******************************************************** NOTICE ******************************************************** This document was converted from WordPerfect to ASCII Text format. Content from the original version of the document such as headers, footers, footnotes, endnotes, graphics, and page numbers will not show up in this text version. All text attributes such as bold, italic, underlining, etc. from the original document will not show up in this text version. Features of the original document layout such as columns, tables, line and letter spacing, pagination, and margins will not be preserved in the text version. If you need the complete document, download the WordPerfect version or Adobe Acrobat version, if available. ***************************************************************** Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 In the Matter of: ) ) ) TCI CABLEVISION OF OAKLAND ) COUNTY, INC. ) CSR-4790 ) Petition for Declaratory Ruling, ) Preemption and Other Relief ) Pursuant to 47 U.S.C.  541, 544(e), ) and 253 ) MEMORANDUM OPINION AND ORDER Adopted: September 18, 1997 Released: September 19, 1997 By the Commission: Table Of Contents Page No. I. INTRODUCTION. . . . . . . . . . . . . . . . . . . . . . . .2 II. EXECUTIVE SUMMARY. . . . . . . . . . . . . . . . . . .2 III. BACKGROUND . . . . . . . . . . . . . . . . . . . . . .5 IV. TITLE VI ISSUES . . . . . . . . . . . . . . . . . . . . . 17 A. Overview . . . . . . . . . . . . . . . . . . . . . . 17 B. Section 621 . . . . . . . . . . . . . . . . . . 18 1. Positions of the Parties. . . . . . . . . . 18 2. Discussion. . . . . . . . . . . . . . . . . 27 a. Section 621(b)(3)(A) . . . . . . . . . 29 b. Section 621(b)(3)(B) . . . . . . . . . 30 c. Section 621(b)(3)(D) . . . . . . . . . 34 C. Section 624(e) . . . . . . . . . . . . . . . . . . . 35 1. Positions of the Parties. . . . . . . . . . 35 2. Discussion. . . . . . . . . . . . . . . . . 36 V. TITLE II ISSUES . . . . . . . . . . . . . . . . . . . . . 38 A. Overview of Title II Legal Allegations . . . . . . . 38 B. Ripeness, Standing, and Advisory Opinions. . . . . . 41 1. Positions of the Parties. . . . . . . . . . 41 2. Discussion. . . . . . . . . . . . . . . . . 43 VI. MOTIONS TO DISMISS OR DENY . . . . . . . . . . . . . 49 VII. ORDERING CLAUSES . . . . . . . . . . . . . . . . . . 49 APPENDIX A: LIST OF COMMENTERS. . . . . . . . . . . . . . . .A-1 APPENDIX B: TEXT OF TROY TELECOMMUNICATIONS ORDINANCE . . . .B-1 APPENDIX C: COMMENT SUMMARIES . . . . . . . . . . . . . . . .C-1 I. INTRODUCTION 1. On July 10, 1996, TCI Cablevision of Oakland County, Inc. ("TCI") filed a petition ("Petition") seeking preemption, a declaratory ruling and other relief against the City of Troy, Michigan ("City"), pursuant to sections 621, 624(e), and 253 of the Communications Act of 1934, as amended ("Communications Act"). We placed the petition on public notice and established a pleading cycle on July 26, 1996. In addition, the Commission held a public forum on December 16, 1996 where the parties to this proceeding, as well as a number of other persons, submitted oral and written presentations concerning many of the issues presented in this case. II. EXECUTIVE SUMMARY 2. In this matter, we are asked to examine certain aspects of the City's regulation of both cable and telecommunications services. By virtue of a cable franchise it holds from the City, TCI maintains cable facilities under and along public rights-of-way throughout the City and offers cable service to its residents. From time to time, the maintenance and upgrade of these cable facilities requires TCI to engage in construction activities within the public rights-of-way. City regulations establish a permitting process by which TCI obtains specific authority to disrupt the rights-of-way each time such activity is planned. This matter arises out of the City's treatment of two construction permit applications submitted by TCI. 3. By its first permit application (the "Royal Oak" permit application), filed in October, 1995, TCI sought to install fiber optic facilities in an area of the City in which it did not currently provide cable service. While the stated purpose of the installation was to interconnect three cable headends, the proposed route was not the most direct route between the headends. The City apparently suspected that TCI intended to use the fiber optic facilities to offer telecommunications services in the City. While TCI is franchised to offer cable service, it does not hold a franchise or other authorization for the provision of telecommunications services. Although TCI maintained that it did not intend to provide telecommunications services in Troy, TCI agreed in writing that any construction permits issued by the City would be for the provision of cable service only, and would not authorize the provision of telecommunications services until TCI had obtained all lawful requisite authorizations pursuant to federal, state and local requirements. The City instructed its City Engineer that all permits that appeared to be usable for services other than cable should be endorsed with "not for telecommunications purposes" language, consistent with the terms of its agreement with TCI. 4. Thereafter, in December, 1995, the City enacted an ordinance ("Telecommunications Ordinance") consisting of a broad array of regulations governing the provision of telecommunications service. TCI submitted the second construction permit application (the "Livernois Road" permit application) to install aerial cable along two other rights of way in February, 1996, for the purpose of upgrading an institutional network (I-NET) and improving cable service to a local school. The City eventually granted the Livernois Road application, subject to the condition that the facilities installed pursuant to the permit not be used for other telecommunications purposes. The City then asked TCI to amend the Royal Oak permit application to correct what the City claimed were some technical problems in the application, including the indirect route between headends, and the need for TCI, as a potential telecommunications provider, to obtain a telecommunications franchise pursuant to the City's Telecommunications Ordinance. TCI re-submitted that application in May, 1996, with information that TCI claims meets the City's stated concerns about the installation route, but without agreeing to the inclusion of the endorsement language sought by the City. The City has yet to act upon TCI's Royal Oak permit application, contending that not all of its concerns have been addressed. The City has offered to grant the permit application if TCI agrees to route the upgraded facilities along the most direct route between the headends that TCI seeks to interconnect, and agrees to the inclusion of the "not for telecommunications purposes" endorsement. 5. TCI's Petition raises a series of related claims regarding the permissible scope of local franchising authority over cable operators and their provision of telecommunications services under both Titles VI and II of the Communications Act. First, the Petition alleges that by conditioning or refusing to grant the two construction permits, the City has interfered with TCI's operation of its cable system in a manner that violates several sections of Title VI. The cited sections place limits on the power of a local franchising authority to impose telecommunications-related requirements on a cable operator under Title VI, or to dictate the type of transmission technology used by the cable operator to deliver its cable signal. Second, the Petition alleges that the Telecommunications Ordinance violates section 253 of the Communications Act. Section 253(a) restricts the authority of state and local governments to impose regulations that prohibit, or that have the effect of prohibiting, the ability of any entity to provide any interstate or intrastate telecommunications service. TCI also alleges that the City lacks authority under state law to enact or enforce the Telecommunications Ordinance. The City contends that its actions comply fully with federal and state law. Further, the City maintains that the Commission lacks jurisdiction to determine the validity of its Telecommunications Ordinance under section 253. 6. The Title VI provisions relied upon by TCI, sections 621(b)(3)(A), (b)(3)(B), (b)(3)(D) and 624(e), generally limit the power of a local franchising authority, under Title VI, to condition the provision of telecommunications services by a cable operator; to impose telecommunications-related requirements on cable operators, or to dictate the type of transmission technology used by the cable operator to deliver its cable signal. In this decision, we find that the City has violated section 621(b)(3)(B) by placing a telecommunications condition on its grant of cable permits. By inclusion of these provisions in Title VI, Congress clearly intended to separate the functions of cable franchising from the regulation of telecommunications services. The City's insistence on inclusion of its telecommunications condition in a cable permit impermissibly mixes these separate spheres. In contrast, we do not agree with TCI's claim that the City's actions violate section 621(b)(3)(A) of the Communications Act. That provision applies by its terms only "[i]f a cable operator or affiliate thereof is engaged in the provision of telecommunications services." By its own admission, TCI is not so engaged in the City of Troy. We further find that the City has not violated section 624(e), as claimed by TCI. That section eliminates the authority of franchising authorities to interfere with a cable operator's choice of the subscriber equipment and transmission technology to be used in its cable system. We find that the City has not sought to restrict the discretion granted to TCI in this regard by its actions with respect to TCI's cable permit applications. 7. Congress enacted section 253 to ensure that no state or local authority could erect legal barriers to entry to telecommunications markets that would frustrate the 1996 Act's explicit goal of opening local markets to competition. Section 253(d) directs this Commission to preempt the enforcement of such legal barriers, upon a proper finding. Our treatment of the claims arising under Title VI resolves the controversy between TCI and the City. While TCI advances the additional claim that we should preempt the Telecommunications Ordinance as a barrier to entry under section 253, TCI states that it has no present intention of offering telecommunications services in the City. Any resolution of the claims made by TCI under section 253 would have no impact on TCI's interests given its current intent not to offer telecommunications services. Under the circumstances, there is no concrete dispute between TCI and the City for the Commission to resolve under section 253. We decline to issue a declaratory or advisory ruling as to whether the Troy Telecommunications Ordinance should be preempted, in whole or in part, under section 253(d). 8. Nonetheless, we are troubled by several aspects of the Troy Telecommunications Ordinance in the context of the effort to open local telecommunications markets to competition. While Congress mandated a role for the Commission and the states in the regulation of telecommunications carriers and services, we are concerned that Troy and other local governments may be creating an unnecessary "third tier" of telecommunications regulation that extends far beyond the statutorily protected municipal interests in managing the public rights-of-way and protecting public safety and welfare. We take this opportunity to address several issues related to section 253 that have come to our attention in the course of this proceeding. In particular, we articulate our concern regarding how redundant and potentially inconsistent levels of regulation of telecommunications services and service providers may deter or discourage competition. III. BACKGROUND 9. Local Cable and Utility Placement Ordinances. In accordance with Chapter 63 of the Troy City Code ("Cable Ordinance"), a party seeking to provide cable television service in the City must obtain a license before constructing, maintaining or operating a cable system in the City, and must obtain a franchise before transacting business by way of a cable system in the City. While a license or a franchise under Chapter 63 constitutes a general grant of authority to operate a cable television system in the City, the physical construction and installation of cable and other utility facilities in the public right-of-way is governed by Chapter 33 ("Public Right-of-Way"). Chapter 33 establishes a permitting process by which a franchisee, licensee, or other party may seek authority to conduct construction, repair or maintenance operations in the public rights-of-way. No person, public utility company, franchisee or licensee may conduct any construction, repair or maintenance operations in the rights-of-way without first obtaining a written permit or annual permit from the City Engineer. Chapter 33 also prescribes various engineering, fee and other requirements that permittees must follow when doing work in a right-of-way. 10. TCI offers cable television service in Troy, Michigan pursuant to a franchise issued in 1982 by the City. TCI acquired the cable system in 1993 from the original grantee of the franchise. In addition to providing cable television service, TCI is authorized and required by the franchise to provide the City and its residents interactive data and telecommunications services by means of an institutional network ("I- NET"). TCI claims that, despite the explicit terms of TCI's franchise, since approximately 1994, the City has engaged in a pattern of conduct designed to preclude TCI from upgrading its cable system or from ever offering telecommunications services in the City. 11. Since at least early 1994, TCI and the City have engaged in a steady dialogue regarding a series of construction permit applications submitted by TCI for the stated purpose of upgrading its cable system with fiber optic cables. TCI states that such upgrades are routinely undertaken by cable operators in order to expand channel capacity, to improve signal quality to digital standards, and to increase the reliability of cable systems. In 1994, the City surmised that TCI was interested in expanding its offerings beyond cable service by branching into the telecommunications field. TCI indicates that in July, 1994, the City had informed TCI that its permit applications would not be granted unless TCI provided signed assurances that its system would not be used to provide telephone service. TCI denies that it had intended at that time to offer telecommunications services in Troy, and in its pleadings states that it still "has no present intention to provide such services in the City . . . ." As of 1994, the City had not adopted any regulations governing telecommunications, but nevertheless wanted to "insure that TCI would not enter into telecommunications service in Troy without first obtaining the requisite authority to do so . . . ." According to the City, under state law that authority includes a license from the Michigan Public Service Commission and a telecommunications franchise from the City. TCI disputes the City's authority under state law to require a telecommunications franchise. 