HBA-CCH H.B. 1400 77(R) BILL ANALYSIS Office of House Bill AnalysisH.B. 1400 By: Brimer State Affairs 3/7/2001 Introduced BACKGROUND AND PURPOSE Cable television modem service has become an increasingly popular means to access the Internet. Historically, municipalities have exercised authority over cable television companies by issuing franchises, imposing franchise fees, regulating basic service rates, managing access, and establishing customer service standards. While a franchise does not always have exclusive rights to operate a cable television system, effective competition is uncommon because a second cable operator must overbuild the existing cable system. As a result, most areas have only one cable television company and without competition, they have little incentive to provide fair prices and quality services. Under current law, the state has little authority and oversight over cable television companies and their ability to access the Internet through a cable modem. House Bill 1400 grants the Public Utilities Commission authority to determine state communications policy and to ensure that cable television companies provide economical, efficient, fair, and quality services. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that rulemaking authority is expressly delegated to the Public Utility Commission of Texas in SECTION 1 (Section 11.002, Utilities Code), and SECTION 2 (Sections 81.001, 82.002, 82.003, 82.004, 83.003, 83.004, 83.005, 84.001, 86.001, 86.002, 86.004, 86.051, 86.103, 86.105, 86.106, Utilities Code) of this bill. ANALYSIS General Purpose, Policy, and Application House Bill 1400 amends the Utilities Code to require the Public Utilities Commission (PUC) to determine state communications policy; ensure that cable television companies provide adequate, economical, and efficient services to subscribers, municipalities that have franchises, and other relevant parties; oversee the development of the communications industry for the public interest; encourage a competitive marketplace; and promote public awareness of telecommunications issues. H.B. 1400 requires the PUC to review municipal practices for franchising cable television services, prescribe standards for cable television systems and franchise practices, provide consultation to community organizations and municipalities, ensure full community access and a diversity of quality programming, and perform various specific duties related to telecommunications (Secs. 81.001, 81.002, and 86.003). The bill prohibits the PUC, a municipality, and a cable television company from censoring a program or type of program or engaging in discriminatory behavior that interferes with free speech (Sec. 81.006). PUC Duties H.B. 1400 requires the PUC to develop a statewide plan for cable television services, prescribe standards for the construction and operation of cable television systems, and to provide advice and technical assistance to municipalities and community organizations regarding franchises and services. The bill also requires the PUC to establish minimum specifications for equipment, represent the interests of Texas residents before the Federal Communications Commission and other appropriate federal agencies, stimulate cooperation between various organizations, encourage the creation of public and community groups, and perform any necessary studies related to meeting PUC's objectives (Sec. 82.002). H.B. 1400 requires the PUC, by rule, to prescribe the certification and reporting requirements for a cable television company or system. The bill authorizes the PUC to require a cable television company to maintain and file reports to the PUC and specifies the contents of the reports. Before January 15 of each odd-numbered year, the PUC is required to report to the legislature on the scope of competition in cable television markets, the effect of competition on subscribers, and an overall assessment of the telecommunications industry and of the impact of adopted regulations (Sec. 82.004). The bill also requires the PUC to adopt and enforce rules to govern franchises, oversee rates, consumer complaints, network or program changes, and whether a company offers what it advertises (Secs. 82.002, 83.053, 83.151, 86.004, 86.051, 86.103, 86.105, 86.106). Franchise Requirements and Certification of Confirmation H.B. 1400 specifies requirements for franchises, and requires the PUC, by rule, to prescribe standards for procedures and practices that a municipality must follow in granting a franchise. The bill prohibits a municipality from granting an exclusive franchise (Sec. 83.001--83.003). The bill provides that the PUC, by rule, prescribe minimum standards for the terms of a franchise agreement necessary or appropriate to protect the public interest, and to prescribe standards by which a municipality may determine whether an applicant possesses the qualifications necessary to operate a cable television system in the public interest (Secs. 83.004 and 83.005). The bill provides that a franchise application, a franchise agreement, and all related documents accepted by the municipality in relation to a franchise are public information and sets forth publication requirements (Secs. 83.007 and 83.008). A person is prohibited from exercising a franchise without a confirmation from the PUC (Sec. 83.051). H.B. 1400 sets forth procedures for the application for a franchise and makes provisions regarding the issuance of a certificate of confirmation and for the transfer, renewal, amendment, suspension, or revocation of a franchise and certificate of confirmation (Secs. 83.052, 83.053, 83.101--83.104, 83.151, and 83.152). The bill also sets forth conditions under which a cable television company is prohibited from abandoning any service or portion of service that the company initially agreed to provide (Sec. 83.154). Duties of Certificate Holders H.B. 1400 requires the PUC, by rule, to prescribe standards relating to the construction of cable television systems to promote quality service, high-speed or broadband service, facilities that provide for local programming, the capacity to connect with other systems in the PUC's statewide plan, signal transmission from subscribers to the cable company, and the prompt handling