On June 27, 2008, the Sixth Circuit upheld the FCC's March 2007 Order easing barriers to entry into the cable market by defining what constitutes unreasonable refusal to award a competitive local franchise under the Communications Act. Several local franchising authorities, along with the trade association for the MSOs, challenged the Commission's Order, arguing that the agency had overstepped its authority and that its actions were arbitrary and capricious.
The Court determined that the Commission had properly used its general authority to regulate the local franchising process under the Communications Act and the Cable Act. The Court determined that the FCC had appropriate jurisdiction to clarify the meaning of § 621(a)(6), that the Commission's interpretation was a reasonable construction of the statutory language, and that the agency's actions were grounded in the record.
Under the Commission's Order, a local franchising authority unreasonably refuses to grant a competitive franchise if it:
- Fails to act within 90 days for applicants with existing access to rights-of-way or six months for any other applicant;
- Imposes certain build-out requirements;
- Requires certain costs, fees, or other payments beyond the 5 percent cap on franchise fees; or
- Makes unreasonable demands for PEG channel capacity, such that they exceed the obligations placed on the incumbent cable operator; and
- The Order leaves state-level franchising laws untouched, but it does preempt local laws in conflict with it (excluding those that comport with state law).