12. January 1995 Letter Agreement. Although TCI believed that the City lacked jurisdiction to impose such regulatory conditions, it entered into negotiations with the City, regarding the conditions under which TCI could provide telecommunications services over its cable network in the City. Ultimately, TCI and the City entered into a letter agreement dated January 23, 1995 ("January 1995 Letter Agreement"). That agreement provides that all permits for the upgrade of TCI's cable system will include the following endorsement: The authorized officer of TCI agrees in writing that the permits (i) are granted solely for the purpose of enhancement and up-grade of the cable system and not to be used for, or enable any other person or entity to provide, any kind of telephone service and (ii) if and when TCI shall have obtained all lawful requisite authorizations and consents pursuant to federal, state and local requirements, such system may be used for the provision of other lawful telecommunications services, including telephone service. 13. The January 1995 Letter Agreement further provides that, with respect to the construction permits which result from the agreement, both Troy and TCI agree to the following: a. Neither Troy nor TCI intends or understands that the construction permits will alter either party's rights under the existing franchise agreement. b. Neither Troy nor TCI intends or understands that the construction permits will alter either party's rights under applicable law. The City Attorney, Peter Letzmann, explained that the purpose of this letter agreement was to allow TCI to make its improvements to the cable system and to acknowledge that TCI would obtain all requisite consents prior to entering into the telecommunications business. Further, Mr. Letzmann declared: "I advised the City Engineer that all permits that appeared to be usable for services other than cable should be endorsed with 'not for telecommunications purposes' language consistent with the terms of the Agreement with TCI." 14. TCI explains that it accepted the condition because it needed to upgrade its cable facilities, to keep pace with cable technology and to be able to offer its subscribers state-of-the-art cable services in an increasingly competitive video marketplace. TCI notes that fiber upgrades also offer a platform which can support the later offering of telecommunications services. TCI explains that it "understood that the [January 1995 Letter] agreement would allow TCI to enter the telecommunications market in Troy once it 'obtained all lawful requisite authorizations and consent pursuant to federal, state and local requirements,' as stated in the condition." TCI further claims that under federal and state law, TCI is not required to obtain any form of certification or authorization before providing private line telecommunications services. "Moreover, since Troy's "Telecommunications Ordinance" is unlawful, TCI may presently provide certain telecommunications services using its system." TCI maintains that, contrary its understanding regarding the January 1995 Letter Agreement, the City subsequently asserted in a letter that the condition was intended to preclude TCI from providing telecommunications services in Troy. 15. The Troy Telecommunications Ordinance. The City Council adopted its Telecommunications Ordinance, codified at Chapter 62 of the City Code, in December, 1995. Like the provisions of Chapter 63 governing cable service, Chapter 62 requires a party to obtain a license before constructing, maintaining or operating a telecommunications system in the City, and to obtain a franchise before transacting business by way of a telecommunications system in the City. Chapter 62 also contains a number of more substantive regulations governing the provision of telecommunications service and the payment of franchise fees. 16. The telecommunications service requirements include Section 12(4), which requires that interconnection between telecommunications providers, where feasible, for the purpose of promoting universal service. This section also prohibits a telecommunications provider from charging punitive or discriminatory fees for interconnection. Section 12(1) states that if a franchisee provides a "new service, facility, equipment, fee or grant to any other community . . . within the State of Michigan, the same shall be provided in or to the City." This requirement is subject to waiver if compliance is "undesirable, impractical, infeasible or uneconomical . . . ." Section 27(2) requires that telecommunication services to the City be provided at the lowest rate given to any other subscriber. Section 8 provides that the City shall regulate rates for telecommunications services "to the full extent authorized by federal or state law." Section 15(3) requires the provider to maintain an "accurate and comprehensive file" of all subscriber and user complaints, and to establish a procedure "to quickly and reasonably remedy complaints to the satisfaction of the City." 17. Franchise fee provisions include Section 3(6), which defines gross revenues to include "all receipts collected . . . for all telecommunications and related operations and services within the corporate limits of the City as well as any other revenue arising from operation or possession of [the] Franchise regardless of where billed." This definition is relevant for purposes of Section 9(2), under which a provider may be required to pay an annual franchise fee of up to 5% of gross revenues. Alternatively, the franchise fee may be based on a linear foot charge of $0.40 per foot for underground facilities and $0.25 for aerial facilities. Section 27(1) requires the provider to pay a franchise fee based on the formula used in any of certain other Michigan communities, if that formula produces a higher fee than would be due under Section 9(2) of the City's Telecommunications Ordinance. 18. Chapter 62 also includes a severability clause, Section 23, and an "Equal Application" clause, Section 25, which states that the provisions of the ordinance "shall be imposed upon and enforced against all Telecommunications System in the City requiring a License or Franchise under state law from the City." Pursuant to Section 10, "New Developments," Grantees agree to "have no recourse whatsoever against the City for any loss, cost, expense or damage arising out of the failure of the City to have the authority to grant all or any part of a License or Franchise. A Grantee expressly acknowledges that on accepting a License or Franchise it did so relying on its own investigation and understanding of the power and authority of the City." 19. Construction Permits in Dispute. TCI had originally applied on October 27, 1995 for a permit (the "Royal Oak" application) to install conduit along several public rights-of-way for the purpose of interconnecting three separate cable headends and upgrading its cable facilities. The City rejected this application because it "did not meet the most rudimentary engineering standards." On or about January 14, 1996, TCI re-filed the application. In a letter to TCI dated February 14, 1996, the City's Civil Engineer raised three concerns with respect to the Royal Oak Application. First, the City's letter stated that the route proposed by TCI to interconnect its headends "deviates from the most direct route." The letter asked TCI to explain why it had selected an indirect route. Second, the letter indicated that one portion of the route proposed by TCI interfered with an easement that TCI had no right to occupy, thus requiring TCI to re-route that portion of its installation or to obtain permission to occupy the easement. Third, the City's letter referred to a City Council meeting that had been held on December 18, 1995. According to the letter: "At this meeting a resolution was approved which requires any prospective telecommunications companies to apply for and obtain a franchise. This you must do." The letter then stated: "Until the above items have been completed a permit for your cable/conduit installation cannot be issued." 20. TCI re-submitted the Royal Oak Application again in early May, 1996 and that application remains pending. TCI claims that the re-submitted application responds "only to the City's assertion . . . that the original application did not propose the most direct route for the facilities." With respect to the City's other concern, TCI states that it "has not, and will not[,] obtain a telecommunications franchise as the City insists . . . ." The City responds in its comments that the re-submitted Royal Oak Application "did not resolve the [C]ity's concerns." Subsequent correspondence demonstrates that the City has continued to question the route proposed by TCI, because it includes areas not served by TCI and is not the most direct route between the headends TCI seeks to interconnect, and continues to insist upon inclusion of its "not for telecommunications purposes" condition in the permit. In May, 1997, the City again reiterated that it will grant the Royal Oak Application if TCI submits a new plan showing a route running directly between the headends to be interconnected, and accepts the "not for telecommunications purposes" condition. TCI has responded that it will agree to the direct route suggested by the City, but continues to object to the inclusion of the "not for telecommunications purposes" condition. TCI also stated that it, "nonetheless wishes to provide video services to the area that would be passed under the route plan originally submitted with the Royal Oak permit request," and that it will be submitting a request for a new permit to bring hybrid fiber- coaxial plant to that area. 21. In addition to the Royal Oak Application, TCI submitted another permit application to the City ("Livernois Road Application") on February 23, 1996 by which TCI sought authority to install aerial cable along two other rights-of-way. The application described the work to be performed as follows: "Place new aerial cable (coax & fiber) on existing poles for telecommunications." In a letter dated February 29, 1996, the City responded: "The City of Troy cannot process the above permit application until TCI Cablevision of Oakland County obtains a telecommunications franchise from the City of Troy." TCI thereafter advised the City that the purpose of the Livernois Road Application was to upgrade an institutional network and improve the cable service being provided to a local school. Both the institutional network and the cable service were authorized under the terms of TCI's cable franchise. After being advised of the purpose of the Livernois Road Application, the City approved it by letter dated May 13, 1996. The letter stated that the City had issued the permit subject to the following endorsement: This permit is granted for the installation or upgrading of cable service as described in Troy City Code Chapter 63 only. This permit specifically prohibits and excludes installation, upgrading or operations for all other telecommunication service. 22. Subsequent correspondence indicates that on October 9, 1996, TCI informed the I-NET authorities that TCI had accepted the right-of-way permit for its Livernois Road construction to meet its I- NET extension obligations, but reserved its objection that the conditions in the permit violate sections 253, 621 and 624 of the Communications Act. TCI stated that it had petitioned the Commission under those statutory provisions to preempt enforcement of those conditions, and would commence construction of the I-NET facilities, "but without agreeing to the conditions placed on the Livernois Road permit by the City. TCI's construction of these facilities is subject to the express reservation of TCI's rights under state and federal law, and before the FCC." In October, 1996, the City responded to TCI's assertions by stating that the Livernois Road permit was issued pursuant to TCI's cable television franchise for the City of Troy, the agreement between the City and TCI to upgrade the cable system in Troy, "and the endorsement on the above mentioned (building) permit." The City also stated: [E]ven though the City disagrees, it does recognize TCI's opinion regarding the preemption. And though TCI may disagree with the conditions endorsed on that (building) permit, TCI has agreed and the City expects TCI to honor those conditions. If those conditions are set aside by some competent authority or TCI obtains a franchise to expand its services beyond the current franchise, the matter can again be reviewed. The City does not interpret your actions to comply with the franchise agreement as a waiver of any right or objection that TCI may have. 23. In the comments the City filed before this Commission on September 4, 1996, responding to the TCI Petition, the City stated that the terms of the Livernois Road permit endorsement "were narrower than intended . . . ." According to the City, "the actual language of the condition should have conformed to the terms of the January 1995 Agreement between Troy and TCI." The City averred in its comments that it: will not enforce the condition beyond the provisions of the January 1995 Agreement with TCI, i.e., TCI may not use the facilities authorized in the permit for telecommunications services until it has obtained the requisite consents to provide such service. The City avers that it does not expect a breach of the 1995 Letter Agreement or permit endorsements to occur, but if such a circumstance arises with respect to TCI, "the City would pursue remedies ordinarily available." In addition, the City states: [h]owever, it is not the City's expectation that the City would consider such an event to constitute a breach of the TCI cable franchise. Moreover, it would not require TCI to terminate any operation of its cable television service using the facilities in question. 24. The City has granted at least 30 construction permits to TCI since 1993, including permits for the installation of fiber optic cable. However, the City did not seek to impose the "no telecommunications services until requisite consents granted" provision on any of the six coaxial cable construction permits granted TCI during 1995. The first time Troy sought to impose the condition was in connection with the Royal Oak and Livernois Road permits for hybrid fiber-coaxial construction in October 1995 and February 1996, respectively. TCI did not apply for any cable construction permits during 1996. TCI records indicate that only one coaxial cable construction permit with any condition purporting to limit future use of the facility to provide telecommunications services was granted in January 1997. TCI claims that this permit has since been used for the construction of hybrid fiber-coaxial plant, and that it did not object to the inclusion of the condition on the January 1997 permit, in light of the City' awareness of its objections to such conditions. 25. For the most part, TCI's Petition characterizes the City's actions with respect to both the Royal Oak and Livernois Road construction permits as "denials" of these applications. For example, the Petition states: "The City has denied permits to install fiber or conditioned them on a surrender of the right to deliver telecommunications services." Similarly, the Petition states, "[t]he City has denied the permits solely because of its fear that fiber optic facilities could be used in the future to deliver telecommunications services over which the City seeks regulatory control." Other portions of the text characterize the City's action with respect to the Livernois Road application as either one in which the City is "purporting to approve the Livernois Road Application," while insisting on the inclusion of the "not for telecommunications purposes" endorsement, or one in which the Livernois Road Applications "was also denied in part because of the use of fiber." 