State Laws/Franchising

La. Franchise-Law Challenge Freezes Cablers

8/31/2008 1:37 AM Eastern

A Louisiana state court has slammed the brakes on implementing the opt-out provision for some incumbent cable operators in the state's franchising law.

The state's Police Jury Association, the lobby for parish governments, and the Louisiana Municipal Association challenged the law, which was to have taken effect Aug. 15, on constitutional grounds after Republican Gov. Bobby Jindal signed it. The lawsuit, filed Aug. 13 in the 19th Circuit Court in Baton Rouge, alleges the new law violates the state constitution because that document prevents the legislature from creating a law that “extinguishes” an obligation owed to a parish or municipality.

Since local franchises are considered contracts, the terms of which are conventional obligations, the new law improperly alters those local obligations, according to attorneys for the regulators.

Louisiana Cable & Telecommunications Association CEO Cheryl McCormick stressed that only the opt-in has been suspended. That would have immediately allowed operators with current, active franchises to apply for state regulation in the parishes and municipalities covered by the bill.

She noted that the bill is active, which means that operators with expired or soon-to-expire franchises can still apply for state oversight. Louisiana is now creating forms that will allow for that eventuality, she said.

Nineteen states have approved laws to shift jurisdiction over cable operators from local governments to state agencies. So far, there have been no successful challenges of those changes in oversight rules.

A court date has been set for Oct. 27, but while the complaint is pending, an agreement has been reached to suspend the opt-out provision until the case is resolved.

Police Jury Association attorney Dan Garrett said he's confident the court will find the opt-out provision unconstitutional. Then it will be up to a judge to decide whether to let the law take effect without the offending language, or to rule if the opt-out language is so intertwined in the overall bill that it should not stand at all.

The bill does include severance language, indicating the legislature anticipated the opt-out provision might be challenged. If the opt-out language is removed, the rest of the bill will still be law.

“The law is the law, whether the opt-in language withstands challenge or not. We feel just as strongly the law will stand,” said McCormick.

The cable trade group filed to intervene in the suit, as did the bill's major backer, AT&T. The opt-in challenge does not effect the latter's ability to enter the state by filing for a state franchise. The law does not mean, however, that the telco will never have to negotiate with localities.

There was a significant carve-out in the legislation, exempting parishes and cities with home-rule charters in effect before 1974 to retain their local powers. That means any newcomers will still have to negotiate deals with local officials in communities including New Orleans and Baton Rouge, regardless of the suit.

The legislature seems wise to have anticipated a challenge of the opt-in provision, as this is not the first time for this measure. Lawmakers passed such a bill in 2006, but these same groups heavily lobbied against the measure and convinced then-Gov. Kathleen Babineaux Blanco to veto the it. The fate of the local contracts was a key issue then, too.

The current law, the Consumer Choice for Television Act, was passed in June. It assigns franchising authority to the office of the Secretary of State, which has 30 days to grant a franchise. It may still grant franchises to new providers such as AT&T while the challenge is pending. Providers can be granted 15-year, renewable franchises.

Though the opt-out provision is at the heart of the suit, it is not the only language criticized by the local governments.

Localities are also upset that when an incumbent provider applies for state regulation, the locality must pass a local ordinance to retain franchise-fee payments. Otherwise, local governments may lose the right to collect those funds, according to Garrett.

Municipalities are also concerned they may lose such local obligations as free cable connections to schools and other public buildings under the new law, he added.

September