Federal Public Policy Update

1. Jim Horwood Partner Spiegel & McDiarmid Gerard Lavery Lederer Partner Best Best & Krieger FederalPublic Policy Update www.spiegelmcd.com

2. So What’s Happened in the Past Year?

3. Presidential 536.com

4. Masters of Our Destiny

5. House Masters of Our Destiny Chairman Greg Walden (R-OR) Ranking Member Pallone (D-N.J.) Senate Sen. Thune (R-S.D.) Sen. Nelson (D-FL) Subcommittee Chair Blackburn (R-TN) Ranking Member Doyle (D-PA)

6. Hill • Legislation repealing of FCC BB privacy rules approved • MOBILE NOW Act (S. 19) – Passed by Senate • Watch out for possible ROW/wireless preemption add-ons in House • Gigabit Opportunity Act. (S 1013/ HB 2870) • Sen. Capito (R-WV)/Rep. Collins (R-GA) • Community Broadband Act (S. 742) • A bill to promote competition, to preserve the ability of local governments to provide broadband capability and services, and for other purposes

7. Hill • Balancing the Rights of Web Surfers Equally and Responsibly (BROWSER) Act of 2017 – HR 2520 • Rep. Blackburn (R-TN) introduces Internet privacy legislation – • HR 2479 (Leading Infrastructure for Tomorrow’s America Act) – which includes $40 billion for broadband deployment  • Again, watch out for ROW/wireless, or “GO Act”-like add-ons. • Sens. Booker (D-NJ) and Hoeven (R-ND) introduce legislation (Commercial UAS Modernization Act) dealing with interim operating guidelines for small commercial unmanned aircraft systems (UAS)

8. 2016 Commission

9. Federal Communications Commission • Independent regulatory agency • Governed by five Commissioners (3 +2 typically) • Commissioners nominated by President and confirmed by Senate • Commissioner’s term in office is five years (except when filling an unexpired term) • Chair • Appoints staff and controls agenda; first among equals. • Customarily, FCC Chair resigns at the end of Presidential term if there is a change in Administrations. • Not mandatory • New President will make one Commissioner Acting Chair

10. Populating the FCC Rosenworcel June 2020 Brendan Carr June 2018 Clyburn Pai O’Rielly June 2017 June 2021 June 2019

11. 2017 Commission

12. Recurring Theme at the FCC: Local Government as Part of Problem, Not Solution, to Broadband Deployment Multiple FCC items describe local government policies as “barriers to entry and investment” • Mobilitie wireless siting petition • Wireless and wireline infrastructure proceedings • Preemption Petition Targeting San Francisco MDU Ordinance • Multiple Tenants Environment Proceeding • Section 706 Inquiry

13. Deadlines

14. Section 706 Inquiry • Annual Report on Progress of Broadband Deployment • FCC wants to consider wireless or wireline coverage together – if either exists, community deemed served • Wireless coverage adequate even at slower speeds • Wireless-wireline equivalency indicates push to emphasize wireless over wireline • Video over wireless means less wireline plant, supporting argument for abandoning franchise fees

15. Cable Television Technical and Operational StandardsReport and Order– MB Docket No. 12-217 • Order specifies the SCTE 40 standard; • Declines to require proof of performance testing at the Federal level. • Streamline (read: reduce) signal quality certification and testing requirements. • Reserves ability of franchising authority to require testing in franchise – (How many folks thought to do – and none of the state laws require.)

16. PEG: CC Obligations • Obligations • Absent an exemption Television channels, including PEG, must be captioned. • See 47 CFR 79.1(d) for a number of exemptions available to PEG stations, including 47 CFR 79.1(d)(12), which captures almost all PEG channels, because it exempts from closed captioning channels that “…produce revenue less than $3,000,000.”

17. PEG: CC Registration • Recent FCC Order establishes: • No change in exemption rules, but • Creates a Reporting system for all video channels and video producers so the Commission can: • Refer consumer complaints; and • Document exemption status of channels and producers. • ACM asks for PEG channel to serve as single registrant. • FCC has yet to create platform – question is will it?

