109th CONGRESS
2d Session
S. 2989
To reform the franchise procedure relating to cable service and
video service, and for other purposes.
IN THE SENATE OF THE UNITED STATES
May 23, 2006
Mrs. HUTCHISON introduced the following bill; which was read twice and
referred to the Committee on Commerce, Science, and Transportation
A BILL
To reform the franchise procedure relating to cable service and
video service, and for other purposes.
Be it enacted by the Senate and House of Representatives of the United
States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the `Franchise Reform Act of 2006'.
SEC. 2. STATE CABLE AND VIDEO FRANCHISING.
Part III of title VI of the Communications Act of 1934 (47 U.S.C. 541 et
seq.) is amended by adding at the end the following new section:
`SEC. 630. FRANCHISING AUTHORITY.
`(a) State Commissions Designated as Franchising Authority- The State Commission
of each State shall be designated as the franchising authority for any state-issued
franchise for the provision of cable service or video service in that State.
`(b) State Authorization to Provide Cable Service or Video Service-
`(1) APPLICATION FOR FRANCHISE-
`(A) IN GENERAL- An entity or person seeking to provide cable service
or video service in a State shall file an application for a state-issued
certificate of franchise authority with the State Commission.
`(B) EXISTING FRANCHISES- Except as provided in subsection (c), an entity
providing cable service or video service under an existing franchise
agreement with a municipality shall not be subject to the requirement
under subparagraph (A) with respect to such municipality until such
franchise agreement expires.
`(A) IN GENERAL- Not later than 15 business days after an applicant
for a state-issued certificate of franchise authority submits an affidavit,
a State Commission shall notify such applicant whether such affidavit
is complete.
`(3) AFFIDAVIT- For purposes of this subsection the term `affidavit' means
an application for a state-issued certificate of franchise authority--
`(A) submitted by an entity or person;
`(B) signed by such person or the officer or general partner of an entity;
and
`(i) that such entity or person has filed, or will timely file with
the Commission all forms required by the Commission;
`(ii) that such entity or person agrees to comply with all applicable
Federal and State statutes and regulations;
`(iii) that such entity or person agrees to comply with all applicable
municipal regulations regarding the use and occupation of public rights-of-way
in the delivery of cable service or video service, including the police
powers of the municipalities in which the service is delivered;
`(iv) a description of the service area footprint to be served within
the municipality, if such description is applicable, otherwise the
municipality to be served by such service, including designations
of unincorporated areas, which description shall--
`(I) be updated by such entity or person prior to the expansion
of cable service or video service to a previously undesignated service
area; and
`(II) upon such expansion, provide notice to the State Commission
of the service area to be served by the applicant; and
`(v) the location of the principal place of business of such entity
or person and the names of the principal executive officers of such
entity.
`(4) ISSUANCE- Not later than 17 business days after a State Commission
receives a completed affidavit from an applicant, the State Commission
shall issue a certificate of franchise authority to such applicant.
`(5) CONTENTS OF CERTIFICATE OF FRANCHISE AUTHORITY- A certificate of
franchise authority issued by a State Commission shall contain--
`(A) a grant of authority to provide cable service or video service
as requested in the application;
`(B) a grant of authority to use and occupy the public rights-of-way
in the delivery of that service, subject to the laws of the State in
which the State Commission is located, including the police powers of
the municipalities in which the service is delivered; and
`(C) a statement that the grant of authority to operate a franchise
under this section shall be subject to lawful operation of cable service
or video service by any applicant for such authority, or any successor
in interest to such applicant.
`(A) IN GENERAL- A certificate of franchise authority issued by a State
Commission under this section shall be fully transferable to any successor
in interest to the applicant to which such certificate was initially
granted.
`(B) NOTICE- Not later than 14 business days after the completion of
any transfer under subparagraph (A), a notice of transfer shall be filed
with each relevant--
`(i) State Commission; and
`(7) TERMINATION- A certificate of franchise authority issued by a State
Commission under this section may be terminated by a cable service provider
or video service provider by submitting a notice of termination to such
State Commission.
