HF 2300 (LSB 5662HH (3) 83)

HOUSE FILE 2300

BY  ISENHART

(COMPANION TO SF 2113 BY JOCHUM)

A BILL FOR

An Act modifying provisions relating to franchises for the provision of cable service or video service, and including effective date and retroactive applicability provisions.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  Section 476.55, subsection 2, Code 2009, is amended by striking the subsection.
    Sec. 2.  Section 477A.2, subsection 4, Code 2009, is amended to read as follows:
   4.  A competitive cable service provider or competitive video service provider shall provide at least thirty days’ notice to each municipality with authority to grant a franchise in the service area, and to the incumbent cable provider, in which the competitive cable service provider or competitive video service provider is granted authority to provide service under a certificate of franchise authority that the competitive cable service provider or competitive video service provider will offer cable services or video services within the jurisdiction of the municipality, and shall not provide service without having provided such thirty days’ notice.  A copy of the notice shall be filed with the board on the date that the notice is provided.
    Sec. 3.  Section 477A.3, Code 2009, is amended to read as follows:
   477A.3  Application requirements —— certificate of franchise authority.
   1.  The board shall issue a certificate of franchise authority under this chapter within fifteen thirty business days after receipt of a completed application and affidavit submitted by the applicant and signed by an officer or general partner of the applicant. The application and affidavit shall provide all of the following information:
   a.  That the applicant has filed or will timely file with the federal communications commission all forms required by the commission in advance of offering cable service or video service in this state.
   b.  That the applicant agrees to comply with all applicable federal and state statutes, regulations, and rules.
   c.  That the applicant agrees to comply with all applicable state laws and nondiscriminatory municipal ordinances and regulations regarding the use and occupation of a public right-of-way in the delivery of the cable service or video service, to the extent consistent with this chapter, including the police powers of the municipalities in which the service is delivered.
   d.  A description of the service area to be served and the municipalities to be served by the applicant which may include certain designations of unincorporated areas. This description shall be updated by the applicant prior to the expansion of cable service or video service to a previously undesignated service area and, upon such expansion, notice shall be given to the board of the service area to be served by the applicant.
   e.  The address of the applicant’s principal place of business and the names of the applicant’s principal executive officers.
   f.  Documentation that the applicant possesses sufficient managerial, technical, and financial capability to provide the cable service or video service proposed in the service area.
   g.  Copies of advertisements or news releases announcing the applicant’s intent to provide cable service or video service in the service area intended for release if the certificate of franchise authority is granted.
   h.  A date certain by which the cable system or video service network shall commence operation.
   2.  The failure of the board to notify the applicant of the completeness of the applicant’s affidavit or issue a certificate of franchise authority before the fifteenth thirtieth business day after receipt of a completed affidavit shall constitute issuance of the certificate of franchise authority applied for by the applicant without further action by the applicant.
   3.  The certificate of franchise authority issued by the board shall contain all of the following:
   a.  A grant of authority to provide cable service or video service in the service area designated in the application.
   b.  A grant of authority to use and occupy the public right-of-way in the delivery of cable service or video service, subject to the laws of this state, including the police powers of the municipalities in which the service is delivered.
   c.  A statement that the grant of authority provided by the certificate is subject to the lawful operation of the cable service or video service by the applicant or the applicant’s successor.
   d.  A statement that the franchise is for a term of ten years, is renewable under the terms of this section, and is nonexclusive.
   e.  Such other conditions, restrictions, or requirements as deemed necessary or appropriate by the board after review of the application and affidavit submitted pursuant to subsection 1.
   4.  A certificate of franchise authority issued by the board is fully transferable to any successor of the applicant to which the certificate was initially issued. A notice of transfer shall be filed by the holder of the certificate of franchise authority with the board and the affected municipality and shall be effective fourteen business days after submission. The notice of transfer shall include the address of the successor’s principal place of business and the names of the successor’s principal executive officers. The successor shall assume all regulatory rights and responsibilities of the holder of the certificate. Neither the board nor an affected municipality shall have authority to review or require approval of such transfer.