26. The City specifically objected, in its comments, to TCI's characterization of its permitting actions as "denials." The City explained that, notwithstanding TCI's arguments to the contrary, Troy has never denied TCI any building permits for its cable system nor has Troy conditioned the permits granted to TCI in a manner that prohibits TCI from providing telecommunications services. Rather, according to the City, the condition Troy has placed on TCI building permits, which is consistent with the January 1995 Letter Agreement between the City and TCI, "simply requires TCI to obtain all requisite federal state, and local authority before providing telecommunications service using the facilities authorized in the permits. This condition does not prohibit TCI from providing telecommunications service, but rather is intended to make certain that before TCI provides any such service, it has obtained the requisite authority, including the right to use Troy's rights-of-way to provide telecommunications service as required in the Michigan Constitution and the Ordinance." The City notes that TCI has never sought authority to provide telecommunications service in Troy. To the contrary, the City states that TCI has told Troy officials that TCI was not asking for and has never asked for permission to provide such service. 27. In its reply comments, TCI argues that Troy's refusal to grant TCI's construction permit applications "is the equivalent of a denial." TCI explains that it has demonstrated, and the City has admitted, that the City has adopted a steadfast position that TCI will not be permitted to install hybrid fiber-coaxial facilities as part of its cable television system upgrade unless TCI agrees that telecommunications services over the upgraded facilities are prohibited or unless TCI obtains a telecommunications franchise. TCI notes that the City maintains that its actions are not denials, but merely requirements that TCI obtain other authorizations, or accept a conditional permit, in order to receive authority to begin construction. TCI avers as follows: Regardless of the semantic distinctions involved, the simple fact remains that the City of Troy refuses to grant TCI a construction permit without restricting or conditioning the permit on matters wholly unrelated to its regulation of TCI's cable service. In practice and in effect, the City's refusal amounts to nothing less than a denial of TCI's permit applications on grounds forbidden under the 1996 Act. 28. TCI also complains that the City's treatment of Ameritech, the incumbent local exchange carrier, and its efforts to enter the cable market by over-building TCI's system, has been the opposite of the City's treatment of TCI. TCI states that Ameritech maintains a substantial corporate presence in Troy, and that the City appears to be more than willing to protect its corporate 'favorite son.' For example, the City allowed Ameritech to construct a fiber optic backbone for its cable system prior to obtaining a cable franchise, and then granted it a cable franchise on substantially less burdensome and more favorable terms than TCI's franchise. Further, TCI alleges, "the City has refused to apply the Telecommunications Ordinance's franchise requirements to Ameritech." Moreover, TCI states that the City has not sought to include in any of Ameritech New Media (the Ameritech cable subsidiary) permits for hybrid fiber-coaxial construction the condition that Troy seeks to impose on TCI. TCI objects that Ameritech has been permitted to install fiber optics without limitation, while TCI "has been arrested in its ability to upgrade its system to keep current with cable technology or to respond to competition." 29. In its comments, the City defends its actions with respect to Ameritech New Media's construction in the City. It stated that as early as 1993, the City had advised Ameritech New Media that if it were to construct a system to provide cable service in Troy it would need to obtain a cable franchise. The City explained that the headend and conduit construction it later authorized did not require a cable franchise because the facilities were not being built to provide cable service within Troy, and that Ameritech New Media did not construct or begin constructing its cable system in the City of Troy until after it received its cable franchise in April, 1996. In a subsequent ex parte presentation, the City challenges TCI's claim that the City is applying the Telecommunications Ordinance in a discriminatory manner. The City asserts that its Telecommunications Ordinance applies equally to all providers of telecommunications services within Troy, including Ameritech, drawing no distinction between competition local exchange carriers and incumbent local exchange carriers. In addition, the City represented that, on December 16, 1996, it had notified Ameritech that the carrier was in non-compliance with the Ordinance, and had requested that Ameritech complete and submit a franchise application. 30. The City maintains generally that neither Troy's Ordinance, nor the City's handling of TCI's building permit applications violate any provision of the 1996 Act. The City claims that it has afforded similar treatment to all entrants and potential entrants desiring to provide telecommunications service in the City. It has issued a telecommunications franchise pursuant to the City's Telecommunications Ordinance following enactment of the 1996 Act to one potential provider of competitive telecommunications services Metropolitan Fiber Systems ("MFS"), and has engaged in on-going discussions with another potential provider, MCI Telecommunications Corporation ("MCI"). The City maintains that if it were to allow TCI to provide telecommunications service in Troy using its cable plant without first obtaining a telecommunications franchise under the Telecommunications Ordinance, it would create a situation in which TCI's potential competitors, such as MFS and MCI, could claim that the City was giving TCI a preference and acting in a discriminatory manner relative to other service providers that seek and obtain a franchise under the Telecommunications Ordinance. 31. Other Providers' Experiences with Telecommunications Franchising in Troy. In its comments responding to the TCI Petition, MCI stated that its affiliate, MCI Metro, had intended to construct a network in Troy to fulfill a contract made with a customer located in another city, but decided to reroute its network around Troy rather than subject itself to the provisions of the Telecommunications Ordinance. MCI also asserted that, "using its newly enacted [Telecommunications Ordinance], and asserting the power to exercise franchising authority thereunder, Troy has . . . precluded MCI's local telecommunications affiliate, MCI Metro, from entering the City's local telecommunications exchange market." 32. The City initially responded to MCI's statement in its reply comments. According to the City, Troy was discussing with MCI Metro its interest in providing service in Troy throughout the first half of 1996, including an exchange of draft telecommunications franchise documents. The last exchange occurred on July 26, 1996, when the City forwarded a revised draft to MCI. This was approximately two weeks after TCI filed the instant Petition with the Commission. The City explains that it heard nothing further from MCI until it received a copy of MCI's comments in this proceeding, when, for the first time, Troy learned that MCI had apparently decided not to obtain a franchise. The City claims that although MCI now describes the requirements of the Troy Ordinance as burdensome, they are the same conditions that applied when MFS obtained its franchise and that existed during the course of discussions with MCI through the first half of 1996. 33. Later, in an April 1, 1997 written ex parte presentation, the City responded to a TCI notice of ex parte presentation made on March 12, 1997, in which a representation was made by TCI that MCI had reiterated, "the point, reflected in its filing in this docket, that Troy's ordinance had deterred it from offering competitive local service." The City's April 1 response to this assertion takes the position that it was not Troy's Ordinance that deterred MCI from providing a competitive local service, and that in any event, MCI's comments in the proceeding do not support the allegation. The City quotes from page 3 of MCI's comments that, "MCI Metro had planned to build a network in Troy in connection with a contract made with a customer located in another city, but it opted instead to reroute around the City." The City avers that this is MCI's only description of the service it "was deterred from offering," and the statement is a reflection of the fact that MCI neither planned to offer a "competitive local service" in Troy, nor was subject to the franchising requirement of Troy's Ordinance. Instead, the City states, MCI would only have been subject to the licensing requirement before building in the City's rights-of-way to connect service locations outside of Troy, and that the provisions of the Ordinance applicable to franchisees would therefore not have applied to MCI. 34. In a responsive May 13, 1997 written ex parte presentation, MCI takes issue with the City's description of its intentions as "wholly inaccurate," and with the City's claim that MCI would not have needed a telecommunications franchise in Troy. MCI explains that originally, MCI had intended to offer local telecommunications services to the City. MCI notes that in March, 1995, MCI was authorized to provide basic local service by the Michigan Public Service Commission, and that it subsequently initiated franchise negotiations with the City in order to use the public rights-of-way to construct a fiber optic system to access and serve Troy customers. Following enactment of what MCI describes as the "burdensome" Troy Telecommunications Ordinance in December, 1995, MCI opted instead to reroute its system around the City. MCI further claims that, "at no time during the negotiations with the City was MCI advised that, as a licensee, it would only be subject to certain provisions of the Ordinance and not others. Nor did Troy raise this argument in any of its comments in this proceeding." MCI urges that the Commission "not allow any state or local government to undertake such 'bait and switch' tactics." 35. MFS did not file comments or reply comments in response to TCI's Petition. However, on April 30, 1997, LDDS Worldcom ("Worldcom"), the parent corporation of Metropolitan Fiber Systems of Detroit, Inc. ("MFS-D") filed a letter explaining the circumstances of MFS-D's entry into the Troy market. Worldcom explains that MFS-D initiated discussions regarding the installation of fiber optic telecommunications facilities in the public rights-of-way in early 1994. Negotiations over the terms and conditions under which MFS-D would be allowed to install its facilities continued over a two year period, during which time the City was attempting to develop its telecommunications policy. The negotiations ultimately culminated in the execution of a Telecommunications Franchise agreement in March, 1996. "During the course of its negotiations with Troy, MFS-D consistently expressed concern over many aspects of the city's demands, but, despite those concerns, felt compelled to enter into the agreement because of a pressing need to begin providing service to several significant customers located in Troy." 36. According to Worldcom, MFS-D objected throughout the two years of negotiations, to, inter alia, the City's compensation requirements for use of the public rights-of-way, the requirement that MFS-D provide the City with free or discounted service, any attempts by the City to regulate its provision of telecommunications services, and to the City's discriminatory treatment of MFS-D vis-a-vis its treatment of Ameritech. Worldcom explains that, over two years of arduous negotiation, MFS-D was, at risk of losing customers and the ability to enter into the Troy marketplace if an agreement could not be reached. This was an extremely difficult decision for MFS-D in light of the Michigan Telecommunications Act and the Telecommunications Act of 1996 which was signed by President Clinton on February 8, 1996 - just 4 days before MFS-D's franchise was to be voted by the Troy City Council. MFS-D knew that the City would not permit further negotiations of the agreement and was forced to accept its terms on a 'take-it-or-leave-it' basis. IV. TITLE VI ISSUES A. Overview 37. As a general matter, TCI claims that the City has impermissibly sought to assert regulatory authority over telecommunications services, and to limit the construction of cable plant solely because of its potential use in the provision of telecommunications services. TCI claims that it is directly through the City's cable franchising power that the City is attempting to limit, restrict and condition TCI's deployment of advanced telecommunications-capable technology. TCI argues that Congress did not intend municipalities to use their pre-existing regulatory relationships with cable operators to impose franchise-like obligations on providers of telecommunications services under any circumstances. Although TCI concedes the City has certain regulatory powers over use of the public rights-of-way, TCI maintains that the scope of the City's authority to manage the use of its rights-of-way is limited, and must be exercised in a nondiscriminatory and competitively neutral manner. 38. Under Title VI, TCI's Petition alleges that by conditioning or refusing to grant the two construction permits, the City has interfered with TCI's operation of its cable system in a manner that violates sections 621(b)(3)(A), (b)(3)(B), (b)(3)(D) and 624(e). These provisions generally limit the power of a local franchising authority, under Title VI, to condition the provision of telecommunications services by a cable operator; to impose telecommunications-related requirements on cable operators; and to dictate the type of transmission technology used by the cable operator to deliver its cable signal. With respect to the question of the franchising authority's ability, under Title VI, to regulate telecommunications services of cable operators, TCI and other cable commenters maintain that section 621(b)(3) precludes the imposition of franchise obligations upon the provision of telecommunications services by cable operators, even if that franchising authority is claimed to arise under a grant of authority other than Title VI TCI objects to Troy's attempts to require it to obtain a second franchise to provide telecommunications services over a cable system that is already subject to a cable franchise between TCI and the City. TCI also claims that the City's failure to grant TCI's permits has interfered with TCI's discretion under section 624(e) to use fiber optic transmission technology in its cable system. 