`(c) Eligibility for Uniform State-Issued Franchise-
`(1) PRIOR FRANCHISE AGREEMENT- Subject to paragraphs (2) and (3), a cable
service provider or a video service provider that currently has or had
previously received a franchise to provide cable service or video service
with respect to a municipality may not be eligible to seek a state-issued
certificate of franchise authority under this section as to such municipality
until the date of expiration of any existing franchise agreement between
such provider and such municipality.
`(2) SMALL INCUMBENT CABLE SERVICE PROVIDERS-
`(A) IN GENERAL- A cable service provider or video service provider
that is not an incumbent cable service provider and serves fewer than
40 percent of the total cable customers in a particular local franchise
area may elect to terminate that local franchise and seek a state-issued
certificate of franchise under subsection (b) by providing written notice
to the relevant State Commission and any affected municipality not later
than 120 days after the date of enactment of the Franchise Reform Act
of 2006.
`(B) TERMINATION DATE- Any local franchise terminated in accordance
with subparagraph (A) shall terminate on the date a State Commission
issues a state-issued certificate of franchise authority.
`(3) REMITTANCE OF UNPAID FRANCHISE FEES-
`(A) IN GENERAL- A cable service provider that serves fewer than 40
percent of the total cable customers in a local franchise area and that
elects under paragraph (2) to terminate an existing local franchise
shall be responsible for remitting to the affected local franchise authority
not later than the 91st day after the date the local franchise is terminated
any accrued but unpaid franchise fees due under the terminated franchise.
`(B) CREDITS- If a cable service provider has credit remaining from
prepaid franchise fees, such provider may deduct the amount of the remaining
credit from any future fees or taxes such provider is required to pay
to the municipality, either directly or through an appropriate State
agency.
`(4) RULE OF CONSTRUCTION- For purposes of this section, a cable service
provider or video service provider shall be deemed to have or have had
a franchise to provide cable service or video service in a specific municipality
if any affiliates, successor, or predecessor entity of such cable or video
provider has or had a franchise agreement granted by that specific municipality.
`(5) DEFINITION- For purposes of this subsection the terms `affiliates,
successor, or predecessor entity' include any entity receiving, obtaining,
or operating under a municipal cable or video franchise through merger,
sale, assignment, restructuring, or any other type of transaction.
`(d) Franchise Fee Paid to Municipalities-
`(A) IN GENERAL- A holder of any state-issued certificate of franchise
authority shall pay each municipality in which such holder provides
cable service or video service a franchise fee of 5 percent of the gross
revenues of such holder.
`(B) UNINCORPORATED AREAS- The fee established under subparagraph (A)
shall apply to any unincorporated area that is annexed by a municipality
after the effective date of the state-issued certificate of franchise
authority.
`(A) TIMING- A franchise fee payable under this subsection shall be
paid quarterly, not later than 45 days after the end of the quarter
for the preceding calendar quarter.
`(B) SUMMARY- Each payment of a franchise fee under this subsection
shall be accompanied by a summary explaining the basis for the calculation
of such fee.
`(i) IN GENERAL- A municipality may review the business records of
any cable service provider or video service provider to the extent
necessary to ensure compensation in accordance with this subsection.
`(ii) COST- Each party to a review under clause (i) shall bear the
party's own costs of such examination.
`(D) CIVIL ACTION- If a dispute concerning compensation arises under
this subsection, a municipality may bring an action in any court of
competent jurisdiction.
`(3) RECOVERY OF FEE- A holder of a state-issued certificate of franchise
authority may recover from the customers of such holder any fee imposed
by this subsection.
`(e) In-Kind Contributions to Municipality-
`(1) EXISTING FRANCHISES-
`(A) IN GENERAL- Until the expiration of an incumbent cable service
provider's existing franchise agreement with a municipality, a holder
of a state-issued certificate of franchise authority shall pay each
municipality in which such holder is offering cable service or video
service the same cash payments on a per subscriber basis as required
by the existing franchise agreement of such incumbent cable service
provider.
`(B) REPORT REQUIREMENT- Each cable service provider and each video
service provider shall report quarterly to a municipality the total
number of subscribers served by such provider within that municipality.
