During oral arguments on Wednesday, a three-judge panel of the Sixth Circuit Court of Appeals questioned the FCC‘s authority to “deem” a local video franchise application as granted and to impose other limits on the local franchise process, as representatives of the FCC and of petitioners challenging the FCC clashed on the extent to which local franchise authorities (LFAs) have hindered competition in the multichannel video distribution market. The Alliance for Community Media, the National Cable & Telecommunications Association, and various local governments have asked the Sixth Circuit to overturn a December 2006 order in which the FCC required LFAs to reach a final decision on new video franchise applications within 90 days of receipt for incumbent local exchange providers and other applicants that are authorized to use public rights-of way. (If an LFA fails to act within the prescribed timeframe, the applicant would be vested with interim franchise authority.) The order also struck down various LFA requirements that the FCC declared to be unreasonable, such as the imposition of franchise fees that exceed 5% of gross revenues and build out rules that require applicants to complete network deployment prior to providing video services. For its part, the FCC based its actions on provisions of the 1934 Communications Act that allow the agency to “prescribe . . . rules and regulations as may be necessary in the public interest” in instances in which LFAs “unreasonably refuse” to permit the entry of competitors into the market. Although counsel for the FCC told the court that complaints about delays in franchise negotiations are widespread, Judge Guy Cole Jr. noted that the FCC’s record on unreasonable refusal could be weak as “the petitions argue it’s really a small number” of LFA proceedings that have been delayed. Noting that factors other than LFA misbehavior may have contributed to the lack of competitive franchises, counsel for the local government petitioners said the FCC failed to weigh the influence of such other factors that include economics or flaws in the franchising system that, under the law, are beyond the FCC’s authority to change. Assuming the petitioners are correct in asserting that the FCC lacks the authority to deem a franchise as granted, Judge Julia Smith Gibbons asked whether it followed that time limits imposed by the FCC on LFA negotiations are also beyond the agency’s jurisdiction. Responding to Gibbons, counsel for the local governments replied: “if the FCC cannot issue franchises, then surely it can’t dictate the terms for every franchise in the country.”