18. Captioning and ADA (Justice Dept.) • Justice target, as we understand, was streaming of Council meetings that were not captioned. If you carry G channel, likely that ADA applies. • “Covered entities are required to provide aids and services unless doing so would result in an ‘undue burden,’ which is defined as significant difficulty or expense.” • Obama Justice opened a docket to clarify – • NATOA and others filed. • Will Trump Justice complete or let go quiet? • Eddie Sierra v. School Board of Broward County, Case No. 16-cv-63021-BLOOM/Valle, (S.D. FL 4/20/17)

19. Small Cell Mania at the FCC • Mobilitie Petition, Wireless Barriers NPRM, and Wireline Barriers NPRM • What industry wants (and FCC seems sympathetic): • Shorter (60-day) shot clock. • “Deemed granted” remedy. • Fees limited to costs. • Application of §§ 253/332(c)(7) to ROW access and municipal pole access. • Other issues (in Wireline NPRM): • Pole attachment rule revisions (including possibly OTMR). • Streamlined service discontinuance and copper retirement requirements.

20. Small Cell Mania at the FCC • BDAC • Membership heavily tilted to industry • 3 key working groups • Removing State and Local Regulatory Barriers Working Group • Model Code of Municipalities Working Group • Model Code for States Working Group • BDAC recommendations as early as November 9

21. Small Cell Mania – the States • Many states have enacted various forms of small-cell legislation. Details vary, but legislation typically – • Grants ROW access. • Limits fees. • Sets shot clock-like deadlines.

22. One-Touch Make-Ready • District court upholds Louisville Metro’s OTMR ordinance against AT&T’s challenge. • Other pending OTMR litigation: • Charter challenges Louisville Metro’s OTMR ordinance. • AT&T and Comcast are challenging Metro Nashville’s OTMR ordinance. • Frontier is challenging West Virginia’s OTMR requirement.

23. Net Neutrality • In the courts – • DC Circuit upholds 2015 Open Internet Order and denies rehearing. • Industry still deciding whether to seek cert. • Before the FCC – • The Pai FCC issues an NPRM proposing to undo the 2015 Open Internet Order and reclassify broadband as an “information service.” • Likely to act by year’s end. • On the Hill – • Talk of “compromise” net neutrality legislation; but action seems unlikely until dust settles on appeal of anticipated Pai FCC undoing of 2015 Open Internet Order.

24. Broadband Privacy • Congress “un-does” the Wheeler FCC’s broadband privacy rules. • Pai FCC believes broadband privacy should be handled by the FTC, not the FCC. • 9th Circuit is rehearing AT&T v. FTC on the scope of the “common carrier” exemption in the FTC Act. • 9th Circuit panel had ruled that exemption applies to carrier and all of its services, not just common carrier services. • That interpretation would deprive FTC of all jurisdiction over any entity that provides any common carrier service.

25. Elimination of Local Studio Requirement • FCC eliminates rule requiring broadcast station groups to maintain physical presence in community of primary local coverage • Action supported by NAB and NPR • Will boost ambitions of Sinclair Broadcast Group • Claim that smaller stations will save money to allow hiring of other personnel for news gathering • The FCC action will impact localism, including coverage of disasters • This provides an argument to support PEG as a resource to fill the void created by the rule

26. Media Ownership Reconsideration Order (Pending consideration at November 16 FCC Commission meeting) • Will do away with cross-ownership rules and joint sales agreement attribution rules and will allow case-by-case waiver of top-four network rule • Pai claims that the change will establish an incubator to encourage diversity in media ownership • Prediction that the change will be approved with a 3-2 party line vote

27. OTT Basics • What is “over the top?” Technically, the delivery of media content over the Internet without the involvement of a system operator – the operator can’t control the content, redistribution rights (etc.); operator can affect viability of OTT service via data caps, or control of connectivity. • An online video distributor (OVD) is “any entity that offers video content by means of the Internet or other Internet Protocol (IP)-based transmission path provided by a person or entity other than the OVD.” • Content and conduit are theoretically separated.

28. OTT Basics • But, cable and video system owners/operators are beginning to offer their own streaming services and cloud-based services to their customers. • System operators/owners often have deals with programmers that allow subscribers to access the programmer’s streaming services at no charge (HBO GO) from any location. • System operator/owners may offer real time or on-demand video services accessible through many devices (tablets, smartphones) to system subscribers. • Affiliates of system owners (e.g., Hulu) may offer national streaming services. • The “Layer 3” twist: What if a non-affiliated video service provider leases capacity from a facilities-based broadband provider (e.g., Verizon)?

