On June 25, 2007, Governor Ted Strickland signed Amended Substitute Senate Bill 117 into law, effective September 23, 2007 (“Video Franchise Legislation” or “Legislation”). This Legislation fundamentally alters the way municipalities may regulate wireline video service providers operating within their boundaries. At its core, this law eliminates a municipalities’ authority to require a franchise for video services, along with attendant conditions and fees, and places that authority with the Director of Commerce in the form of a “video service authorization” allowing a video service provider to serve statewide without obtaining the permission of local authorities. The Legislation provides for a standard remittance to local authorities from video service providers, based on gross receipts, and provides for a standard package of public access channel requirements. Importantly, the law does not affect a municipality’s right to govern access to its public ways.
The following briefly summarizes the Video Franchise Legislation.
The starting date of the law is set at September 23, 2207, after which no person shall provide video service without video service authorization. Companies currently operating under a franchise may continue to do so pursuant to that franchise after September 23, 2007. However, once the franchise expires, it may not be renewed or extended beyond its term.
Companies that provide video service as of September 23, 2007, pursuant to an expired franchise or video service agreement, have 90 days from September 23, 2007 to file an application for video service authorization.
Companies operating under existing franchises can apply for video service authorization within an area served by its video service network on September 23, 2007 only if one of the following conditions exists:
- No sooner than 120 days from the expiration of the franchise or video agreement [Ohio Revised Code Section (“R.C.”) 1332.23(B)(2)(a)]
- After any other person provides video service in that area [R.C. 1332.23(B)(2)(b)]
- After receiving 10 days’ written notice that service will be provided in that area [R.C. 1332.27]
- After a determination by the Federal Communications Commission (“FCC”) that the area is subject to effective competition [R.C. 1332.23(B)(2)(d).
Upon receipt of a video service authorization the franchise or video agreement terminates. [R.C. 1332.23(B(2)]
Video Service Authorization
The Director of Commerce (“Director”) may issue a video service authorization, which allows a person to provide video service and to construct and operate a video service network on or near a public right-of-way. [It appears that the video service authorization is a qualification of standing to seek occupancy that the entity has a right to make a right-of-way application and cannot be turned down as not being a proper party.] The video service authorization shall renew every 10 years. A video service authorization constitutes a franchise pursuant to the Cable Communications Policy Act of 1984 (47 U.S.C. 521 et seq.), and the Director shall be the sole franchising authority. [R.C. 1332.24(A)]
While the Director may investigate violations, failures to comply and complaints, the Director has no authority to regulate rates, terms and conditions of video service. The Director has the authority to revoke in part or in whole the video service authorization of a provider that has knowingly and repeatedly violated its obligations under the Legislation. [R.C. 1332.24(B)]
Video Service Areas
A video service area shall coextend with the boundaries of the relevant municipality, township or county, except that the video service area of a provider using telecommunications facilities to provide video service is limited to the geographic area in which the applicant offers basic local exchange service. Video service areas may overlap. Cable operators offering service under a franchise agreement on the effective date of this section are initially limited, at a minimum, to the franchise area under the agreement. (R.C. 1332.25)
Video Service Standards
A political subdivision cannot require a video service provider to obtain from it authority to provide video service within its boundaries. Except for Public Education and Government (“PEG”) channels (R.C. 1332.30) and payment of a fee based on gross revenue of the previous year (R.C. 1332.32) the political subdivision cannot:
- request anything of value from the video service provider for providing service
- impose any fee
- require a license
- impose a gross receipt tax on the provision of video service
- impose a franchise or other requirement on the video provider including, but not limited to:
- any provision regulating rates charged;
- establishing any build-out requirement;
- requirement to deploy any facility or equipment.
Upon request, the video service provider shall assist the municipal corporation or township in addressing video service subscriber complaints consistent with the provider’s complaint handling process.
Video service providers must meet the following customer service standards:
- Service restoration within 72 hours after a reported service interruption.
- If service provider causes an interruption that lasts for more than four hours in a given day, the provider shall credit the subscriber’s account the cost of each such day the subscriber is billed.
- If the interruption is not caused by the provider and lasts for more than 24 consecutive hours, the customer bill shall be credited in the amount of the cost per hour of service.
- Provide at least 30 days’ advance notice before removing a channel.
- Provide 10 days’ advance notice prior to disconnection, unless the disconnection has been requested by the subscriber, or if disconnection is necessary to prevent theft or to reduce or prevent signal leakage.
- The subscriber’s bill must be at least 45 days past due before service can be disconnected.
- The subscriber must be given at least 30 days’ advance notice prior to increasing rates. (R.C. 1332.26)
Commencement or abandonment of service
Prior to offering service or changing service, the video provider must provide the municipality and each operational video service provider in the relevant territory at least 10 days’ written notice.
Before a provider can terminate service, the provider must provide 90 days’ advance written notice to the Director, affected subscribers and the respective municipal corporations or townships comprising the video service area. The Director has no authority to act upon the notice.
If a provider is providing service under a franchise on September 23, 2007, the provider cannot abandon the video service within the franchise area until the franchise expires if not terminated. (R.C. 1332.27)
Service Obligations of Large Telephone Companies
Providers that use telecommunications facilities to provide video service and that have more than 1,000,000 access lines shall provide access to its service or make video service available to:
- 25% of the households in its service area two years after it began providing video service.