`(C) AMOUNT TO BE PAID- The amount paid by a holder of a state-issued
certificate of franchise authority shall be calculated quarterly by
a municipality by multiplying the amount of cash payments under the
incumbent cable service provider's franchise agreement by a number derived
by dividing the number of subscribers served by a video service provider
or cable service provider by the total number of video or cable service
subscribers in the municipality.
`(D) TIMING OF PAYMENTS- Any payments required under this paragraph
shall be paid quarterly by a holder of a state-issued certificate of
franchise authority to a municipality not later than 45 days after the
end of the quarter for the preceding calendar quarter.
`(2) EXPIRATION OF EXISTING AGREEMENTS-
`(A) IN GENERAL- On the expiration of an incumbent cable service provider's
existing franchise agreement with a municipality, a holder of a state-issued
certificate of franchise authority shall pay--
`(i) each municipality in which such holder is offering cable service
or video service 1 percent of the gross revenues of such holder; or
`(ii) at the election of a municipality, the per subscriber fee that
was paid to that municipality under the expired incumbent cable service
provider's agreement, in lieu of in-kind compensation and grants.
`(B) TIMING- Any payment under this paragraph shall be paid in the same
manner as described in paragraph (1)(D).
`(3) RULES OF CONSTRUCTION- All fees paid to a municipality under this
subsection--
`(A) shall be paid in accordance with sections 531 and 541(a)(4)(B);
`(B) may be used by the municipality as allowed by Federal law; and
`(C) may not be chargeable as a credit against the franchise fee payments
authorized under this section.
`(4) CONSTRUCTION OF SERVICE- Upon the later of 2 years after the date
of enactment of the Franchise Reform Act of 2006, or the expiration of
the term of any existing franchise agreement between a municipality and
a cable service provider or video service provider, the following services
shall continue to be provided by such cable service provider or video
service provider:
`(A) Institutional network capacity, however such term is defined or
referred to in the existing franchise agreement but generally referring
to a private line data network capacity for use by the municipality
for noncommercial purposes, at the same capacity as was provided to
the municipality prior to the date of the termination, only if the municipality
agrees to compensate the cable service provider or video service provider
for the actual incremental cost of such capacity.
`(B) Cable services to community public buildings, such as municipal
buildings and public schools, to the same extent such services were
provided immediately prior to the date of the termination.
`(5) FUTURE PROVISIONS OF CERTAIN SERVICES- Upon the expiration of the
period described in paragraph (4), any cable service provider or video
service provider that provides the services described in subparagraphs
(A) or (B) of paragraph (4) may deduct from the franchise fee to be paid
to a municipality an amount equal to the actual incremental cost of such
services if the municipality requires such services after that date.
`(6) DEFINITION OF CABLE SERVICE- For purposes of this subsection, the
term `cable service' generally refers to the existing cable drop connections
to public facilities and the tier of cable service provided pursuant to
the franchise agreement at the time of the termination of such agreement.
`(f) No Mandatory Build-Out Provisions- A holder of a state-issued certificate
of franchise authority shall not be required to comply with any mandatory
build-out provisions.
`(g) Customer Service Standards- A holder of a state-issued certificate
of franchise authority shall comply with customer service requirements consistent
with section 76.309(c) of title 47, Code of Federal Regulations, until there
are 2 or more providers offering service in a municipality, excluding direct-to-home
satellite service providers.
`(h) Public, Educational, and Governmental Access Channels-
`(1) PROVISION OF CAPACITY- Not later than 120 days after a request by
a municipality, a holder of a state-issued certificate of franchise authority
shall provide such municipality with capacity in the communications network
of such holder to allow public, educational, and governmental access channels
for noncommercial programming.
`(2) NUMBER OF PEG CHANNELS- A holder of a state-issued certificate of
franchise authority shall provide no fewer than the same number of public,
educational, and governmental access channels to a municipality than were
provided to such municipality under the incumbent cable service provider's
franchise agreement as of the date of enactment of the Franchise Reform
Act of 2006.