29. Revenues for use of rights of way Under Cable Act: LFA can collect 5% of gross revenues derived from operation of cable system to provide cable service. Is streaming service provided by system owner a “cable service”? What about video service provided by a non-affiliate? Affiliate? What about video service provided by a non-affiliated fiber lessee (like Layer 3)? OTT Basics: Why We Care • Impacts • If services move to OTT, and OTT is not a “cable service,” or if OTT provider is not a “cable operator,” franchise fees may drop significantly. • If services move to OTT, it also may affect cable equipment revenues.

30. Access to local programming Under Cable Act: LFA can designate cable system capacity for PEG. Can operator be required to provide PEG as part of its streaming service? If not, how will subscribers discover/obtain access to PEG programming? Would access be subject to data caps? Additional charges? OTT Basics: Why We Care • Impacts • If streaming services not treated as part of cable system, access to PEG programming may be limited, or require additional investments. • As services (like DVR services) move to cloud, it may become impossible to record PEG; or PEG may lack functionality of other streamed services.

31. Consumer protection/competition Under Cable Act: broad authority to adopt customer services standards. If not a cable service, will OTT/streaming video be subject to consumer protections? By whom? If not a cable service, can privacy be protected? OTT Basics: Why We Care • Impacts • It may become very difficult to protect consumers at all if (as now) service packages are bundled, part of the package is not subject to protections, part is, and all service requests/customer service responses flow through the same system. • Development of OTT could promote “intra-system” content and price competition – unless likely “information service” reclassification eliminates Open Internet obligations.

32. FCC’s OTT/MVPD NPRM - OVERVIEW • THE FCC’S OTT/MVPD NPRM - OVERVIEW. • Some definitional background. • MVPD is a “person such as, but not limited to, a cable operator, a multichannel multipoint distribution service, a [DBS] service, or a [TVRO] satellite program distributor, who makes available for purchase, by subscribers or customers, multiple channels of video programming.”47 U.S.C. § 522(13). • OVS operator? Yes • OVS program packager? Yes. • Lesson: Just because a provider is an MVPD does not mean it’s a “cable operator” subject to Cable Act franchising.

33. FCC’s OTT/MVPD NPRM - OVERVIEW • “Channel” is a TV channel as defined by FCC regulation. 47 U.S.C. § 522(4). • “Video programming” is “programming provided by, or generally considered comparable to programming provided by, a television broadcast station.” 47 U.S.C. § 522(20). • “Linear” programming is prescheduled programming, i.e., not “on-demand” programming. • “Subscription linear” programming is linear programming sold on a subscription basis, i.e., not free (like YouTube) and not per-program (like VoD or PPV).

34. FCC’s OTT/MVPD NPRM - OVERVIEW • NPRM proposes to classify providers of OTT subscription linear programming as MVPDs. • Tentatively concludes on-demand (e.g., Netflix) and free OTT would not be classified as MVPDs, but seeks comment on that conclusion. • Justification: Assuming FCC Open Internet rules adopted in the OpenInternet proceeding prevent operator discrimination against OTTs, would promote new non-facilities-based multichannel video programming competition over existing cable/broadband systems. That would spur broadband demand and thus deployment. • BUT in light of the Pai FCC’s pending proposal to re-classify BIAS as an “information service,” this justification may evaporate.

35. FCC’s OTT/MVPD NPRM - OVERVIEW • Alternative on which NPRM sought comment (but FCC does not tentatively support) -- limit MVPD definition to those who control the video programming physical transmission path (likely limited to facilities-based providers that own or control the end-user physical transmission path, i.e., cable operators and DBS and MMDS providers). • Key issue: What is a “channel”? • “Linear Programming Interpretation” vs. “Transmission Path Interpretation.” • Cable industry supports the “Transmission Path” alternative.

