Los AngelesOctober 10, 2007

Michael MorrisVideo Franchising & Broadband Deployment

Communications DivisionCalifornia Public Utilities Commission

DIGITAL INFRASTRUCTURE & VIDEO COMPETITION ACT

ROLE OF THE

CALIFORNIA PUBLIC UTILITIES COMMISSION

DIVCA’s GOALS

Create a fair and level playing field for all market competitors that does not disadvantage or advantage one service provider or technology over another.

Promote the widespread access to the most technologically advanced cable and video services to all California communities in a nondiscriminatory manner regardless of socioeconomic status.

Protect local government revenues and their control of public rights-of-way.

Require market participants to comply with all applicable consumer protection laws.

Complement efforts to increase investment in broadband infrastructure and close the digital divide.

STATE FRANCHISING AUTHORITY COMMISSION’S RESPONSIBILITIES

Issue and renew 10-year state franchises

Enforce build out and nondiscrimination requirements Holders submit data regarding households offered

service (video and broadband), subscribers and demographic data annually

Annual reports to legislature and governor

Protect against cross-subsidization

STATE FRANCHISING AUTHORITYFRANCHISING PROCESS

Video providers are not utilities No protests or interveners

$2000 application fee

Confirm Technical, Managerial, Financial Qualifications Bond requirement ($100,000 to $500,000) $100,000/20,000 households

Affidavit re lawful operation

Definition of franchise territory

Demographic information re households/low income by census block group

List of affected local entities

STATE FRANCHISING AUTHORITYFRANCHISING PROCESS

Ministerial process

Within 30 days – determine if application is complete

If incomplete – notify applicant Restart 30-day clock

If complete – issue franchise within 14 days or it is deemed issued

Notify affected local entities

STATE FRANCHISING AUTHORITYFRANCHISING PROCESS

Proposed rules were released in January – final vote on March 1st Modification and Resolution changing forms Phase II underway (small LECs; additional data requirements) Phase III to examine certain procedural questions

Established a Video Franchising Team and began accepting applications for state franchises on March 2nd

The Commission has approved franchises for Verizon, AT&T and Cox and Wave Verizon application received March 2nd; franchise granted March 8th

AT&T application received March 7th; franchise granted March 30th

Cox application received April 11th; franchise granted April 27th

Wave application received August 9th; franchise granted Sept. 7th

STATE FRANCHISING AUTHORITY

BUILD OUT REQUIREMENTS Holders may not discriminate against or deny access to service to any

group of potential residential subscribers because of the income of the residents in the local area in which the group resides

Holders or their affiliates with fewer than 1,000,000 telephone customers satisfy this section if they offer video service to all customers within their telephone service area within a reasonable time, as determined by the Commission Phase II proposes “safe harbor” equal to large LEC test

Holders or their affiliates with more than 1,000,000 telephone customers shall provide access to its video service 25-35 percent of the customer households in the holder’s telephone service area within two years after it begins providing video service, and to a number at least equal to 40-50 percent of those households within five years (see fine print)

STATE FRANCHISING AUTHORITY NONDISCRIMINATION REQUIREMENTS

State franchisee may not discriminate against or deny access to service to any group of potential residential subscribers because of the income of the residents

A holder with more than 1,000,000 telephone customers satisfies this requirement if all of the following conditions are met:

Within three years after it begins providing video service, at least 25 percent of households with access to the holder’s video service are low-income households, and within five years, 30% are low-income

It provides service to community centers in underserved areas, as determined by the holder, without charge, at a ratio of one community center for every 10,000 video customers.

STATE FRANCHISING AUTHORITY COMPLAINTS

Local governments may bring complaints alleging violations of the build out or nondiscrimination requirements

or the Commission may open an investigation on its own motion public hearings are required

The Commission may suspend or revoke the franchise

The Commission may impose a fine not to exceed 1 percent of the holder’s total monthly gross revenue received from provision of video service in the state each month from the date of the decision until the date that compliance is achieved

DIVCALOCAL ENTITY RESPONSIBILITIES

Franchise fees Customer service standards

½ of fines to Digital Divide Account CEQA review Encroachment permits Emergency alert PEG channels/support