   5.  The certificate of franchise authority issued by the board may be terminated by a person providing cable service or video service by submitting written notice to the board and any affected municipality. Neither the board nor an affected municipality shall have authority to review or require approval of such termination.
   6.  a.  A holder of a certificate of franchise authority shall provide status reports to the board every three months regarding progress toward completion of construction and commencement of operation of the cable system or video service network. The status reports shall be required during the period beginning with issuance of the certificate of franchise authority and ending on the date that construction is completed and operation commences.
   b.  If a holder of a certificate of franchise authority fails to complete construction and commence operation of a cable system or video service network by the date specified in the application and affidavit submitted pursuant to subsection 1, or two years from the date of issuance for a certificate of franchise authority issued prior to the effective date of this Act, or if any conditions, restrictions, or requirements included in the certificate by the board are not adhered to, the board may revoke the certificate of franchise authority, and the franchise agreement in effect between an incumbent cable provider wishing to reinstate the franchise agreement and the municipality prior to issuance of the certificate of franchise authority shall be reinstated.
   6.  7.  a.  The board shall only have the authorization to issue a certificate of franchise authority as provided in this section, and shall not impose any additional requirements or regulations upon an applicant.
   b.  The board may assess a holder of a certificate of franchise authority for the costs incurred by the board during review of the application and affidavit submitted pursuant to subsection 1, and any additional costs incurred resulting from a contested case proceeding requested pursuant to chapter 17A.
    Sec. 4.  Section 477A.8, subsection 2, Code 2009, is amended to read as follows:
   2.  The holder of a certificate of franchise authority shall implement an informal process for handling inquiries from municipalities and customers concerning billing events, service issues, and other complaints. If an issue is not resolved through this informal process, a municipality may request a confidential nonbinding mediation with the holder of a certificate of franchise authority, with the costs of such mediation to be shared equally between the municipality and the holder of a certificate of franchise authority or a customer may, as an exclusive and final remedy, request a confidential binding arbitration by an arbitrator selected by the parties, with the costs of arbitration assessed as determined by the arbitrator.
    Sec. 5.  Section 477A.8, Code 2009, is amended by adding the following new subsection:
   NEW SUBSECTION.  3.  The board shall compile and maintain on its internet site in an easy-to-read format a chart providing a comparison of costs and services provided for every provider of cable service and video service in this state. The information shall include the name, address, telephone number, and internet site address for each provider and each provider’s parent company, if applicable; and available service packages, the cost of each service package, and any other information deemed appropriate or significant by the board.
    Sec. 6.  Section 477A.10, subsection 3, Code 2009, is amended by striking the subsection and inserting in lieu thereof the following:
   3.  A cable service provider or video service provider operating under a certificate of franchise authority that is using a cable system to provide cable services or that is using telecommunication facilities to provide video services shall, commencing five years after initially obtaining a certificate of franchise authority, and every three years thereafter, increase by twenty percent the number of households in any municipality in its franchise service area to which it offers cable service or video service by the beginning of the next three-year period, if it has in the preceding three-year period offered cable service or video service to at least fifteen percent of the households in the municipality, until such cable service provider or video service provider is capable of providing cable service or video service to all households in the municipality.
    Sec. 7.  Section 477A.10, Code 2009, is amended by adding the following new subsection:
   NEW SUBSECTION.  4.  A cable service provider or video service provider shall not engage in unlawful discrimination in relation to the establishment of rates.
   a.  A cable service provider or video service provider shall be prohibited from subsidizing its lower rate offerings with rates paid by customers in higher rate exchange areas. Any person who provides cable service pursuant to a franchise granted under this chapter shall be prohibited from selling such service or a bundle of services that includes cable service or video service at a price that is more than two hundred percent of the lowest price that provider charges for a functionally equivalent service or bundle of services to another customer in this state. A cable service provider or video service provider that offers a price to a customer in the franchised area in violation of this subsection shall be deemed to have engaged in predatory pricing. If the lowest price meets a bona fide price offered to a customer in the franchised area by an unrelated or unaffiliated competitor, such price shall not be used to determine a violation of this subsection.
   b.  A cable service provider or video service provider found by a court of competent jurisdiction to have failed to materially comply with this subsection shall be subject to the following:
   (1)  An injunction ordering compliance with this subsection.