36. FCC’s OTT/MVPD NPRM - OVERVIEW • NPRM sought comment on what MVPD rights and obligations should apply to linear programming OTTs. • Rights • Programming access rules (access to vertically integrated programming). • Right to seek relief under retrans consent rules. • Obligations • Program carriage agreement limitations (47 U.S.C. § 536). • Competitive availability of navigation devices (47 U.S.C. § 549). • Retrans consent (47 U.S.C. § 325). • EEO requirements. • Closed captioning. 36

37. FCC’s OTT/MVPD NPRM - OVERVIEW • MVPD obligations continued… • Video description. • Access to emergency information. • Loudness of commercials. • Proceeding is on hold. • Current Pai FCC dislikes all forms of local franchising regulation. • As a result, if current FCC were to re-activate the proceeding, the likely result would be for the FCC to exclude all OTT from “cable service” definition. 37

38. OTT/MVPD NPRM Franchising-Related Issues • THE FCC’s OTT/MVPD NPRM -- KEY CABLE FRANCHISING-RELATED ISSUES. • Good news: NPRM concludes that “cable service” definition includes managed linear IP video service and thus that any entity that delivers cable service via IP over ROW-crossing facilities it owns is a “cable operator” subject to the cable franchise provisions of the Cable Act. • Applies only to managed—i.e., prioritized—video programming offered by ROW-using operator. (Note: “cable service” is a “specialized service” not subject to FCC’s Open Internet rules.) • Seems to clearly answer the question: AT&T’s U-verse video is a “cable service,” and AT&T is therefore a “cable operator.” • CenturyLink challenged that conclusion in its comments. 38 38

39. OTT/MVPD NPRM Franchising-Related Issues • Not-So-Good News: NPRM tentatively concludes that OTT video programming offered by a cable operator is not a “cable service.” • Note that, under the FCC’s Open Internet rules adopted in the Open Internet proceeding, cable operators would be prohibited from favoring their own non-cable OTT video services over those of other non-facilities-based OTT providers. • For this reason, cable operators will likely (a) continue to offer traditional (albeit increasingly IP-based) managed “cable services” along with OTT and not go exclusively to OTT; and/or (b) continue to contend that their proprietary streaming services are a cable service (Comcast Stream). • But if Pai FCC re-classifies BIAS as an “information service,” cable operators will likely reverse position and argue all OTT is not a “cable service” but a deregulated “information service.” • Classifying cable operator-provided OTT as a non-cable service will likely result in a siphoning off of cable franchise fee and PEG fee revenues, as well as frustrate efforts to require operators to include PEG in their OTT offerings.

40. OTT/MVPD NPRM Franchising-Related Issues • NPRM also asked for comment on: • Whether cable operator-provided OTT within its cable footprint should be treated differently (i.e., as a “cable service”), and • Whether and, if so, how the “not a cable service” analysis should change if cable operator bundles OTT with traditional cable service. • NPRM’s tentative conclusion about operator-provided OTT seems wrong: • OTT linear video programming is a “video programming service.” • When offered by a ROW-crossing system owner, OTT should therefore be a “cable service” provided by a “cable operator.” • Cable industry argues that treating its OTT as a “cable service” would be unfair, because cable operators would have to pay franchise and PEG fees and be subject to other franchising obligations that pure, non-facilities-based OTTs are not. • But that overlooks that cable operators make money from others’ OTT in the form of broadband service revenues, which are not subject to cable franchise fees, other cable franchising obligations or taxes (ITFA). 40

41. OTTs AND FRANCHISE FEES • OTTs (LINEAR AND ON-DEMAND) AND FRANCHISE FEES. • Cable Act Franchise Fee Provision. • 47 U.S.C. § 542(h): Nothing in the Cable Act prevents an LFA from imposing a tax or fee on any person other than a cable operator that provides cable service or other communications service over a cable system, as long as the tax or fee doesn’t exceed 5%. • Could be read to reach the revenues of OTTs unaffiliated with the cable operator. • But state law (Dillon rule and/or state law limits on local taxing authority) may stand in the way, at least in many states like Virginia. • Reaching non-facilities-based OTT content providers for tax/fee purposes may end up being a DGSTA issue. 41

42. OTTs AND FRANCHISE FEES • “Solely Interactive, On-Demand Service” Exception to “Cable System” Definition (47 U.S.C. § 522(7)(C). • Added in 1996. • Industry might claim it means on-demand services are not a “cable service.” • That is wrong: If on-demand service were not a “cable service,” the “interactive, on-demand” exception to the “cable system” definition would be meaningless surplusage. • Issue raised in Video Franchising proceeding, but FCC never addressed or resolved it. 42

