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File how2ftp (.txt & .wp) is in directory /pub/Bureaus/Miscellaneous/Public_Notices/ ***************************************************************** ******** FOR FCC RECORD ONLY $//MO&O, NH House of Representatives, Town of Chapel Hill, NC, DA 96-260//$ $/76.921 Buy Through of other Tiers Prohibited/$ $/Converter Boxes/$ Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 DA 96-260 In Re ) ) Committee on Science, Technology and ) Energy of the New Hampshire House ) Public Notice No. 43173 of Representatives ) ) and ) ) Town of Chapel Hill, North Carolina ) CSR-4291-Z ) Petitions for Declaratory Ruling ) Regarding Preemption of State and Local ) Laws Restricting Scrambling of Cable ) Programming Services Tiers ) MEMORANDUM OPINION AND ORDER Adopted: February 27, 1996 Released: February 29, 1996 By the Chief, Cable Services Bureau INTRODUCTION 1. The above captioned petitions, filed by the Committee on Science, Technology and Energy of the New Hampshire House of Representatives ("New Hampshire Committee") and the Town of Chapel Hill, North Carolina ("Chapel Hill"), seek declaratory rulings relating to federal preemption of state or local laws regulating the use of converter boxes and restricting the scrambling of programming on "cable programming service" or nonbasic service tiers. 2. The New Hampshire Committee filing states that in order to comply with the tier buy-through prohibition of the 1992 Cable Act, several New Hampshire cable companies are using scrambling technology and requiring subscribers to use set-top converter boxes. According to the New Hampshire Committee, subscribers have voiced concerns that the introduction of scrambling, encryption and digital technologies by cable operators will result in additional converter box requirements. In response, the Committee has proposed legislation (HB 1342) that would: (a) unless federal law requires otherwise, prohibit cable companies doing business in New Hampshire from requiring consumers to obtain converter boxes to receive cable television service (except for pay per view or premium services) unless the local franchise authority has provided such a requirement; and (b) authorize local franchise authorities to impose conditions and restrictions on the use of scrambling, encryption or digital technology and the use of converter boxes or other forms of electronic interface, to the extent consistent with FCC rules and regulations. The Committee asks whether this pending legislation is preempted by the 1992 Cable Act or the Commission's Rules, particularly the tier buy-through prohibition 47 C.F.R. Section 76.921(a). 3. A number of parties filed comments, replies or letters responding to the petition, all but one arguing that the proposed New Hampshire legislation would be preempted under federal law. These parties generally contend that the state action proposed conflicts with federal requirements and policies and that preemption is warranted under any of the three grounds for federal preemption of state law: (1) preemption is expressly stated in a federal statute or regulations promulgated pursuant to the federal statute; (2) preemption is implied through a scheme of federal regulation so pervasive as to leave no room for supplemental state or local regulation; or (3) preemption is required where state law stands as an obstacle of federal policies or objectives. The City of Akron urged the Commission to find the proposed legislation not to be preempted and provide local governments broad power over this issue. 4. The Chapel Hill petition states that, in its capacity as the local cable television franchising authority, it granted a cable television franchise to Time Warner in 1979 which has now expired. At present, Time Warner's Chapel Hill system is designed and operated so that converter boxes are required for all channels above the 12-channel basic tier. The two regulated tiers above basic contain a total of 17 scrambled channels. According to Chapel Hill, many cable subscribers object to the use of converter boxes, due to their cost and problems of incompatibility with televisions and video cassette recorders. Chapel Hill has been unable to reach a new franchise agreement with Time Warner, due to Time Warner's refusal to agree to provide a substantial number of channels (35) in unscrambled format. Time Warner has argued that Chapel Hill is preempted by federal law from having such a franchise requirement. 5. Chapel Hill asks whether it is preempted under federal law from conditioning the renewal of Time's Warner's cable franchise on the requirement that it eliminate the need for subscribers to rent a converter box in order to receive the basic and standard tier channels (35 channels total). In support of its petition, Chapel Hill argues that reducing or restricting the use of converters for regulated channels would not be a "technical standard" because Chapel Hill does not seek to specify signal clarity (signal to noise ratio) or other electronic performance qualities of converter boxes. Rather, it argues that it is merely seeking to address community need and fairness to consumers. Chapel Hill notes that although the headend and system that serves its franchise area will also serve other communities, Time Warner has made clear that the Chapel Hill system and its programs and services are separate and distinct from those made available to other communities. Finally, Chapel Hill states that the Commission has discretion under Section 624(c) of the 1992 Cable Act (regarding consumer electronics equipment compatibility) to issue regulations in a manner that allows state or local governments to establish franchise restrictions or requirements regarding community need in the franchise renewal process under Section 626 of the Act. If the Commission determines that Chapel Hill's request is preempted under federal law, then Chapel Hill requests a waiver, pursuant to Section 624(e) of the Communications Act, to impose more stringent technical standards than the Commission. 6. Time Warner has responded to this petition arguing that Chapel Hill is preempted by federal law from having such a franchise requirement. DISCUSSION 7. Subsequent to the filings in these two petitions, the Telecommunications Act of 1996 was enacted and its provisions appear to resolve the questions raised. Section 624 of the Communications Act of 1934, states that the Commission shall establish technical standards relating to a cable system's technical operation and signal quality. It further provides that: Any franchising authority may not regulate the services, facilities, and equipment provided by a cable operator except to the extent consistent with this title. Prior to enactment of the Telecommunication Act of 1996, Section 624 also included the following: A franchising authority may require as part of a franchise (including a modification, renewal, or transfer thereof) provisions for the enforcement of the standards prescribed under this subsection. A franchising authority may apply to the Commission for a waiver to impose standards that are more stringent than the standards prescribed by the Commission under this subsection. 8. Section 301(e) of the Telecommunications Act of 1996 strikes the above two sentences and adds the following: No State or franchising authority may prohibit, condition, or restrict a cable system's use of any type of subscriber equipment or any transmission technology. 9. Regardless of any ambiguity that may have previously existed regarding the question raised by the New Hampshire Committee and Chapel Hill, Congress has now addressed the matter. While the full reach of this provision has not yet been determined, the provision, at a minimum, precludes a state or franchising authority from prohibiting the use of cable boxes completely. The Supreme Court in City of New York v. FCC, has specifically held that federal technical standards policies have preemptive force in the cable television field. Thus, it now appears that the actions proposed by the New Hampshire Committee and Chapel Hill would directly conflict with the accomplishment of federal policies and would be preempted. With respect to the requested waiver, Chapel Hill has argued only that subscribers object to convertor boxes. In the absence of any specific evidence of unique local circumstances that would justify a departure from our technical standards and in light of the above change in the statute, the requested waiver must also be denied. ORDER 10. Accordingly, IT IS ORDERED, that the petitions (Public Notice 43173 and CSR-4291-Z) filed by the Committee on Science, Technology and Energy of the Hampshire House of Representative and the Town of Chapel Hill, North Carolina are DENIED. 11. This action is taken pursuant to authority delegated by Section 0.321 of the Commission's Rules. FEDERAL COMMUNICATIONS COMMISSION Meredith J. Jones Chief, Cable Services Bureau