- 50% of households within five years. The provider does not have to meet this requirement until two years after the provider has provided service to 25% of the households for six consecutive months.
A provider may comply with this section through the use of alternate technology, except for satellite technology, that offers similar service, functionality and content that the provider would otherwise provide through its network.
The provider may request a waiver or an extension of time to comply. (R.C. 1332.29)
Access to PEG Channels
Municipal corporations or townships having three or more PEG channels for noncommercial use (R.C. 1332.21) programmed on January 1, 2007, may retain its arrangement with the company delivering that service pursuant to a franchise, ordinance or resolution, provided that three of such channels shall be on the company’s basic plan with the additional PEG channels on the basic plan or any service tier viewed by more than 50% of the subscribers in the relevant service area. A PEG channel may be reclaimed if it is not substantially utilized. A PEG channel is considered not substantially utilized if less than 40 hours of noncharacter-generated content are programmed each week and less than 60% of the programming is nonrepeat and locally produced.
Municipal corporations or townships having one or two PEG channels may also maintain the same arrangement, with the requirement that one channel be provided on the basic plan and the additional channel provided on any service tier subscribed to by more than 50% of the subscribers in the service area.
Municipal corporations or townships that retain their arrangements with the incumbent provider to carry PEG channels must send written notice to all other video service providers not delivering PEG programming on January 1, 2007, indicating that such carriers must provide the same number of PEG channels under the same service tier arrangements as the incumbent provider. Such providers have 120 days to deliver the channels.
Municipal corporations or townships within a video service area having no PEG channels, may, upon written request, require video service providers to provide PEG channels. A provider shall provide the channels 120 days after the municipality delivers the PEG channel content, and may use any service tier viewed by more than 50% of the subscribers.
- If population of the municipality is at least 50,000 the number of PEG channels shall not exceed three.
- If there is more than one provider, then all the providers shall provide the same number of PEG channels.
- If the provider provides video service to more than one municipality through a single head-end or hub office and the aggregate population of all the municipalities is at least 50,000, none of the municipalities shall require the provider to provide, in the aggregate, more than three PEG channels.
A PEG channel may be reclaimed if it is not substantially utilized. If the municipality can later certify that the channel will be substantially used, the provider must restore the channel within 120 days from the receipt of the certification. The provider need not carry the channel on any specified tier service.
The unfulfilled obligation of a provider to provide monetary or other support to a municipality under a franchise, video agreement, ordinance or resolution in effect on September 23, 2007 shall continue until the obligation expires if it is not terminated.
Each provider providing access to video service within a municipality or unincorporated area shall have a pro rata share of the same unfulfilled obligation to support the PEG channel facilities. If there is more than one incumbent, each provider shall have the same obligation as the incumbent with the most recent obligation.
- If the support is in the form of a percentage of gross revenues per subscriber fee, the provider shall provide the same level of support in the same form.
- If the support is in the form of a lump sum payment without an offset to its video service provider fee, the provider shall be responsible for a pro rata share of that payment.
- If it is an in-kind support, the provider shall pay the municipality a pro rata share of the fair market value of that support.
The provider may recover the cost of any fees authorized as a separate line item on subscribers’ bills. A provider’s pro rata share of the unfulfilled obligation shall be based on its proportion of the subscribers located within the municipality.
Municipalities shall not require the provision of any funds, services, programming, facilities or equipment related to PEG channels. The provider shall only bear the responsibility for transmission of the PEG channel once the programming is delivered to the provider. (R.C. 1332.30)
Emergency Interrupt Service
Six months after the effective date, the video provider shall carry emergency interrupt service announcements transmitted by local broadcasts and shall transmit national, state and local emergency interrupt service. (R.C. 1332.31)
Video Service Fee
No sooner than 45 days nor later than 60 days after the end of each quarter, a video service provider -fee shall be paid to the municipalities. The fee shall be calculated quarterly based upon the provider’s gross revenue for the preceding calendar quarter and multiplying it by the percent as set forth below.
Gross revenues are comprised of:
- Recurring monthly charges;
- Event-based charges, including, but not limited to, pay-per-view and video-on-demand;
- Rental of set-top boxes and other video equipment;
- Service charges related to the provision of video service, including, but not limited to, activation, installation and repair;
- Administrative charges, but not limited to charges for service order and service termination.
Gross revenue may not include:
- Taxes, fees or assessments that are collected from subscribers for pass-through to any federal, state or local government, including the video service provider fee;
- Uncollectible charges, except those charges that are written off as bad debt but subsequently collected, less the expense of collection;
- Late payment charges;
- Maintenance charges;
- Charges for services other than video service that are identifiable by reasonable means, that are aggregated or bundled with amounts billed to subscribers, including, but not limited to, revenue received for telecommunications services, information service or the provision of directory or internet advertising and electronic publishing;
- Reimbursement by programmers of marketing costs incurred by the provider;
- Advertising revenue, unless an ordinance is enacted that uniformly applies to all providers. (R.C. 1332.32)