particular, verify that the fee provisions of the agreement have been filled in. Otherwise, the agreement is arguably incomplete.

Conclusion

This area of the law is currently unclear because a significant case ruling on the interplay between the two acts was later dismissed and vacated. Regardless, any municipality can be prepared to achieve positive results for its community under either the state or federal process. When it comes time to renew or reissue a cable franchise, consulting with experienced individuals can ensure that no rights are waived.

Most importantly, at least understand that any submission of a uniform franchise under the Michigan Franchise Act must be reviewed immediately and a response provided within 15 business days as to completeness and 30 days following receipt of a complete application, otherwise the township risks losing out negotiating its cable franchises for the next 10 years.
— Christopher Patterson and Matthew Kuschel

 Click here for a PDF version of this publication.

Fahey Schultz Burzych Rhodes PLC, Your Township Attorneys, is a Michigan law firm specializing in the representation of Michigan townships. Our lawyers have more than 150 years of experience in township law, and have represented more than 150 townships across the state of Michigan. This publication is intended for our clients and friends. This communication highlights specific areas of law, and is not legal advice. The reader should consult an attorney to determine how the information applies to any specific situation.

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