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State Laws/Franchising

California Signs New Statewide Law

10/06/2006 8:00 PM Eastern

Gov. Arnold Schwarzenegger signed the new statewide video franchising bill into law late last week, stating the legislation will “add another significant player into the cable television marketplace and help speed the spread of new and innovative technologies across the state.”

New entrants will now apply for a single statewide franchise, to be administered by the state Public Utilities Commission. He signed the bill on Sept. 29.

TWO-YEAR WINDOW

Incumbent cable operators will be able to apply for a state franchise, but not until the PUC has had up to two years to set up a process. The window was created in anticipation of the rush of operators with currently expired franchises, such as Comcast Corp. in San Jose and Time Warner Cable in Los Angeles, who might want to apply for statewide franchises. In two years, an incumbent with an active local agreement may apply for a state franchise after a competitor announces it will launch local cable service.

Telephone companies lauded the governor's action, stating statewide franchising will accelerate competition. Since one competitor, Verizon Communications, is deploying fiber-to-the-home architecture to deliver its FiOS TV service, the bill will give that company the legislative certainty it commit hundreds of millions of dollars in investment in its fiber deployment, according to Tim McCallion, the company's West Region president.

The law replaces an old policy that required that new providers match the service areas of current providers. The bill includes a staged build-out requirement. Large competitors that are deploying fiber infrastructure (i.e. Verizon) are mandated to reach 25% of their telephone customers in two years, and 40% in five years.

Internet-based video providers (such as AT&T Inc.) must reach 35% of its market in three years, and 50% in five years.

LOW-INCOME TEST

One quarter of the homes passed must be low income, defined in the bill as households with $35,000 or less in annual income.

But if a telephone company captures less than 30% penetration within three years, it can petition for hearings to determine if the lack of success is due to outside factors, such as lack of access to multiple-dwelling units.

If those outside factors are verified, the telco can get relief from build out requirements.

September