39. In response to TCI's Title VI claims, the City defends its actions with respect to the two cable permits as appropriate exercises of its traditional authority to manage the public rights-of-way and to see that street cuts and trenching are done in the least disruptive manner. Troy states that it has not sought to use, nor has it used, TCI's cable franchise in a manner that restricts TCI's ability either to upgrade its cable system or provide telecommunications service. The City and its supporters argue that the language in section 621(b)(3), "under this title" means that telecommunications regulation exercised under some other authority is not subject to the section 621(b)(3) limitation. The City claims that its regulation of telecommunications providers stems from its responsibility under the Michigan Constitution, Article VII, Section 29, and is beyond the scope of the limitations on cable franchise requirements contained in Section 621(b)(3) of the Communications Act. Therefore TCI's reliance on section 621 is misplaced. The City argues that, with respect to TCI's section 624(e) claim, its concern was not with the transmission technology selected by the operator, but rather, was with the circuitous route chosen. B. Section 621 1. Positions of the Parties 40. TCI specifically alleges that the City has violated the following subsections of section 621, as amended by the 1996 Act: (b)(3)(A) If a cable operator or affiliate thereof is engaged in the provision of telecommunications services -- (i) such cable operator or affiliate shall not be required to obtain a franchise under this title for the provision of telecommunications services. . . . * * * (b)(3)(B) A franchising authority may not impose any requirement under this title that has the purpose or effect of prohibiting, limiting, restricting, or conditioning the provision of a telecommunications service by a cable operator or an affiliate thereof. * * * (b)(3)(D) Except as otherwise permitted by sections 611 and 612, a franchising authority may not require a cable operator to provide any telecommunications service or facilities, . . . as a condition of the initial grant of a franchise, a franchise renewal, or a transfer of a franchise. 41. As described above, TCI asserts that the City has denied TCI's applications for permits to install fiber optics and has done so "solely because of [the City's] fear that fiber optic facilities could be used in the future to deliver telecommunications service over which the City seeks regulatory control." According to TCI, the City is attempting to allay this concern by requiring TCI to obtain a telecommunications franchise as a condition to receiving the cable construction permits. TCI acknowledges the City's legitimate interest in managing and maintaining its rights-of-way and does not contest the City's authority to coordinate construction schedules, establish building codes, impose indemnity and insurance requirements, and otherwise oversee the placement of facilities in rights-of-way. TCI asserts, however, that these matters are addressed in the Public Right-of-Way Ordinance set forth in Chapter 33 of the City Code. TCI alleges that it has complied with the permit application process prescribed by Chapter 33 and that its cable franchise allows it to install fiber optic facilities. Thus claiming to have all of the authority it needs to proceed with its fiber installation, TCI argues that the City may not require TCI to obtain a telecommunications franchise as a condition of receiving a permit for that installation. 42. In amending the subsections of section 621 quoted above, Congress has "broken the link between cable franchising and the delivery of telecommunications," according to TCI, by "prohibit[ing] franchising authorities from imposing telecommunications requirements or conditions in cable franchises or through the cable franchising process." TCI contends that "[i]n direct contravention of this policy, the City has sought to use its cable construction permit process to establish domain over telecommunications facilities and services and to limit the construction of cable plant merely because of its potential use as a carrier of such services." TCI asserts that it has not sought to provide telecommunications service, and has no present intention to provide such service. According to TCI, the City may not use its cable franchising authority "to hold a cable upgrade hostage until the cable operator obtains a 'franchise' for the delivery of telecommunications services that might later be delivered over those upgraded facilities." 43. TCI contends that the City's actions would violate section 621 even if TCI intended to offer telecommunications service in Troy. According to TCI, "a state or local government that directs a cable operator to obtain a Title VI franchise or to comply with franchise-like requirements in order to provide telecommunications services, as Troy has done here, directly conflicts with section 621 and must be preempted." Acknowledging certain legislative history that indicates Congress intended local governments to retain some oversight of a cable operator's provision of telecommunications, TCI states: "Congress specifically limited cities to the 'management' of their rights-of-way and thus precluded the kind of elaborate regulatory regime that Troy seeks to impose . . . ." 44. By way of analogy, TCI notes that in establishing a regulatory regime for open video systems in the 1996 Act, Congress provided that operators of open video systems are not subject to the Title VI cable franchise requirement. TCI quotes the portion of the Commission's order implementing this provision stating that "a state or local government requirement that directs an open video system operator to obtain a Title VI franchise to operate an open video system directly conflicts with section 653 of the Communications Act and is, therefore, preempted." TCI asserts that the Commission must apply section 621(b)(3)(A)(i) in a similar fashion and preempt any state or local requirement that a cable operator obtain a Title VI franchise or comply with franchise-like obligations in order to provide telecommunications service. TCI acknowledges that, with respect to open video systems, the Commission determined that local governments retain authority to oversee the installation of facilities in public rights-of-way, if done in a non-discriminatory and competitively neutral manner. This authority, however, does not permit the imposition of Title VI-type franchise requirements, either in the case of an open video system or in the case of the provision of telecommunications service by a cable operator, according to TCI. "The limited range of permissible management functions . . . appropriate to municipal right-of-way authority stands in marked contrast to the sweeping power that Troy and others would have the Commission believe is their right," TCI argues. 45. A number of cable operators and other parties have filed comments in support of TCI's position. According to MCTA, "Section 621 . . . prohibits a municipality from attempting to regulate a cable operator's provision of telecommunications service over its cable system." On this basis, MCTA asserts that Troy cannot require "that a cable operator obtain an additional franchise before providing telecommunications service over its cable system," or in any way "regulate a cable operator's provision of telecommunications over its cable system." Adelphia asserts that the provision of telecommunications service over existing cable facilities "entails no physical effect on the rights-of-way" and therefore should not require separate franchising. 46. In joint comments filed with other cable operators, Comcast asserts that by amending sections 621 and 624, Congress sought "to clear the way for cable operators to upgrade and improve their networks to eventually provide telecommunications services without municipal interference." Comcast agrees with TCI's analogy to open video systems, arguing that when a cable operator provides telecommunications service, local jurisdiction over rights-of-way extends to "construction issues and protection of the streets from disruption and damage," but does not permit substantive regulation of the telecommunications service itself. Comcast asserts that the City's Public Right-of-Way Ordinance is protected under section 621 while the Telecommunications Ordinance "is nearly identical to a traditional Title VI, cable television franchise" and therefore violates section 621. 47. Likewise, Cox argues that the amendments to section 621 prohibit a local government from invoking Title VI to impose any franchising or regulatory requirements on a cable operator's provision of telecommunications service. Cox states that "any residual, non-Title VI authority that local governments might retain with respect to the regulation of telecommunications service was to be restricted" to managing the rights-of-way. According to Cox: Managing public rights-of-way does not mean imposing requirements and obligations in return for the use of public rights-of-way. Nor does it mean regulating the type of service that is provided over such rights-of-way. What it means . . . is managing the physical manner in which rights-of-way are encumbered by the construction, maintenance and continuing use of facilities that provide telecommunications services. 48. Cox argues that no franchising is required when an incumbent cable operator seeks to provide telecommunications service because, according to Cox, (i) the local government already regulates the cable operator's use of public rights-of-way through the cable franchise, and (ii) apart from overseeing the physical use of the rights-of-way, local governments have no authority to regulate telecommunications service. As Cox states: If a city has authorized, or is willing to authorize, the use of public right[s]- of-way for deployment of facilities for the provision of cable service pursuant to Title VI, there is no legitimate reason for it to require additional permission for the provision of telecommunications service over those facilities unless the provision of such service somehow raises new problems of safety, interference, disruption or aesthetics relating to rights- of-way management that are not dealt with by the cable franchise. 49. NCTA contends that Congress has separated regulation of cable service from regulation of telecommunications service. "The City of Troy, by contrast, has confused these distinct spheres of regulation by impermissibly using telecommunications considerations to decide a cable franchising matter," NCTA concludes. 50. The City generally agrees that Title VI divides cable regulation and telecommunications regulation into separate spheres. Distinctions between cable service and telecommunications service justify separate regulatory structures at the local level, according to the City. The City notes, for example, that cable distribution plant is installed largely in residential areas since cable television is primarily a residential service, while "business users are primary consumers of telecommunications service and the type of consumers that new telecommunications service providers seek to attract." When a cable operator decides to expand into the telecommunications area, it will not simply piggyback its existing distribution plant, but instead will have to install new plant where it does not currently have facilities, according to the City. The City asserts: This will require access and cause disruption to different rights-of-way than are occupied for traditional cable service. It is, therefore, appropriate to require a cable operator desiring to provide telecommunications service to obtain a telecommunications franchise or other local authorization for the use of a city's rights-of-way before it may provide such service. The City's Telecommunications Ordinance "is just such a requirement," and has no impact on the City's regulation of TCI as a cable operator, according to the City. 51. The City argues that the subsections of section 621 cited by TCI do not forbid local franchising or regulation of telecommunications providers, even when the provider is a cable operator. The City notes that by their express terms, the cited subsections of section 621 merely restrict local regulation of telecommunications "under this title," i.e., Title VI. These provisions, according to the City, allow for local franchising and regulation of telecommunications provided by a cable operator to the extent permitted by any non-Title VI grant of authority. "Thus, when Section 621(b)(3)(A)(i) provides that a 'cable operator or affiliate shall not be required to obtain a franchise under this title for the provision of telecommunications services,' . . . the section applies solely to a franchise for cable television service," according to the City. 52. The City further contends that another subsection of section 621 makes clear that Congress did not foreclose local franchising and regulation of a cable operator providing telecommunications services. The City cites section 621(d)(2) which states: "Nothing in this title shall be construed to affect the authority of any State to regulate any cable operator to the extent that such operator provides any communication service other than cable service, whether offered on a common carrier or private contract basis." Although section 621(d)(2) expressly allows only a state to regulate a cable operator that provides other communications services, a state may delegate that authority to a local government, according to the City. In this case, the City claims that the Michigan Constitution grants it the authority to franchise and license telecommunications providers, as well as any other person making use of its public rights-of-way. While agreeing that the provisions of section 621 cited by TCI restrict its authority to use Title VI as a means of regulating TCI's provision of telecommunications service, the City denies having attempted to use Title VI in this fashion. Neither the City's Cable Ordinance nor the TCI cable franchise "prohibit[s] TCI from providing telecommunications service over its cable system," according to the City. Claiming that its regulation of telecommunications providers stems from its authority under state law, not from Title VI, the City contends that TCI's reliance on section 621 is misplaced. 53. The City disputes TCI's characterization of the Commission's rules with respect to open video systems, where we implemented the statutory requirement that operators of such systems be exempt from the cable franchise requirement. The City quotes the Commission's determination that: [i]f, for example, a state or local government characterizes permission to use the public rights-of-way as a "franchise," such franchises are not preempted so long as they are issued in a non-discriminatory and competitively neutral manner. 54. A number of local governments have filed comments agreeing with the City's construction of the relevant Title VI provisions. In a joint motion to dismiss or deny the Petition, several local governments and PROTEC, which itself is a coalition of local governments from Michigan, argue that the City has authority under state law to impose reasonable requirements on telecommunications providers occupying public rights-of-way. The City's exercise of that authority is valid under section 621, PROTEC asserts, because that section does not affect "any non-Title VI authority a state or local government may have under state law to regulate or franchise the provision of telecommunications services by cable operators." According to PROTEC, the City "has never conditioned TCI's provision of telecommunications as a Title VI cable operator, but has only exercised the authority it possesses under state law, including authority that was specifically preserved to it under Section 621(b)(3) and 621(d)(2), to manage and receive compensation for telecommunications providers' use of its rights-of-way." 55. PROTEC thus argues that the City acted reasonably in restricting the use of any facilities installed by TCI to cable service. This restriction merely recognizes that TCI's authority to install and use facilities in the rights-of-way derives solely from its cable franchise and the City's Cable Ordinance, which authorize only cable service, according to PROTEC. PROTEC disputes what it characterizes as TCI's argument that section 621(b)(3) "magically transforms a Title VI cable franchise into a free pass to use local streets for non-cable purposes . . . ." According to PROTEC: "Just as TCI would not be permitted to use its cable franchise authorization to obtain permits to install gas lines, so too TCI is not permitted under applicable law to use its cable franchise to obtain permits for any other non-cable purposes for which it has not received a franchise." PROTEC further cites section 621(d)(2), which provides that nothing in Title VI prohibits a state from regulating a cable operator that provides any communication other than cable service. 