`(3) MINIMUM NUMBER PEG CHANNELS- If a municipality had no public, educational,
and governmental access channels as of the date of enactment of the Franchise
Reform Act of 2006, a cable service provider or video service provider
shall furnish--
`(A) up to 3 public, educational, and governmental channels for a municipality
with a population of at least 50,000; and
`(B) up to 2 public, educational, and governmental channels for a municipality
with a population of less than 50,000.
`(4) NONUTILIZATION OF PEG CHANNELS-
`(A) IN GENERAL- Any public, educational, and governmental channel provided
pursuant to this subsection that is not utilized by a municipality for
at least 8 hours a day shall no longer be made available to such municipality,
but may be programmed at the discretion of a cable service provider
or video service provider.
`(B) RETURN OF PEG CHANNEL-
`(i) IN GENERAL- At such time as a municipality can certify to a cable
service provider or video service provider that a schedule for at
least 8 hours of daily programming exists, such cable service provider
or video service provider shall restore any channel previously reprogrammed
under subparagraph (A).
`(ii) LIMITATION- A cable service provider or video service provider
shall be under no obligation to carry on a basic or analog tier any
channel restored under clause (i).
`(5) ADDITIONAL CHANNEL CAPACITY- In the event a municipality has not
utilized the minimum number of access channels as permitted by paragraph
(3), access to that additional channel capacity shall be provided to a
municipality not later than 90 days after written notice from such municipality,
if the municipality meets the following standards:
`(A) If a municipality has 1 active public, educational, and governmental
channel and wishes to activate an additional public, educational, and
governmental channel, such active channel must be substantially utilized.
A channel under this subparagraph shall be considered to be substantially
utilized when 12 hours are programmed on that channel each calendar
day.
`(B) At least 40 percent of the 12 hours of programming required under
subparagraph (A) for each business day on average over each calendar
quarter shall be non repeat programming. Non repeat programming shall
include the first 3 video-castings of a program.
`(C)(i) If a municipality is entitled to 3 public, educational, and
governmental channels under paragraph (3) and has in service 2 active
public, educational, and governmental channels, each of the 2 active
channels must be substantially utilized.
`(ii) A channel under this subparagraph shall be considered to be substantially
utilized when--
`(I) 12 hours are programmed on each channel each calendar day; and
`(II) at least 50 percent of the 12 hours of programming for each
business day on average over each calendar quarter is non repeat programming
for 3 consecutive calendar quarters.
`(6) OPERATIONAL RESPONSIBILITY-
`(A) IN GENERAL- The operation of any public, educational, and governmental
access channel provided pursuant to this subsection shall be the responsibility
of the municipality receiving the benefit of such channel, and the holder
of a state-issued certificate of franchise authority bears only the
responsibility for the transmission of such channel.
`(B) CONNECTIVITY- A holder of a state-issued certificate of franchise
authority shall be responsible for providing the connectivity to each
public, educational, and governmental access channel distribution point
up to the first 200 feet.
`(7) ADDITIONAL RESPONSIBILITIES AND MUNICIPALITY-
`(A) IN GENERAL- Each municipality shall ensure that all transmissions,
content, or programming to be transmitted over a channel or facility
by a holder of a state-issued certificate of franchise authority is
provided or submitted to the cable service provider or video service
provider in a manner or form that is capable of being accepted and transmitted
by such provider.
`(B) OTHER REQUIREMENTS- Any transmission, content, or programming transmitted
in accordance with the requirements of subparagraph (A) shall be transmitted--
`(i) without requirement for additional alteration or change in the
content by a cable service or video service provider over the particular
network of such provider; and
`(ii) in a manner compatible with the technology or protocol utilized
by such provider to deliver services.
`(A) IN GENERAL- To the maximum extent that is technically feasible,
a holder of a state-issued certificate of franchise authority and an
incumbent cable service provider shall use reasonable efforts to interconnect
the cable or video systems of each for the purpose of providing public,
educational, and governmental programming.
`(B) METHODS OF CONNECTION- Interconnection under this paragraph may
be accomplished by direct cable, microwave link, satellite, or any other
reasonable method of connection.
`(C) REQUIREMENT OF GOOD FAITH- A holder of a state-issued certificate
of franchise authority and incumbent cable service providers shall each
negotiate in good faith with the other and the incumbent cable service
provider may not withhold interconnection of public, educational, and
governmental channels.