43. COMCAST’S STREAM AND INSTANT TV SERVICES: CABLE OR OTT? • COMCAST’S STREAM AND INSTANT TV SERVICES • Comcast’s Stream TV Service • IP-based multichannel video service package, including local broadcast, PEG, HBO and on-demand. • Can be accessed on smartphones and tablets. • Xfinity’s Instant TV Service • Xfinity re-branding of “Stream” TV service (including PEG), with more channels and options. • No traditional cable subscription required; only Xfinity broadband subscription. • Both Stream and Instant TV are exempt from Xfinity’s data caps. • Public Knowledge’s FCC Petition • Claims that Stream TV is an OTT service, yet not subject to Comcast’s Internet data caps. • Argues that Stream TV therefore violates (a) FCC’s Open Internet rules, and/or (b) the FCC’s Comcast/NBCU merger conditions. 43

44. COMCAST’S STREAM AND INSTANT TV SERVICES: CABLE OR OTT? • Comcast’s Response • Stream TV is a “cable service,” not an OTT service (ditto Instant TV, according to Instant TV FAQs). • It does not traverse the public Internet (ditto Instant TV, according to Instant TV FAQs). • Cable service definition is transmission protocol agnostic. • Cable Modem Redux? • In January 2017, Pai FCC dropped its predecessor FCC’s inquiry into Comcast’s Stream TV service. • If FCC reclassifies BIAS as information service, Comcast will flip its position and say Stream/Instant TV is not a “cable service,” but an unregulatable “information service.” 44

45. WHAT IS LAYER 3’s MULTICHANNEL VIDEO SERVICE? • Layer 3’s Multichannel Video Service • Offered over Verizon FiOS System. • Allegedly a lease arrangement, with Layer 3 leasing capacity from Verizon on FiOS system. • Is it a “cable service”? • Is Layer 3, as lessee, a “cable operator”? • Is Layer 3’s service a “communications service” subject to VA’s CST (Va. Code § 58.1-646, et seq.)? 45

46. In the Courts

47. ACM Participation in FCC Proceedings – I-Nets/In-Kind • Montgomery Co v. FCC (6th Cir. 2017) • 6th Circuit Remands Several Issues to FCC on 621 Orders Released in 2007 and 2015 • Court vacates, as inadequately justified, FCC’s rulings that: • Costs of cable-related in-kind franchise requirements are a “franchise fee.” • LFAs cannot regulate provision of non-cable services over a cable system (“mixed use” rule). • Court upholds FCC’s ruling on franchise MFN clauses.

48. Video Franchising • Montgomery County v. FCC (6th Circuit) • Rejected notion that all in-kind consideration was part of the franchise fee • Includes I-Nets and PEG Channel Capacity • On remand, the FCC should determine and explain anew whether, and to what extent, cable related exactions are “franchise fees” under the Communications Act. And the FCC should do so expeditiously, rather than take another seven years to issue a proper order under the law. • 621 Orders should be on the FCC’s Docket Sometime Soon or not at all.

49. ACM Participation in FCC Proceedings – Closed Captioning • ACM Petition for Waiver of Registration and Certification Requirement of Closed Captioning (MB DN 05-261) • FCC Second Report and Order on CC Issued During Obama Administration (CG DN 05-231) (effective 9-22-2016) • New Reporting and Certification Rules Affecting All PEG Programmers • ACM Petitioned FCC • For Waiver for PEG Producers of new Reporting and Certification Rules • Burden on PEG Channels and Producers • All Exempt from FCC CC Rules (although not ADA – covered later) • Electronic Reporting and Certification Not Completed by either Obama or Trump Administrations yet. Matter still pending.

50. ACM Participation in FCC Proceedings – EPG • In the Matter of Expanding Consumers’ Video Navigation Choices (MB DN 16-42) • FCC NPRM to Open Market to Set Top Boxes • ACM Submitted Letter Comments in January and May 2016. • Urged that all MVPDs include programming Descriptions of all programming – including PEG. • For Programming Discovery • DVR capabilities • FCC Has Not Taken Final Action