56. The TMIC Communities agree that Congress merely intended "to separate cable franchising under Title VI from telecommunications franchising." They argue that the phrase "under this title" was added as an amendment to the subsections restricting local franchising of telecommunications providers, thus signalling Congress's intent to permit non-Title VI regulation of telecommunications. The TMIC Communities argue that Troy derives its franchising authority over telecommunications providers from the Michigan Constitution, not Title VI, and thus may exercise such authority without violating section 621(b)(3)(B). "Congress did not intend that a cable operator can build or operate a telecommunications system without a telecommunications franchise or that the cable franchise sufficiently covers telecommunications services," according to the TMIC Communities. 57. Franchising telecommunications service separately from cable service makes practical sense as well, according to municipal commenters, even when one entity is providing both services. Separate franchises will ensure that the provider's cable and telecommunications obligations are not mixed and will make clear the source and extent of the local government's authority over each service, PROTEC states. The TMIC Communities assert that the cable operator will have to use more streets and rights-of-way to provide telecommunications service than it uses to provide cable service. "These practical considerations alone suggest that a cable franchise does not suffice to protect public rights-of-way in connection with telecommunications systems," according to the TMIC Communities. 58. According to some commenters, the Conference Report makes clear Congress' intent to preserve a municipality's non-Title VI authority to franchise and regulate the provision of telecommunications services by a cable operator: The conferees intend that, to the extent permissible under State or local law, telecommunications services, including those provided by a cable company, shall be subject to the authority of a local government to, in a non-discriminatory and competitively neutral way, manage its public rights-of-way and charge fair and reasonable fees. 59. In joint comments filed with other municipalities and organizations, Richmond argues that the foregoing quotation from the Conference Report proves that Congress intended separate, local franchising of cable operators to the extent they seek to provide telecommunications service, particularly when read in conjunction with an amendment to section 622(b) governing the cable franchise fee. Section 622(b) allows a local franchising authority to impose a franchise fee of up to 5% of the cable operator's gross revenues. In the 1996 Act, Congress amended section 622(b) to clarify that the 5% fee can be imposed only on revenues derived from the provision of cable service. Richmond thus contends that contrary to the intent of Congress, franchising authorities would receive no compensation for a cable operator's use of the rights- of-way to provide telecommunications service, absent a separate telecommunications franchise requirement. 60. More generally, Richmond argues that the legislative history cited above demonstrates that Congress authorized local governments to regulate telecommunications separately from cable, even when a single entity is providing both services. Accordingly, Richmond contends it is lawful for the City to issue a construction permit for cable service with the condition that the permit does not authorize telecommunications service, and that such service cannot be provided until all federal, state and local requirements are satisfied. 61. A number of commenters argue that exempting TCI from the requirement of obtaining a telecommunications franchise, based solely on its status as a cable operator, would give TCI an unfair advantage over other potential telecommunications providers, when the intent of Congress was to provide for nondiscriminatory, competitively neutral regulation. The TMIC Communities assert that "the city of Troy would be discriminating in favor of TCI were it not to require a telecommunications franchise before TCI builds a telecommunications network and offers telecommunications services," since all non-cable telecommunications providers will be required to obtain a telecommunications franchise before offering service. Noting that under a cable franchise a franchising authority may impose a franchise fee only on revenues derived from cable service, PROTEC asserts that eliminating a separate franchise requirement for cable operators providing telecommunications service would allow cable operators to evade fees on telecommunications revenues, even though other telecommunications providers would be subject to such fees. 2. Discussion 62. Title VI establishes "a national policy concerning cable communications," including "guidelines for the exercise of . . . State and local authority with respect to the regulation of cable systems. . . ." A fundamental aspect of the regulatory scheme erected by Title VI is the requirement that a cable operator obtain a franchise before providing cable service. A franchise is "an initial authorization, or renewal thereof . . ., issued by a franchising authority . . . which authorizes the construction or operation of a cable system . . . ." In most cases, the franchising authority with jurisdiction to grant a cable franchise is a body of state or local government. In general, Title VI governs cable service only. The scope of a local government's franchising authority under Title VI does not extend to communications services other than cable service. 63. The plain language of the three provisions of section 621(b)(3) cited by TCI, as amended by the 1996 Act, make clear that a local government may not invoke its franchising authority under Title VI as grounds for franchising or regulating the provision of telecommunications service by a cable operator. Section 621(b)(3)(A) states that a cable operator or affiliate "engaged in the provision of telecommunications services - (i) . . . shall not be required to obtain a franchise under this title for the provision of telecommunications services . . . ." Similarly, section 621(b)(3)(B) states: A franchising authority may not impose any requirement under this title that has the purpose or effect of prohibiting, limiting, restricting, or conditioning the provision of a telecommunications service by a cable operator or an affiliate thereof. The third provision cited by TCI, section 621(b)(3)(D), states: Except as otherwise permitted by sections 611 and 612, a franchising authority may not require a cable operator to provide any telecommunications service or facilities, other than institutional networks, as a condition of the initial grant of a franchise, a franchise renewal, or a transfer of a franchise. 64. The enactment of these provisions as part of the 1996 Act is related to the simultaneous repeal of the cross-ownership restriction of former section 613(b) of the Communications Act. Subject to certain exceptions, former section 613(b) prohibited a Title II common carrier from offering cable service or other video programming directly to subscribers within its telephone service area. With the repeal of this cross-ownership restriction and adoption of other pro-competitive provisions, Congress anticipated that a variety of regulatory issues would arise as locally-franchised cable operators sought to begin providing telecommunications services in addition to cable service. In light of this, it was logical for Congress to confirm, with the addition of section 621(b)(3), that local governments may not use their cable regulatory authority under Title VI as a basis to franchise, regulate or condition a cable operator's provision of telecommunications services. 65. TCI and the City seem to agree on this point. TCI asserts that Congress "has broken the link between cable franchising and the delivery of telecommunications . . . .," and the City states that Congress intended "to separate cable franchising from rights-of-way management for . . . telecommunications services . . . ." Ironically, both TCI and the City claim support for their respective interpretations of section 621(b)(3) from the relevant section of the Conference Report, which states: The conferees intend that, to the extent permissible under State and local law, telecommunications services, including those provided by a cable company, shall be subject to the authority of a local government to, in a non-discriminatory and competitively neutral way, manage its public rights-of-way and charge fair and reasonable fees. The foregoing statement from the Conference Report reflects an intent to preserve the powers of local governments to manage the use of the public rights-of-way and to receive compensation for the use of those rights-of-way, consistent with the stated standards that such actions be nondiscriminatory, competitively neutral and that fees be fair and reasonable. 66. While essentially agreeing with the City on the effect of section 621(b)(3) to this extent, TCI and other cable interests contend that section 621(b)(3) imposes a further restriction on local regulation of telecommunications service and telecommunications providers. TCI contends that "section 621(b)(3) precludes the imposition of franchise obligations upon the provision of telecommunications services by cable television operators," even if the franchising authority purports to be acting under a grant of authority other than Title VI. As noted above, however, two of the three subsections, section 621(b)(3)(A) and section 621(b)(3)(B), prohibit local franchising and regulation that is imposed "under this title," i.e., Title VI. a. Section 621(b)(3)(A) 67. We first conclude that TCI has failed to establish that the City has violated section 621(b)(3)(A) with respect to the City's actions on TCI's construction permit applications. That provision states: If a cable operator or affiliate thereof is engaged in the provision of telecommunications services -- (i) such cable operator or affiliate shall not be required to obtain a franchise under this title for the provision of telecommunications services . . . . This provision is inapplicable here because TCI states, and the City acknowledges, that TCI is not now engaged in the provision of telecommunications services, and has no present intention to provide such services in the City of Troy. In this case, the cable operator is not "engaged in the provision of telecommunications services," but rather, is engaged solely in the provision of cable services under its Title VI cable franchise. Because the prohibition in this subsection does not apply by its terms to TCI's business in the City of Troy, we find no violation of section 621(b)(3)(A). b. Section 621(b)(3)(B) 68. The second provision cited by TCI, section 621(b)(3)(B), states that a franchising authority "may not impose any requirement under this title that has the purpose or effect of prohibiting, limiting, restricting, or conditioning the provision of a telecommunications service by a cable operator or an affiliate thereof." The City's actions complained of by TCI include: the January 23, 1995 Agreement (prohibiting TCI from using for telecommunications purposes any facilities installed pursuant to cable construction permits, until TCI has obtained all lawful federal, state and local authority to provide telecommunications service); the corresponding endorsement on the Livernois Road Application; the City's failure to grant the Royal Oak Application without inclusion of a like endorsement; and the City's enactment of the Telecommunications Ordinance. With respect to its enactment of the Telecommunication Ordinance, the City claims authority under the Michigan Constitution, not Title VI. 69. We find on the record before us that the City has violated section 621(b)(3)(B). Clearly, as Troy itself recognizes, the City entered into the 1995 Agreement with TCI, imposed the endorsement on the Livernois Road Application, and seeks to condition the Royal Oak permit on the basis of TCI's status as a cable operator. The City's franchising authority over cable operators such as TCI derives from Title VI of the Communications Act. Accordingly, the City clearly was acting under Title VI when it endeavored to condition the grant of the building permits at issue, and the subject matter of the condition was not related to the cable service TCI provides. Rather, it expressly concerns the provision of telecommunications service in Troy, a service TCI neither currently provides, nor plans to provide in that locality. 70. The literal terms of the Livernois Road permit endorsement state that the "permit specifically prohibits and excludes installation, upgrading or operations for all other telecommunications service." This language would force TCI to forego the right to provide telecommunications service as a condition of upgrading its cable system, and would violate section 621(b)(3)(B), if it were to be enforced as originally written. Even if, as the City has represented to this Commission, the City does not intend to enforce the terms of the Livernois Road Application permit beyond the terms of the 1995 Agreement, the language of the condition as written and as later interpreted by the City plainly violates the express terms of the statute. Section 621(b)(3)(B) states that a "franchising authority may not impose any requirement under this title that has the purpose or effect of prohibiting, limiting, restricting, or conditioning the provision of a telecommunications service by a cable operator or an affiliate thereof." In this case, the condition or endorsement is being imposed "under this title," and by its own terms its purpose is to condition the provision of a telecommunications by a cable operator. Both the cable interests and the cities agree that Congress intended by this provision to separate the realms of cable franchising from telecommunications service regulation. The City's required endorsement therefore violates the plain language of the statute and it impermissibly mixes the two distinct regulatory spheres in direct contravention of Congress' intent in amending section 621. 71. The still pending Royal Oak Application presents no different circumstance. The stated purpose of the Royal Oak Application is "to upgrade CATV service quality and interconnect [three] . . . Headends." In its letter to TCI dated February 14, 1996, the City raised three concerns with respect to the Royal Oak Application. Two of the concerns dealt with the route of the proposed installation. First, according to the City, the installation proposed by TCI deviated from the most direct route between the headends. Second, TCI's plans called for a portion of its facilities to be installed in an easement to which TCI has no right of access. The third concern related to the Telecommunications Ordinance which, according to the letter, "requires any prospective telecommunications companies to apply for and obtain a franchise." The letter adds: "This you must do." The City explained that its concern that TCI intended to provide telecommunications using the facilities proposed in the permit application arose principally from the fact that TCI's building plans indicated planned installation of conduit and cable through a complex of office buildings, where TCI had no existing cable plant and provided no cable service. 