Pick your plaintiff.
That might be the choice for the city of Minneapolis as its considers an application to bring the first competition to the cable market. CenturyLink has applied to compete with Comcast for cable customers but its application might force the city to choose between following state law or following federal law.
The issue relates to how quickly CenturyLink would be required to offer its cable service citywide — known in regulator language as “build out.” State law requires that all providers — both the so-called incumbents like Comcast and new entries like CenturyLink — reach the entire city within five years. But federal law and rules consider such requirements for new entries to be anti-competitive. That is, building citywide before it has enough revenue from customers keeps rivals out of markets. Federal law favors policies that encourage new competitors that give customers choices of providers.
Monday, the City Council Ways and Means Committee forwarded to the full council a direction to city staff to begin negotiating a franchise agreement with CenturyLink. But the staff must wade into this seeming conflict between state law and federal law.
“Does the city [err] on the side of caution and require a five-year build-out commitment from CenturyLink and risk thwarting a competing cable operator that will bring benefits to consumers and jobs and investment to the city?” a staff report to the council asked. “Or does the city [err] on the side of competition?
“Litigation may be inevitable either way,” the report concludes.
Staff, along with a private attorney hired for his expertise on cable law, think there might be a way to hammer out a deal with CenturyLInk that meets both federal and state laws, at least in spirit. Federal rules are pretty clear that rigid five-year build out demands would likely be preempted by federal law. “Due to the risk associated with entering the video market, forcing new entrants to agree up front to build out an entire franchise area too quickly may be tantamount to forcing them out of — or precluding their entry into — the business,” the FCC wrote in 2007 order.
But the FCC does allow local governments to create alternative means for pushing new entrants to bring the benefits of cable competition — specifically better service and lower prices — to everyone. CenturyLink, for example, proposed a method that would require it to expand beyond its initial plan of covering 30 percent of the city once it attracts a certain percentage of customers. That is one of the methods the FCC has said would be reasonable.
Build out is not just a legal issue — one, for example, that Comcast could use to try to block any new franchise agreement with CenturyLink. For some council members it is also an issue of equity. If CenturyLink isn’t required to offer its service citywide, it could avoid low-income areas so as to maximize revenue from wealthier neighborhoods. Council Member Elizabeth Glidden said Monday she would not vote for a franchise agreement with CenturyLink without specific benchmarks for making sure all neighborhoods benefit from competition. These concerns are exacerbated by CenturyLink’s refusal to say exactly where it would build first, citing competitive pressure for the secrecy. But how, several council members asked, can they judge the equity of the new service without knowing where and when it will be offered?
CenturyLink’s lawyers are confident that federal courts will void any attempt to enforce the five-year build out provision of state law. They are so confident that the company’s application offers to cover all of the city’s legal costs should Comcast or any other entity take the city to court.
If the full council gives staff the go-ahead to negotiate with CenturyLink, it would still retain control of the issue. Any franchise agreement would come back to the council for public comment and council approval or rejection.