`(9) JURISDICTION OF COURTS- A court of competent jurisdiction shall have
exclusive jurisdiction to enforce any requirement under this subsection.
`(i) Nondiscrimination by Municipality-
`(1) PUBLIC RIGHT-OF-WAY-
`(A) IN GENERAL- A municipality shall--
`(i) allow a holder of a state-issued certificate of franchise authority
to install, construct, and maintain a communications network within
a public right-of-way; and
`(ii) provide such holder with open, comparable, nondiscriminatory,
and competitively neutral access to the public right-of-way.
`(B) LIMITATION- All use of a public right-of-way by a holder of a state-issued
certificate of franchise authority is nonexclusive and subject to subsection
(j).
`(2) NONDISCRIMINATION- A municipality may not discriminate against a
holder of a state-issued certificate of franchise authority regarding--
`(A) the authorization or placement of a communications network in a
public right-of-way;
`(B) access to a building; or
`(C) the term of any municipal utility pole attachment.
`(j) Municipal Police Power; Other Authority-
`(A) IN GENERAL- A municipality may enforce police power-based regulations
in the management of any public right-of-way that applies to a holder
of a state-issued certificate of franchise authority within the municipality.
`(B) EXTENT OF PUBLIC POWER- A municipality may enforce police power-based
regulations in the management of the activities of the holder of a state-issued
certificate of franchise authority to the extent that such regulations
are reasonably necessary to protect the health, safety, and welfare
of the public.
`(C) COMPETITIVELY NEUTRAL ENFORCEMENT- Any police power-based regulation
of a holder of a state-issued certificate of franchise authority's use
of the public right-of-way--
`(i) shall be competitively neutral; and
`(ii) may not be unreasonable or discriminatory.
`(D) OTHER LIMITATIONS- A municipality may not require that a holder
of a state-issued certificate of franchise authority--
`(i) locate a business office in the municipality;
`(ii) file reports and documents with the municipality that are not
required by Federal or State law and that are not related to the use
of the public right-of-way, except that the municipality may request,
and shall keep confidential, maps and records maintained by the holder
in the ordinary course of business for purposes of locating the portions
of the communications network of such holder that occupy public rights-of-way;
`(iii) provide the municipality with any information concerning the
capacity or technical configuration of the facilities of such holder;
`(iv) provide for inspection the business records of such holder except
to extent permitted under subsection (d)(2);
`(v) seek approval of transfers of ownership or control of the business
of such holder, except that a municipality may require that such holder
maintain a current point of contact and provide notice of a transfer
within a reasonable time;
`(vi) that is self-insured under the provisions of State law, obtain
insurance or bonding for any activities within the municipality, except
that a self-insured holder shall provide substantially the same defense
and claims processing as a non self-insured holder; and
`(vii) possess a bond for any work consisting of aerial construction,
except that a reasonable bond may be required of a holder that cannot
demonstrate a record of at least 4 years' performance of work in any
municipal public right-of-way free of currently unsatisfied claims
by the municipality for damage to the right-of-way.
`(2) CONSTRUCTION PERMITS-
`(A) IN GENERAL- A municipality may require the issuance of a construction
permit, without cost, to a holder of a state-issued certificate of franchise
authority that is locating facilities in or on a public right-of-way
in that municipality.
`(B) TERMS- The terms of any permit required under subparagraph (A)
shall be consistent with other construction permits issued by a municipality
to other persons excavating in a public right-of-way.
`(3) PROCESSING OF REQUESTS-
`(A) IN GENERAL- In the exercise of any lawful regulatory authority
possessed by a municipality, such municipality shall promptly process
all valid and administratively complete applications submitted by a
holder of a state-issued certificate of franchise authority for a permit,
license, or consent to--
`(iv) construct facilities;
`(vi) affect traffic flow; or
`(vii) obtain zoning or subdivision regulation approvals or other
similar approvals.
`(B) REASONABLE EFFORT REQUIRED- A municipality shall make every reasonable
effort not to delay or unduly burden a holder of a state-issued certificate
of franchise authority in the timely conduct of the business of such
holder.