72. In its Petition, TCI acknowledges its refusal to obtain a telecommunications franchise, but claims to have re-submitted the Royal Oak Application in a manner that resolves the City's other concerns. In the re-submitted application, TCI responded to the City's concerns with the proposed route by stating that the plans submitted by TCI with its Royal Oak permit application reveal only prudent management by TCI in planning its proposed upgrade. TCI notes that it has become standard practice in the industry to begin cable system build-outs prior to any specific demand for service in the franchise area, and that franchising authorities routinely urge cable operators to route their facilities through business districts. TCI, in its Petition, urges that the "only conclusion warranted by a review of the building plans submitted with TCI's Royal Oak permit application is that TCI planned to build-out its cable plant for the eventual provision of cable service to business areas in which it previously had no facilities. 73. The City maintains that its concerns were not resolved when TCI re-submitted its Royal Oak permit application in May 1996. In its March 11 Letter to TCI, the City Attorney represents that the City will grant the Royal Oak Application if TCI will submit a new and direct route plan. According to the City, the most direct route between the headends that TCI wishes to interconnect is along a public street known as Crooks Road. The "zigzagging, circuitous" route proposed by TCI deviates from Crooks Road, according to the City, passing several office buildings and a cemetery before returning to Crooks Road. The City notes that the portion of the proposed route that deviates from Crooks Road passes no residential customers. The City states: "The more direct route [along Crooks Road] would create less disruption to Troy's rights-of-way and is the route TCI would normally have been expected to use simply to connect its headends." The City has advised TCI that it will grant the Royal Oak application if TCI corrects this routing problem: "After further discussion with the City engineers, we have come to the conclusion that if you submit the route plan showing a route running due north and south in the Crooks Road right-of-way and otherwise meet appropriate ordinances and design standards, the City will issue the permit." In addition, the City reiterated its insistence that TCI's permit contain the "not for telecommunications purposes" endorsement "reflecting the January 23, 1995 agreement between the City and TCI." 74. In its responsive ex parte submission, TCI: (1) states that it agrees to a route that runs due north and south in the Crooks Road right-of-way; (2) clarifies that it wishes to provide video services in the area that would have been passed in its original Royal Oak application route plan, and (3) states that it will shortly submit a new, separate permit application to bring hybrid fiber-coaxial cable plant to that area. TCI also states that it cannot accede to the City's insistence on including the endorsement restricting use of the facilities to cable services "unless and until" TCI shall have obtained all lawful requisite authorizations and consents for the provision of telecommunications services. TCI explains that, in its view, the City is without authority to impose limitations on TCI's construction of cable facilities in this manner. The City responded by stating that it does not expect a breach of the 1995 Letter Agreement or permit endorsements to occur, but if such a circumstance arises with respect to TCI, "the City would pursue remedies ordinarily available," and that "it is not the City's expectation that the City would consider such an event to constitute a breach of the TCI cable franchise." 75. Again, the City's actions have impermissibly blurred the distinction, mandated by section 621(b)(3)(B), between regulation of telecommunications services and regulation of cable services. The literal terms of the condition the City originally sought to impose on the Royal Oak permit in February, 1996 required TCI to obtain a telecommunications franchise before TCI would be permitted to upgrade its cable facilities. Even as revised, the City's condition required TCI to agree that it would not use the upgraded cable facilities for telecommunications purposes unless and until TCI obtained all lawful authorizations, which the City maintains includes a telecommunications franchise from the City of Troy pursuant to its Telecommunications Ordinance. A requirement that a cable provider must agree to obtain a telecommunications franchise in the future before it could receive a permit to upgrade its cable system for the purpose of providing cable service is just the sort of action that section 621(b)(3)(B) was intended to prohibit. The City's further attempt in March, 1997 to limit the scope of its condition by stating that "it is not the City's expectation that the City would consider such an event to constitute a breach of the TCI cable franchise," is too little, too late. The further limitation comes more than one year after the first revised Royal Oak permit application was filed, and it is not even a definitive statement that the City would not treat a violation as a breach of the cable franchise. The City, to the contrary, has clearly indicated that, in its view, the condition is a legally operative mechanism under which the City may take action against TCI in the future. It is accordingly a significant condition, related solely to the provision of telecommunications service over cable facilities, imposed upon TCI in this case pursuant to the City's Title VI franchising authority. For these reasons, imposition of the condition on TCI's cable permits violates section 621(b)(3)(B). 76. We are also concerned that the Royal Oak Application essentially lay dormant with the City for ten months. An unexplained failure to respond to a permit application by the incumbent cable operator within a reasonable time would lead to the assumption that local franchising authority under Title VI is being used for some other purpose, thereby violating section 621. It appears that the City's March 11, 1997, response is written more in the context of the issues in this proceeding, than as part of it responsibilities in administering the public rights-of-way. The fact that TCI has accepted the City's objection to the proposed installation route for the fiber optic facilities, as reflected in the parties exchange of letters in March and April, 1997, reflects that some elements of this dispute could have been, if not resolved, then at least adequately clarified by the parties at a much earlier time. Although we acknowledge the difficulties parties face when one pursues resolution of their dispute in another forum, we note that, in this case, the City's administrative process relating to the permits was not stayed during the pendency of TCI's Petition here. Unexplained administrative failure to provide permit applicants with responses within a reasonable time may lead the Commission to construe the circumstances most favorable to the party aggrieved by the delay. 77. The Commission's filing procedures are intended to afford parties flexibility to convey the circumstances of their position. We generally do not impose rigid rules, normally associated with civil litigation, that confine a party's ability to supplement the record. Many of our proceedings have broad impact, and our rules seek to include commentary from a range of interested parties. Yet, as this proceeding illustrates, our procedures must not become part of the permit process for franchised cable operators to obtain access to the public rights-of-way to upgrade their cable facilities. It is unfortunate that it took a Petition from TCI for the City to clarify its intentions. In addition, the year-long process of supplementing the record has had a detrimental impact on our ability to render a timely decision on a set of facts that accurately represents the situation faced by TCI and other potential providers in the Troy communications market. We strongly urge future claimants and responding entities under sections 621(b)(3), 624(e) and 253 to submit complete and accurate accounts of the facts in their initial pleadings. 78. We also note that the administration of the public rights-of-way should not be used to undermine the efforts of either cable or telecommunications providers to either upgrade or build new facilities to provide a broad array of new communications services. The City itself appears to have recognized that fiber optic facilities are important to the future of communications networks, but its actions with respect to the attempts of certain providers to install these facilities in the public rights-of-way have been less than welcoming. Upgrades of existing copper and coaxial cable plant are necessary today for the delivery of high quality cable services, are required for the provision of tomorrow's competitive local telephone service, and are essential for the future provision of switched, integrated broadband voice, video and data services. All levels of government can best serve the public interest by joining together to speed the accomplishment of the sorts of cable upgrades TCI seeks to make in Troy by streamlining and hastening administrative processes. c. Section 621(b)(3)(D) 79. The third and final subsection of section 621(b) invoked by TCI, section 621(b)(3)(D), generally prohibits a franchising authority from requiring a cable operator "to provide any telecommunications service or facilities, other than institutional networks, as a condition of the initial grant of a franchise, a franchise renewal, or a transfer of a franchise." It is not clear from TCI's pleadings exactly how the actions of the City violate section 621(b)(3)(D). The only evidence that could even remotely be read to suggest that the City has sought to require TCI to provide telecommunications service is the February 14, 1996 letter from the City's Civil Engineer stating that the City will not grant the Royal Oak Application until TCI obtains a telecommunications franchise. In its Petition, TCI claims the City has imposed this condition to regulate "telecommunications services that might later be delivered" by TCI. 80. TCI's invocation of section 621(b)(3)(D) fails properly to invoke the protections of that provision, because it does not allege that the City has even attempted to require TCI to provide telecommunications service or facilities, other than institutional networks, as a condition of its franchise. Nor would the record in this case support such a claim. We conclude that the decision of when or whether to provide telecommunications service has been left to TCI, and cannot be attributed in any manner to the City. Therefore, we find no violation of section 621(b)(3)(D). B. Section 624(e) 1. Positions of the Parties 81. TCI asserts that the City's actions violate section 624(e) which, as amended, provides in pertinent part: "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." TCI claims that Congress sought "to leave the design of transportation architecture to market players." Quoting legislative history, TCI argues that Congress found that "'the patchwork of regulations that would result from a locality-by-locality approach is particularly inappropriate in today's intensely dynamic technological environment.'" The City has violated section 624(e), according to TCI, by prohibiting it from installing fiber and thus effectively requiring TCI to use only coaxial cable for the transmission of its cable signals. MCTA likewise asserts that the City has denied TCI's construction permit applications and therefore has "prohibited TCI's use of fiber optic technology in the cable system" in violation of section 624(e). 82. The City claims it could not have violated section 624(e) because it has not denied either of the two applications under which TCI has sought the authority to upgrade its cable system with fiber optics. The City granted the Livernois Road Application on February 23, 1996, and the Royal Oak Application is still pending. Further, the City states: "To the extent Troy has conditioned TCI's permits on using facilities for cable purposes only[,] until such time as TCI has obtained the requisite consents to provide telecommunications service, such conditions present no impediment to the technology TCI may deploy for its cable system." PROTEC agrees: "Troy could not have violated Section 624(e), since Troy never in fact denied or rejected TCI's permit applications to the extent such permits applied to the installation of fiber optic cable for the sole purpose of providing a cable system upgrade." Richmond adds that the City's concern was that TCI intended to provide telecommunications service without the requisite authority, and that "[s]uch a concern is unrelated to the transmission technology employed by TCI." Richmond cautions that local governments are not suggesting, by their arguments here, that section 624(e) prohibits local governments from determining whether a cable operator may install a fiber optic system as opposed to some other technology. 83. TCI responds that, regardless of whether Troy has simply refused to grant a construction permit, or whether it has denied TCI a construction permit, Troy has taken or withheld action on TCI's permits based upon the type and potential uses of a particular technology. TCI claims that by blocking its permit applications or placing restrictions upon their grant, Troy has violated section 624(e)'s prohibitions against prohibiting, conditioning, or restricting the transmission technology that TCI intends to deploy for the provision of cable service. TCI argues further that Troy's actions fall squarely within the proscribed conduct under section 624(e) by restricting TCI's use of its preferred cable communications technology in direct violation of Congress' intention that franchising authorities play no part in such decisions. 2. Discussion 84. Section 624(e) provides in pertinent part: "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." The Conference Report indicates that the purpose of the cited provision of section 624(e) is to prohibit cable franchising authorities "from regulating in the areas of technical standards, customer equipment, and transmission technologies." In the case of the Livernois Road Application, we find that the City has granted the application and has not prohibited, conditioned or restricted TCI's use of fiber optics as part of its cable system. The City subsequently explained in this record that it would only enforce the endorsement in accordance with the terms of the 1995 Letter Agreement, so that the prohibition would be limited to TCI's provision of telecommunications services without first having received requisite lawful authorizations. We reject TCI's contention that the endorsement on the Livernois Road permit, standing alone and as limited by the 1995 Agreement, violates section 624(e). As drafted, the Livernois Road permit endorsement limits the use of the facilities installed to cable television service, and prohibits TCI from using its cable facilities for the provision of telecommunications services. We do not believe that the City's conditioning the grant of a cable construction permit in this manner can fairly be considered to constitute a prohibition, condition, or restriction on the use of any subscriber equipment or particular transmission technologies within the terms of section 624(e). The condition simply does not relate to TCI's choice and use within its cable system of either subscriber equipment or transmission technology. Rather, the endorsement is directed at the types of services which may be provided, and the regulatory requirements with which the operator must comply before providing telecommunications services over the subject facilities. Therefore, the endorsement on the Livernois Road Application, both as originally written and as later limited to the scope of the 1995 Letter Agreement, does not violate section 624(e). 