of inquiries, complaints, and requests (Sec. 84.001). The bill authorizes the PUC to order a cable television company to construct, operate, or extend the company's system, regardless of its economic feasibility, if the PUC finds that the construction or operation of a cable television system has been unreasonably delayed or the extension of service to a person or area within a cable television company's territory has been unreasonably withheld, and is required to order the construction, operation, or extension on any terms the PUC considers reasonable and in the public interest (Sec. 84.002). The bill provides that a cable television company has a duty to provide interconnection and open access to broadband Internet transport services to any communications entity, unbundled, at rates and terms that are at least as favorable as those the company provides itself, its affiliates, or any other person (Secs. 84.053 and 84.054). The bill requires a cable company to maintain copies of all advertisements, lists, or other notifications regarding programming sent to or made available to the public for three years and is required to make them available to the PUC (Sec. 84.055). Rates The bill provides the term of franchise rates, requires a cable television company to charge rates specified by the franchise, and authorizes the franchise to establish reasonable classifications of service and categories of subscribers (Sec. 85.001). The bill authorizes the PUC to prescribe, reduce, and restore rates based on whether the cable television company and municipality engage in discriminatory practices, violate an order, or remedy a deficiency (Secs. 85.003 and 85.004). Subscriber Protection and Notification H.B. 1400 requires the PUC to adopt and enforce rules to protect individual and retail subscribers from fraudulent, unfair, misleading, deceptive, or anticompetitive practices. The bill requires the PUC to adopt rules that entitle subscribers to safe, reliable, and reasonably priced cable television services, protect subscribers from service disconnections and interruptions, protect the privacy of subscriber consumption and credit information, protect subscribers from discrimination, provide information in English and Spanish and any other appropriate language, provide deferred payment plans, offer impartial and prompt resolution to disputes with the cable television company, and present all cable television services on a single bill. The bill also requires the PUC to adopt rules prescribing the maximum amounts subscribers of cable televison companies may be charged for deposits, service termination, reconnection of service, and for a late payment (Secs. 86.001 and 86.002). A cable television company or system may only use subscriberidentifying information for the business purpose for which the information was first obtained. A cable television company or system may not share, sell, or lease subscriber-identifying information without the subscriber's written affirmative consent (Sec. 86.006). The bill requires each municipality entering into a franchise agreement with a cable company to establish and develop a subscriber complaint department, and sets forth requirements for receiving complaints (Sec. 86.004). A municipality must comply with these provisions before being granted a franchise (Sec. 81.005). The bill also sets forth provisions for landlord-tenant relationships regarding the installation of cable television facilities (Sec. 86.005). The bill requires a cable television company, if it is technologically feasible, to offer each subscriber a locking program control device that enables the subscriber to limit the reception in the subscriber's residence of any channel that displays public access programs or for which a specific, optional premium charge is imposed, and install the locking program control device at the subscriber's request. The bill sets forth provisions related to informing subscribers about the availability of a locking program device and of the fees to install the device (Sec. 86.007). The bill also sets forth all the information that a company is required to deliver to initial subscribers and to any person who requests the information (Secs. 86.052 and 86.053). Network or Programming Changes H.B. 1400 requires a cable television company to notify the PUC and subscribers of any significant network or programming changes, provides when and how a company shall notify subscribers, and sets forth penalties for a company's failure to comply with these provisions (Secs. 86.102-86.104). The bill provides conditions under which a subscriber is entitled to a refund, upgrade, a termination of services, a rebate, or credit if a subscriber or group elects to continue services. In determining the amount of any credit, the PUC is required to set a fair and equitable amount after considering various specified factors (Secs. 86.105--86.107). The bill provides that these provisions apply to each cable television company and cable television system in Texas to the maximum extent allowed by federal law, and to a person who possesses a franchise for cable television, regardless of whether the person acquires any property, transacts any business, or exercises the franchise (Sec. 81.004). These provisions do not limit the power of a municipality to impose or collect a fee, tax, or charge on a cable television company (Sec. 81.005). Enforcement and Penalties The bill authorizes the PUC to impose an administrative penalty for violating a provision and sets limits on the penalty (Secs. 87.001, 87.002, and 87.003). H.B. 1400 amends the Local Government Code to provide that the franchising authority of home-rule and general-law municipalities is subject to the provisions of this Act (SECTION 7). The bill provides that the PUC implement provisions related to the granting of franchises and certificates of confirmation no later than January 1, 2002, and the other provisions no later than July 1, 2002. The bill prohibits a cable television company from obtaining or renewing a franchise during the period between September 1, 2001 and January 1, 2002. A franchise scheduled to expire during that period is extended until the end of the period (SECTION 9). EFFECTIVE DATE September 1, 2001.