   (2)  For each franchised area in which a violation occurs, a civil penalty in an amount not exceeding ten thousand dollars.
   c.  If the court finds that the noncompliance with this subsection has resulted in a loss of customers to a competitive provider, the injured provider may bring a civil action on behalf of the customer or customers seeking recovery of damages.
   d.  If the court finds that noncompliance with this subsection has resulted in a loss of customers to a competitive cable service provider or competitive video service provider, the injured competitive cable service provider or competitive video service provider may bring a civil action to recover the consequential damages of economic loss suffered by the injured provider as a result of the loss of customers who changed to a noncompliant competitive cable service provider or noncompliant competitive video service provider while that noncompliant provider was in violation of this subsection.
    Sec. 8.  NEW SECTION.  477A.11A  Consumer protection study —— annual report.

   The office of consumer advocate shall conduct an assessment of the consumer impact of this chapter. The assessment shall include but not be limited to the number and nature of consumer complaints received by the office of consumer advocate, the office of the attorney general, and other agencies or political subdivisions; an analysis of the impact on competition in the provision of cable service and video service across the state; and conclusions regarding impact on rates or pricing for the provision of cable service and video service. The office of consumer advocate shall solicit public input in conducting the assessment. The assessment shall include recommendations for changes in this chapter which would benefit consumers. The first assessment shall be provided to the members of the general assembly by January 1, 2011, with subsequent assessments provided by January 1 annually through January 1, 2014.
    Sec. 9.  NEW SECTION.  551.1A  Unfair discrimination in local exchange rates.
   1.  A telecommunications provider holding a certificate of public convenience and necessity for providing local telecommunications services under section 476.29 and offering local exchange services in this state shall be prohibited from selling such services or a bundle of services including such services at a price that is more than two hundred percent of the lowest price that provider charges for functionally equivalent services or a bundle of services including equivalent services to another customer in this state. A telecommunications provider that offers a price to a customer in violation of this subsection shall be deemed to have engaged in predatory pricing. If the lowest price meets a bona fide price offered to a customer in the local exchange by an unrelated or unaffiliated competitor, such price shall not be used to determine a violation of this subsection.
   2.  A telecommunications provider found by a court of competent jurisdiction to have failed to materially comply with this section shall be subject to the following:
   a.  An injunction ordering compliance with this section.
   b.  For each area in which a violation occurs, a civil penalty in an amount not exceeding ten thousand dollars.
   3.  If the court finds that the noncompliance with this section has resulted in a loss or damage to a customer or customers, a person or class of persons may bring a civil action on behalf of the customer or customers seeking recovery of damages.
   4.  If the court finds that noncompliance with this section has resulted in a loss of customers to a competitive telecommunications provider, the injured telecommunications provider may bring a civil action to recover the consequential damages of economic loss suffered by the injured provider as a result of the loss of customers who changed to a noncompliant telecommunications provider while that noncompliant provider was in violation of this section.
    Sec. 10.  EFFECTIVE UPON ENACTMENT AND RETROACTIVE APPLICABILITY.  This Act, being deemed of immediate importance, takes effect upon enactment and the applicable provisions of the section of this Act enacting section 477A.3, subsection 6, apply retroactively to certificates of franchise authority issued prior to the effective date of this Act.
EXPLANATION
   This bill modifies provisions relating to franchises for the provision of cable service or video service.
   The bill makes several changes to requirements concerning providing notice of an intent to offer cable services or video services, contents of applications to the utilities board within the department of commerce for the issuance of a certificate of franchise authority for the provision of such services, and certificate issuance procedures.