`(4) EMERGENCY- If there is an emergency necessitating response work or
repair, a holder of a state-issued certificate of franchise authority
may begin such repair or emergency response work or take any other action
required under the circumstances without prior approval from the affected
municipality, if the holder of a state-issued certificate of franchise
authority--
`(A) notifies the municipality as promptly as possible after beginning
the work; and
`(B) later obtains any approval required by a municipal ordinance applicable
to emergency response work.
`(5) NO REVIEW OF POLICE POWERS- No State Commission, State agency, or
Federal agency shall have jurisdiction to review any police power-based
regulation or ordinance adopted by a municipality to manage the public
rights-of-way in such municipality.
`(k) Municipal Authority-
`(1) LIMITATION- In addition to any authority exercised, permitted, or
established under subsection (j) with respect to public rights-of-way
located in a municipality, the authority of a municipality to regulate
a holder of a state-issued certificate of franchise authority is limited
to--
`(A) requiring that any holder who is providing cable service or video
service within the municipality register with the municipality and maintain
a point of contact;
`(B) establishing reasonable guidelines regarding the use of public,
educational, and governmental access channels; and
`(C) requiring a holder to submit reports to the Commission on the customer
service standards referred to in subsection (g), if such holder--
`(i) is subject to such standards; and
`(ii) has continued and unresolved customer service complaints indicating
a clear failure on the part of such holder to comply with such standards.
`(l) Discrimination Prohibited-
`(1) PURPOSE- The purpose of this subsection is to prevent discrimination
among potential residential subscribers by holders of a state-issued certificate
of franchise authority.
`(2) INCOME NOT A FACTOR- A cable service provider or video service provider
that is a holder of a state-issued certificate of franchise authority
may not deny access to cable or video service to any group of potential
residential subscribers because of the income of the residents in the
local area in which such group resides.
`(A) PROCEEDINGS- Any person affected by this subsection may seek enforcement
of the requirements described in paragraph (2) by initiating a proceeding
with the State Commission in which such person is located.
`(B) RULE OF CONSTRUCTION- A municipality may be considered an affected
person for purposes of this subsection.
`(4) SAFE HARBOR- A holder of a state-issued certificate of franchise
authority--
`(A) shall be provided a reasonable period of time to become capable
of providing cable service or video service to all households within
a designated franchise area; and
`(B) may satisfy the requirements of this subsection through the use
of an alternative technology that provides comparable content, service,
and functionality.
`(5) LIMITATIONS- Notwithstanding any provision of this subsection, a
State Commission has the authority--
`(A) to make the determination regarding the comparability of the technology
and the service provided under paragraph (4); and
`(B) to monitor the deployment of cable services, video services, or
alternate technology.
`(A) IN GENERAL- If a holder of a state-issued certificate of franchise
authority is found by a court of competent jurisdiction to be in noncompliance
with any requirement of this section, the court shall order such holder,
within a specified reasonable period of time, to cure such noncompliance.
`(B) FAILURE TO COMPLY- If a holder of a state-issued certificate of
franchise authority fails to comply with any court order issued under
subparagraph (A) such holder shall be subject to such penalties as the
court shall reasonably impose, including revocation of the state-issued
certificate of franchise authority granted under this section.
`(2) PARTIES- A municipality within which a holder of a state-issued certificate
of franchise authority offers cable service or video service shall be
an appropriate party in any civil action brought under this section.
`(n) Rules of Construction- Nothing in this section shall be interpreted
or construed--
`(1) to prevent a voice provider, cable service provider, video service
provider, or municipality from--
`(A) seeking clarification of any right or obligation that such voice
provider, cable service provider, video service provider, or municipality
may be entitled to under any other Federal law; or
`(B) exercising any right or authority under any other Federal or State
law; or
`(2) to limit the ability of a municipality under existing law to receive
compensation for use of the public rights-of-way from any entity determined
not to be subject to all or part of this section, including any provider
of Internet protocol cable or video services, unless such payments are
expressly prohibited by other Federal law.
`(o) Commission to Act if State Will Not- If a State Commission fails to
carry out any of its responsibilities under this section, the Commission
shall--
`(1) issue an order preempting the authority of the State Commission to
carry out such responsibilities; and
`(2) assume exclusive authority to carry out such responsibilities.