85. TCI also argues that the City's failure to grant the Royal Oak Application without the same endorsement has interfered with TCI's discretion under section 624(e) to use fiber optic transmission technology in its cable system. The City's actions with respect to the Royal Oak application were primarily focussed on the question of whether the route chosen by TCI was the least disruptive to the public rights-of- way, given the stated purpose of the work, and with TCI's potential use of the facilities to provide telecommunications services. Section 624(e) does not restrict the City's authority in either regard. Here, the City has issued numerous permits for the installation of both fiber optic and coaxial cable since 1993, and has sought to impose the "not for telecommunications purposes" language upon only three permits; the two permits for fiber optics that are the subject of this proceeding, and one permit for coaxial cable. The condition regarding telecommunications services therefore does not appear to be directed to either the specific transmission technology chosen or the question of whether this technology will achieve the performance required of TCI under its cable television franchise. Thus, the record as a whole supports the City's claim that the terms of the condition were unrelated to the transmission technology chosen by TCI. In light of these circumstances, the prohibition contained in section 624(e) on a cable franchising authority's regulation of technical standards, customer equipment, and transmission technologies is neither implicated nor violated. V. TITLE II ISSUES A. Overview of Title II Legal Allegations 86. The 1996 Act amended Title II of the Communications Act in a number of ways aimed at ending the old regulatory regime of government-protected monopolies. In furtherance of this goal, Section 253, in pertinent part, states: (a) IN GENERAL.--No State or local statute or regulation, or other State or local legal requirement, may prohibit or have the effect of prohibiting the ability of any entity to provide any interstate or intrastate telecommunications service. (b) STATE REGULATORY AUTHORITY.--Nothing in this section shall affect the ability of a State to impose, on a competitively neutral basis and consistent with section 254, requirements necessary to preserve and advance universal service, protect the public safety and welfare, ensure the continued quality of telecommunications services, and safeguard the rights of consumers. (c) STATE AND LOCAL GOVERNMENT AUTHORITY.--Nothing in this section affects the authority of a State or local government to manage the public rights-of-way or to require fair and reasonable compensation from telecommunications providers, on a competitively neutral and nondiscriminatory basis, for use of public rights-of-way on a nondiscriminatory basis, if the compensation required is publicly disclosed by such govern- ment. (d) PREEMPTION.--If, after notice and an opportunity for public comment, the Commission determines that a State or local government has permitted or imposed any statute, regulation, or legal requirement that violates subsection (a) or (b), the Commission shall preempt the enforcement of such statute, regulation, or legal requirement to the extent necessary to correct such violation or inconsistency. Under Title II, the Petition challenges the Telecommunications Ordinance as a barrier to entry in violation of section 253 generally, and seeks preemption under section 253(d). 87. TCI's specific legal challenges under section 253 can be broken down into four principal arguments. First, TCI argues that the Telecommunications Ordinance as a whole prohibits, or has the effect of prohibiting, TCI from providing telecommunications service, in violation of section 253(a). Second, according to TCI, the City has failed to apply the Telecommunications Ordinance to Ameritech and therefore has violated the requirement of nondiscrimination and competitive neutrality that TCI claims applies "[u]nder any interpretation of Section 253." Third, TCI asserts that section 253(c) permits municipalities' oversight over only the physical use of the rights-of-way, as opposed to substantive regulation of the service provided. Various provisions of the Telecommunications Ordinance, including those governing rate regulation, interconnection, and service quality, "far exceed[ ] the City's power to manage the rights-of-way" under section 253(c), according to TCI. Fourth, TCI contends that the franchise fee based upon a percentage of the operator's gross revenues exceeds the "fair and reasonable compensation" to which the City is entitled under section 253(c). TCI argues that both federal and state law require cost-based fees for use of the public rights-of-way 88. TCI further alleges that the City lacks authority under state law to enact or enforce the Telecommunications Ordinance. TCI claims that the Troy Telecommunications Ordinance exceeds the City's limited authority under the Michigan Telecommunications Act to manage the public rights-of-way and to charge franchise fees for use of the rights-of-way. TCI states that "[t]he Michigan Constitution provides only that "reasonable control" of streets and public places is reserved to local governments, and that a "public utility" must obtain a franchise before transacting business in a municipality. Under section 102 of the Michigan [Telecommunications] Act, however, telecommunications service is not a 'public utility service' . . . . " 89. TCI requests that the Commission adopt an order: þ declaring that the City's conditioning of TCI's cable system construction violates Sections 621, 624 and 253 of the Communications Act; þ declaring that the City of Troy's denial of TCI's Royal Oak and Livernois Permit Applications violates the Communications Act, and is preempted by federal law. þ declaring that the Troy Telecommunications Ordinance and the City's denial of TCI's permit applications exceed the City's authority as provided in Section 253(a) of the 1996 Act and have the effect of prohibiting TCI's entry into interstate and intrastate telecommunications markets in violation of Section 253(a) of the 1996 Act; and þ declaring that the City's Telecommunications Ordinance and the City's denial of TCI's permit applications are preempted by Section 253(d) of the 1996 Act. 90. The City both denies TCI's assertions on the merits, and argues that the Commission has no jurisdiction to adjudicate TCI's claims under section 253(d). The City contends that the Telecommunications Ordinance is primarily an exercise of the City's authority under section 253(c) to manage its public rights-of- way and receive fair and reasonable compensation for the use of those rights-of-way, and that section 253(d) withholds from the Commission any authority to preempt such local regulation of telecommunications service. According to the City, any dispute as to the validity of the Telecommunications Ordinance under section 253(c) must be resolved by a court of competent jurisdiction, according to the City. The City argues, that, at most, even if limited jurisdiction exists, the scope of the Commission's preemption authority under section 253 is narrow, and is not appropriately exercised in response to TCI's Petition. The City also argues that to the extent the specific provisions challenged by TCI relate to a matter identified in section 253(b), they are within the City's franchise authority as delegated under the Michigan Constitution, and the minimal requirements that are imposed are done so in competitively neutral manner. The City generally defends its Telecommunications Ordinance as an appropriate exercise of the City's authority to manage its public rights-of-way under both federal and state law. The City asserts that "[t]he Michigan Constitution delegates franchising authority to cities for any telecommunications service provider (i.e., public utility) transacting business in the city." Most municipal and other local government parties also support the view of limited FCC preemption jurisdiction advanced by Troy, and, accordingly, several Motions to Dismiss the TCI Petition were filed in the proceeding. B. Ripeness, Standing and Advisory Opinions 1. Positions of the Parties 91. Several parties contend that the Commission should not reach the merits of TCI's claims under section 253. According to PROTEC and Richmond, since TCI has not applied for a franchise, it cannot claim to have been harmed by the Telecommunications Ordinance. Invoking the judicial concept of standing, PROTEC asks us to dismiss TCI's Petition because there is no injury for the Commission to redress. Anaheim claims that the Telecommunications Ordinance poses no barrier "to an activity that TCI is undertaking (or even proposing to undertake)," in light of TCI's assertion that it does not intend to provide telecommunications service. Anaheim urges the Commission not to render an "advisory opinion" as to the validity of a local regulation "that, at present, does not apply to [TCI's] operations in Troy." 92. In its reply, TCI responds that this matter is ripe for adjudication because "the adoption and enforcement of Troy's Telecommunications Ordinance violates the Communications Act and causes TCI harm by impairing and impeding its ability to proceed with vital system upgrades." TCI further notes that the Commission is not subject to the "case or controversy" requirement that restricts the jurisdiction of federal courts under Article III of the Constitution. TCI also argues that this means that the Commission does not need to wait until the Ordinance is enforced to preempt any of its offending provisions; rather, it may act here to "issue a declaratory order to terminate a controversy or remove uncertainty." 93. CPI acknowledges the concerns raised with respect to the fact that TCI, the filing party, has indicated that it does not seek to provide telecommunications service in Troy. CPI maintains that although this situation would be dispositive in a formal complaint proceeding under section 208 of the Act, section 253 does not by its terms limit relief to the party filing a petition for preemption. CPI maintains that an action under section 253 can be initiated by any entity, or even by the Commission itself. CPI fears that if the Commission were to determine that preemption can only occur where the entity initiating the proceeding is directly harmed, such a determination would effectively preclude any non-profit organization (such as itself) or trade association from filing petitions under section 253. 94. CPI argues that the facts introduced in the record in this case provide a sufficient basis on which the Commission can, and should, preempt the Troy ordinance as a barrier to entry under section 253(a). CPI states: MCI's comments in this record clearly indicate that MCI would have constructed telecommunications facilities in Troy if not for the excessive regulation that the Troy ordinance imposes on telecommunications providers. The city cannot take advantage of the "savings clause" in subsection (c) because the city's actions -- such as regulating interconnection and imposition of a "most favored nation" provision -- are not related to the management of its rights-of-way. This evidence requires the FCC to preempt the Troy ordinance, even though MCI was not the party who filed the initial petition in this proceeding. 95. In the alternative, CPI contends that the Commission should clarify the meaning of section 253 as soon as possible, whether it preempts the Troy Ordinance or not. CPI notes that this proceeding has become "a high-profile case, involving substantial efforts from the industry and the representatives of the cities. . . . Should the FCC remain silent on the section 253 issues, or worse, deny the petition to preempt under section 253, cities may be emboldened to impose a third layer of regulation on telecommunications carriers. This result could deny consumers the benefits of local telephone competition that the 1996 Telecommunications Act was intended to provide." CPI recognizes that the Commission cannot decide specific preemption issues prior to reviewing the facts of a case, but urges the Commission to announce standards it will use in reviewing future preemption proceedings. CPI suggests that the Commission express the following policy statements or standards in its decision on the Troy ordinance that will provide guidance to cities and the industry: (1) Section 253(a) is a broad provision that allows the FCC to preempt any statute that "may" have the effect of prohibiting "any" entity from providing "any" service. (2) Section 253(c) is a limited "savings clause" that allows a State or city to impose rights-of-way regulations only if it meets all three conditions: (a) The city's regulation must be directly and specifically "related to management of the rights-of-way." (b) The "fair and reasonable" compensation standard does not allow the city to charge monopoly rents for use of its rights-of- way. (c) Cities must treat new entrants and incumbents in the same manner at the same time. 96. LSGAC urges that the Commission "not be tempted to act precipitously to preempt state and local governments necessarily. States and local governments should recognize the urgency of telecommunications deregulation and work under appropriate deadlines to make their decisions." LSGAC submits that "[r]egulation, preemption, and formal legal action against another level of government should be the last, not the first, recourse to resolve conflicting claims. It advocates that rights-of-way disputes between telecommunications companies and local governments be resolved in local jurisdictions, and offers to explore with an appropriate delegation of industry representatives "areas of agreement on rights-of-way issues pertaining to state and local governments." 2. Discussion 97. We previously have found that certain governmental actions flatly precluded an entity or class of entities from providing a particular service in violation of section 253(a). We also found that the governmental actions in those cases did not fall within the powers reserved to states and localities under sections 253(b) and/or 253(c). In the Classic Telephone Decision, we held that, under explicit delegated authority from the state, two cities' denials of a franchise to a prospective provider of local exchange service prohibited the ability of that entity, Classic Telephone Co., to provide local exchange service in those cities. Absent a franchise from the cities, Classic Telephone Co. lacked the requisite authority to enter the market and thus was legally barred from providing service. Similarly, in the New England Decision, we preempted a state regulation that permitted only ILECs and certified LECs to provide payphone services in the state of Connecticut. The regulation legally barred a class of entities -- non-LECs -- from providing payphone services in the state. 