   The bill provides that a copy of the notice which a competitive cable service provider or competitive video service provider is required to provide to each municipality with authority to grant a franchise in the service area, and to the service area’s incumbent cable provider, regarding an intent to provide services in the service area must be filed with the board on the date that the notice is provided. A requirement that the board issue a certificate within 15 business days is modified in the bill to 30 business days. The bill adds to information requirements to be included in an application and affidavit for a franchise, submission of documentation that the applicant possesses sufficient managerial, technical, and financial capability to provide the cable service or video service proposed, copies of advertisements or news releases announcing the applicant’s intent to provide cable service or video service in the service area intended for release if the certificate is granted, and a date certain by which the cable system or video service network will commence operation.
   The bill provides that when issuing a certificate the board may impose conditions, restrictions, or requirements as it deems necessary or appropriate after reviewing the application and affidavit. A holder of a certificate of franchise authority will be required to provide status reports to the board every three months regarding progress toward completion of construction and commencement of operation, during the interval between issuance of the certificate and the date that construction is completed and operation commences. The bill provides that if a holder of a certificate fails to complete construction and commence operation of a cable system or video service network by the date specified in the application and affidavit, or within two years from the date of issuance for certificates issued prior to the effective date of this bill, or if any conditions, restrictions, or requirements included in the certificate are not adhered to, the board may revoke the certificate. In this event, the bill provides that the previous franchise agreement in effect between an incumbent cable provider wishing to reinstate that agreement and the municipality shall be reinstated. The bill also authorizes the board to assess holders of certificates of franchise authority for the costs incurred by the board during reviews of applications and affidavits or pursuant to contested case proceedings.
   Additionally, the bill provides that if an informal complaint process fails to resolve an issue, current provisions involving a confidential nonbinding mediation and sharing of costs between a municipality and a certificate holder shall be changed to, as an exclusive and final remedy, a confidential binding arbitration by an arbitrator selected by the parties, with the costs assessed as determined by the arbitrator.
   The bill directs the board to compile and maintain on its internet site in an easy-to-read format a chart providing a comparison of costs and services for every provider of cable service and video service in the state. 
   The bill replaces a provision currently authorizing expansion to potential subscribers under specified circumstances by a video service provider using telecommunication facilities to provide video services with more than 500,000 access lines and servicing more than 50 percent subscribers in a service area. In its place, the bill provides that both a cable service and video service provider shall, beginning five years after having obtained a certificate, and every three years thereafter, increase by 20 percent the number of households in any municipality in its service area by the beginning of the next three-year period, provided that in the preceding three-year period it has provided service to at least 15 percent of the households in the municipality, until it is capable of providing service to all households in the municipality.
   The bill also deletes a provision which permitted the board to receive a complaint from a local exchange carrier that another local exchange carrier has engaged in an activity that is inconsistent with antitrust laws and the policies which underlie them, and prescribing remedies in the event such an inconsistency was determined by the board to be occurring. The bill provides a new unlawful discrimination and predatory pricing provision regarding the establishment of rates by a cable service provider or video service provider, prohibiting subsidizing lower rate offerings with rates paid in higher rate exchange areas, and selling services at a price which exceeds 200 percent of the lowest price charged for a functionally equivalent service to another customer in the state. Penalty provisions in the form of injunctive relief, a civil penalty of up to $10,000, and consequential damages are prescribed. The bill applies the provisions regarding prices exceeding 200 percent constituting predatory pricing, and prescribing penalties therefor, to local telecomunications service providers under Code section 476.29.
   In addition, the bill directs the office of consumer advocate to conduct an assessment of the consumer impact of Code chapter 477A. The study is to include but not be limited to assessing the number of consumer complaints prompted by the Code chapter, and the impact of the Code chapter on competition in the provision of cable service and video service. The office is directed to provide recommendations for changes in the Code chapter’s provisions which would benefit consumers by January 1, 2011, and each year thereafter through January 1, 2014.
   The bill takes effect upon enactment. Provisions in the bill regarding required status reports by holders of a certificate of franchise authority, and franchise revocation for failure to complete construction and commence operation within two years for certificates issued prior to the effective date of the bill, are retroactively applicable to the holders of such certificates.