`(p) Definitions- In this section, the following definitions shall apply:
`(1) ACTUAL INCREMENTAL COST- The term `actual incremental cost' means
only current out-of-pocket expenses for labor, equipment repair, equipment
replacement, and tax expenses directly associated with the labor or the
equipment of a cable or video service provider that is necessarily and
directly used to provide what were, under a superseded franchise, in-kind
services, exclusive of any profit or overhead such as depreciation, amortization,
or administrative expense.
`(2) CABLE SERVICE- Except as otherwise provided in this section, the
term `cable service' has the same meaning as in section 602.
`(3) CABLE SERVICE PROVIDER- The term `cable service provider' means any
person who provides cable service.
`(4) COMMUNICATIONS NETWORK- The term `communications network' means a
component or facility that is--
`(A) wholly or partly, physically located within a public right-of-way;
and
`(B) used to provide video programming, cable, voice, or data services.
`(5) FRANCHISE- The term `franchise' means an initial authorization, or
renewal of an authorization, issued by a franchising authority, regardless
of whether such authorization is designated as a franchise, permit, license,
resolution, contract, certificate, agreement, or otherwise, that authorizes
the construction and operation of a cable or video services network in
the public rights-of-way.
`(A) IN GENERAL- The term `gross revenues'--
`(i) means all consideration of any kind or nature including cash,
credits, property, and in-kind contributions (services or goods) derived
by a holder of a state-issued certificate of franchise authority from
the operation by such holder of the network of such holder to provide
cable service or video service within a municipality; and
`(ii) includes all consideration paid to a holder of a state-issued
certificate of franchise authority and the affiliates of such holder
(to the extent either is acting as a provider of a cable service or
video service as authorized by this section), including--
`(I) all fees charged to subscribers for any and all cable service
or video service provided by the holder of a state-issued certificate
of franchise authority;
`(II) any fee imposed on the holder of a state-issued certificate
of franchise authority by this section that is passed through and
paid by subscribers (including the franchise fee set forth in this
section); and
`(III) compensation received by the holder of a state-issued certificate
of franchise authority or the affiliates of such holder that is
derived from the operation of the holder of a state-issued certificate
of franchise authority's network to provide cable service or video
service with respect to commissions that are paid to the holder
of a state-issued certificate of franchise authority as compensation
for promotion or exhibition of any products or services on the holder
of a state-issued certificate of franchise authority's network,
such as a home shopping or a similar channel, subject to subparagraph
(E)(v);
`(B) COMPENSATION ARRANGEMENTS-
`(i) IN GENERAL- The term `gross revenue' also includes a pro rata
portion of all revenue derived by a holder of a state-issued certificate
of franchise authority or the affiliates of such holder pursuant to
compensation arrangements for advertising derived from the operation
of the holder of a state-issued certificate of franchise authority's
network to provide cable service or the video service within a municipality,
subject to subparagraph (E)(iii).
`(ii) ALLOCATION- Any allocation made under clause (i) shall be based
on the number of subscribers in a municipality divided by the total
number of subscribers in relation to the relevant regional or national
compensation arrangement.
`(C) ADVERTISING COMMISSIONS- For purposes of this paragraph, advertising
commissions paid to third parties shall not be netted against advertising
revenue included in gross revenue.
`(D) REVENUE FROM AN AFFILIATE-
`(i) IN GENERAL- Revenue of an affiliate of a holder of a state-issued
certificate of franchise authority derived from the affiliate's provision
of cable service or video service shall be gross revenue to the extent
the treatment of such revenue as revenue of the affiliate and not
of a holder of a state-issued certificate of franchise authority has
the effect (whether intentional or unintentional) of evading the payment
of fees which would otherwise be paid to a municipality.
`(ii) LIMITATION- In no event shall revenue of an affiliate be gross
revenue to a holder of a state-issued certificate of franchise authority
if such revenue is otherwise subject to fees to be paid to a municipality.
`(E) EXCEPTIONS- The term `gross revenues' does not include--
`(i) any revenue not actually received, even if billed, such as bad
debt;
`(ii) non cable services or non video services revenues received by
any affiliate or any other person in exchange for supplying goods
or services used by a holder of a state-issued certificate of franchise
authority to provide cable service or video service;
`(iii) refunds, rebates, or discounts made to subscribers, leased
access providers, advertisers, or a municipality;
`(iv) any revenues from services classified as non cable service or
non video service under any other Federal law, including--
`(I) revenue received from telecommunications services;
`(II) revenue received from information services (but not excluding
cable services or video services); and
`(III) any other revenues attributed by a holder of a state-issued
certificate of franchise authority to non cable service or non video
service in accordance with any rules, regulations, standards, or
orders of the Commission;
`(v) any revenue paid by subscribers to home shopping programmers
directly from the sale of merchandise through any home shopping channel
offered as part of the cable services or video services, but not excluding
any commissions that are paid to a holder of a state-issued certificate
of franchise authority as compensation for promotion or exhibition
of any products or services on the holder of a state-issued certificate
of franchise authority's network, such as a home shopping or a similar
channel;
`(vi) the sale of cable services or video services for resale in which
the purchaser is required to collect fees under this section from
the purchase customer;
`(vii) the provision of cable services or video services to customers
at no charge, as required or allowed by this section, including the
provision of cable services or video services to--
`(I) public institutions;
`(III) other governmental entities;
`(viii) any tax of general applicability--
`(I) imposed upon a holder of a state-issued certificate of franchise
authority or upon subscribers by a city, State, Federal, or any
other governmental entity; and
`(II) required to be collected by a holder of a state-issued certificate
of franchise authority and remitted to the taxing entity (including
sales and use tax, gross receipts tax, excise tax, utility users
tax, public service tax, communication taxes, and fees not imposed
by this section);
`(ix) any forgone revenue from a holder of a state-issued certificate
of franchise authority's provision of free or reduced cost cable services
or video services to any person including employees of the holder
of a state-issued certificate of franchise authority, to the municipality,
public institutions, or other institutions as allowed in this section,
if, however, the holder of a state-issued certificate of franchise
authority chooses not to receive such foregone revenue in exchange
for trades, barters, services, or other items of value such foregone
revenue shall be included in gross revenue;
`(x) sales of capital assets or sales of surplus equipment that is
not used by a purchaser to receive cable services or video services
from a holder of a state-issued certificate of franchise authority;
`(xi) directory or Internet advertising revenue, including revenue
derived from--
`(III) banner advertisement; and
`(IV) electronic publishing; and
`(xii) reimbursement by programmers of marketing costs incurred by
a holder of a state-issued franchise for the introduction of new programming
that exceeds the actual costs of such programming.
`(F) RULE OF CONSTRUCTION- For purposes of this paragraph, a provider's
network consists solely of the optical spectrum wavelengths, bandwidth,
or other current or future technological capacity used for the transmission
of video programming over wireline directly to subscribers within the
geographic area within a municipality as designated by the provider
in its franchise.
`(7) INCUMBENT CABLE SERVICE PROVIDER- The term `incumbent cable service
provider' means the cable service provider serving the largest number
of cable subscribers in a particular local franchise area on the date
of enactment of the Franchise Reform Act of 2006.
`(8) PUBLIC RIGHT-OF-WAY- The term `public right-of-way' means the area
on, below, or above a public roadway, highway, street, public sidewalk,
alley, waterway, or utility easement in which a municipality has an interest.
`(9) VIDEO PROGRAMMING- The term `video programming' means programming
provided by, or generally considered comparable to programming provided
by, a television broadcast station, as set forth in section 602.
`(10) VIDEO SERVICE- The term `video service'--
`(A) means video programming services provided through wireline facilities
located at least in part in the public right-of-way without regard to
delivery technology, including Internet protocol technology; and
`(B) does not include any video service provided by a commercial mobile
service provider.
`(11) VIDEO SERVICE PROVIDER- The term `video service provider'--
`(A) means a video programming distributor that distributes video programming
services through wireline facilities located at least in part in the
public right-of-way without regard to delivery technology; and
`(B) does not include a cable service provider.'.
END