98. In addition to outright prohibitions of entry, Section 253(a) also forbids state and local governments from enforcing any statute, regulation, or other legal requirement that has the effect of prohibiting any entity's ability to provide any interstate or intrastate telecommunications service. In evaluating whether a state or local provision has the impermissible effect of prohibiting an entity's ability to provide any telecommunications service, we consider whether it "materially inhibits or limits the ability of any competitor or potential competitor to compete in a fair and balanced legal and regulatory environment." 99. This case does not involve the denial of a franchise application or some other express prohibition on the provision of telecommunication service. Rather, TCI challenges the validity of the Telecommunications Ordinance both on its face and as applied by the City to new entrants. Yet, TCI asserts that it "has no present intention" to provide telecommunications services in the City. TCI does not even explicitly contend that it ever contemplated providing any telecommunications service in Troy. On the basis of TCI's representations, the record does not demonstrate that the Troy Telecommunications Ordinance has had the impermissible effect of prohibiting TCI's ability to provide telecommunications service in the City of Troy. Given the facts of this case we will not issue what would be a purely advisory opinion. We therefore decline, in our discretion, to decide on the validity of specific sections of the Troy Telecommunications Ordinance under section 253. 100. We do not agree with those commenters arguing that it is strictly necessary for a party challenging the validity of a Telecommunications Ordinance such as Troy's to first have applied for, and have been denied, a franchise before filing a petition with this Commission. Such a party would clearly have a timely claim under section 253, as may other potential claimants regarding the validity under section 253 of the Troy Telecommunications Ordinance. We do not issue a declaratory ruling or advisory opinion resolving TCI's challenges to the particular provisions of the Troy Ordinance because our resolution of TCI's claims under section 621(b)(3)(B) resolves the actual controversy between the parties. Under our decision, the City may not place a condition related to the cable operator's provision of telecommunications services in a cable permit issued pursuant to Title VI cable franchising authority. In light of this determination, and because TCI has stated that it has no present intention of entering the telecommunications markets in the City of Troy, the Troy Telecommunications Ordinance no longer directly affects the operations of TCI within the City. Our decision under Title VI severs any link between TCI's operations in the City and the impact of the Telecommunications Ordinance. 101. Nor do the comments and informal filings seeking preemption of the Troy Telecommunications Ordinance by MCI, on behalf of MCI Metro, and Worldcom, on behalf of MFS-D, provide an adequate factual basis as currently in the record for us to preempt the Troy Telecommunications Ordinance under section 253(d). Section 253(d) gives the Commission an important and powerful tool to promote competition in telecommunications markets -- it permits us to preempt the enforcement of legal requirements to the extent necessary to correct violations or inconsistencies with section 253. With respect to a particular ordinance or other legal requirement, it is up to those seeking preemption to demonstrate to the Commission that the challenged ordinance or legal requirement prohibits or has the effect of prohibiting potential providers ability to provide an interstate or intrastate telecommunications service under section 253(a). Parties seeking preemption of a local legal requirement such as the Troy Telecommunications Ordinance must supply us with credible and probative evidence that the challenged requirement falls within the proscription of section 253(a) without meeting the requirements of section 253(b) and/or (c). We will exercise our authority only upon such fully developed factual records. This case does not contain such a record, and we exercise our discretion not to address any of the challenges to the validity under section 253 of the Troy Telecommunications Ordinance in this proceeding. 102. We caution that our resolution of the issues under Title VI should not be construed in any manner as prejudging how the Commission would rule on a well-founded section 253 challenge to the Troy Telecommunications Ordinance itself, or to any similar ordinance. Although we decline, in our discretion, to issue a declaratory ruling on the validity of the contested provisions of the Troy Telecommunications Ordinance, we take this opportunity to address generally some issues related to section 253. Section 253 is a critical component of Congress' pro-competitive deregulatory national policy framework that it put into place by enacting the 1996 Act. As we have noted, "Congress intended primarily for competitive markets to determine which entrants shall provide telecommunications services demanded by consumers, and by preempting under section 253 sought to ensure that State and local governments implement the 1996 Act in a manner consistent with these goals." We are troubled by several aspects of the Troy Ordinance in the context of the effort to open local telecommunications markets to competition. While Congress mandated a role for the Commission and the states in the regulation of telecommunications carriers, we are concerned that Troy and other local governments may be creating an unnecessary "third tier" of regulation that extends far beyond the statutorily protected interests in managing the public rights-of-way. 103. We recognize that section 253(c) preserves the authority of state and local governments to manage public rights-of-way. Local governments must be allowed to perform the range of vital tasks necessary to preserve the physical integrity of streets and highways, to control the orderly flow of vehicles and pedestrians, to manage gas, water, cable (both electric and cable television), and telephone facilities that crisscross the streets and public rights-of-way. We have previously described the types of activities that fall within the sphere of appropriate rights-of-way management in both the Classic Telephone Decision and the OVS Orders, and that analysis of what constitutes appropriate rights-of-way management continues to set the parameters of local authority. These matters include coordination of construction schedules, determination of insurance, bonding and indemnity requirements, establishment and enforcement of building codes, and keeping track of the various systems using the rights-of-way to prevent interference between them. 104. Of similar importance is the authority reserved to the states under section 253(b) to preserve and advance universal service, protect the public safety and ensure the continued quality of telecommunications services, and safeguard the rights of consumers, provided such requirements are necessary, competitively neutral, and consistent with the Communications Act's universal service requirements. As we noted in the Huntington Park Decision, section 253(b) ensures that States continue to have authority to require telecommunications service providers to make emergency services available to the public and comply with local consumer protection laws. 105. Our concern is that some localities appear to be reaching beyond traditional rights-of-way matters and seeking to impose a redundant "third tier" of telecommunications regulation which aspires to govern the relationships among telecommunications providers, or the rates, terms and conditions under which telecommunication service is offered to the public. For example, the Troy Telecommunications Ordinance contains provisions that, among other things, require franchisees to interconnect with other telecommunications systems in the City for the purpose of facilitating universal service, provide for regulation of the fees charged for interconnection, and mandate "most favored nation" treatment for the City under which a franchisee providing a "new service, facility, equipment, fee or grant to any other community . . . within the State of Michigan" shall provide the same to the City of Troy. Such Ordinance provisions will be difficult to justify under section 253(c) on the grounds that they are within the scope of permissible local rights-of-way management authority or other traditional municipal concerns such as police, fire, building code enforcement or other public safety concerns. In addition, several of these provisions seem redundant of comprehensive federal and state regulatory programs governing inter-carrier interconnection and universal service obligations and support. Given the likelihood of such local requirements impeding competition and imposing unnecessary delays on new entrants, attempts to impose a redundant "third tier" of regulation at the local level will be met with close scrutiny by the Commission. 106. Each local government may believe it is simply protecting the interests of its constituents. The telecommunications interests of constituents, however, are not only local. They are statewide, national and international as well. We believe that Congress' recognition of this fact was the genesis of its grant of preemption authority to this Commission. In addition, section 253(b)'s reservation to the States of authority over issues such as universal service, safety, and consumer protection appears to reflect Congress' view that an array of local telecommunications regulations that vary from community to community is likely to discourage or delay the development of telecommunications competition. As a result, where relations among telecommunications providers would be affected, or where the rates, terms, and conditions under which telecommunications service is offered to the public are dictated by an local ordinance, is of considerable concern to this Commission. This concern is exacerbated by the potential for multiple, inconsistent obligations imposed on a community-by-community basis. Such a patchwork quilt of differing local regulations may well discourage regional or national strategies by telecommunications providers, and thus adversely affect the economics of their competitive strategies. 107. An especially troubling issue alluded to in the record concerns the discriminatory application of telecommunications regulation, whether at the state or local level. Arguments are advanced by localities that the incumbent providers occupy a favored position vis-a-vis the state and local governments because of the way the provision of telephone service and its regulation have evolved over the last century. While this Commission cannot speak to the intricacies of state law on these matters, Congress sought to strike a balance in the 1996 Act. Obligations were imposed on incumbent carriers to create conditions essential to the development of competition. At the same time, Congress recognized the need for State and local governments to continue respond to truly local issues. Section 253 plays an important role in this regime. 108. One clear message from section 253 is that when a local government chooses to exercise its authority to manage the public rights-of-way or to require fair and reasonable compensation from telecommunications providers, it must do so on a competitively neutral and nondiscriminatory basis. Local requirements imposed only on the operations of new entrants and not on existing operations of incumbents are quite likely to be neither competitively neutral nor nondiscriminatory. 109. Section 253(b) acknowledges the authority of states to prescribe competitively neutral regulations of statewide applicability necessary to preserve and to advance universal service, protect the public safety and welfare, ensure the continued quality of telecommunications services, and safeguard the rights of consumers. Competition is best served where states wield their powers carefully, avoiding, to the greatest extent possible, an intricate intrastate patchwork of telecommunications regulation at the local level that will frustrate the prospects for full and effective competition. States, in deciding which telecommunications regulatory powers to delegate to their political subdivisions and which regulatory powers to retain, should strive to avoid redundant layers of regulation, in keeping with the pro-competitive, deregulatory intent of Congress in enacting the 1996 Act. Similarly, governments that have historically refrained from engaging in substantive telecommunications regulation should not view new entrants as being more susceptible to regulation than the incumbents. These efforts would go a long way in hastening the arrival of local telephone competition of many varieties, and in particular, of facilities-based local competition. 110. Finally, we note that interpreting the 1996 Act is not an easy task. It requires the combined efforts of state and local governments, along with those of the Commission. It is a duty that is shared by all levels of government, shaped by the dictates of section 253. In applying this statutory provision, we must remain mindful of the fundamental purpose of the Act: to promote competition and reduce regulation in order to secure lower prices and higher quality services for American telecommunications consumers and encourage the rapid deployment of new telecommunications technologies. VI. MOTIONS TO DISMISS OR DENY 111. Two joint commenters filed motions to dismiss or deny the Petition on the grounds that the Commission lacks jurisdiction to determine the validity of the Telecommunications Ordinance under section 253(c). In view of our resolution of this matter, we dismiss the motions as moot. VII. ORDERING CLAUSES 112. IT IS ORDERED that the Petition filed by TCI Cablevision of Oakland County, Inc., is granted in part, and denied in part, as provided above. 113. IT IS FURTHER ORDERED that the Motions to Dismiss or Deny are dismissed as moot. FEDERAL COMMUNICATIONS COMMISSION William F. Caton Acting Secretary APPENDIX A List of Commenters in CSR-4790 Petition TCI Cablevision of Oakland, Inc. ("TCI") Responses Adelphia Communications Corp. ("Adelphia") City and County of Denver ("Denver") City of Farmington Hills, Oakland County, Michigan ("Farmington Hills") City of Richmond, Virginia, City of New York, New York, National Association of Teleco mmuni cations Officer s and Adviso rs, Americ an Public Works Associ ation ("Rich mond" ) City of Troy, Michigan ("City") Comcast Communications, Inc., Jones Intercable, Marcus Cable, Scripps Howard Cable, InterM edia Partner s, James Cable, Multi media Cablev ision, Inc., Classic Comm unicati ons, Inc., Cable Televis ion Associ ation of Georgi a, Florida Cable Teleco mmuni cations Associ ation, New Jersey Cable Teleco mmuni cations Associ ation, Ohio Cable Teleco mmuni cations Associ ation, South Carolin a Cable Televis ion Associ ation, Tennes see Cable Teleco mmuni cations Associ ation ("Com cast") Hyperion Telecommunications, Inc. ("Hyperion") MCI Telecommunications Corporation ("MCI") Michigan Cable Telecommunications Association ("MCTA") Municipal Administrative Services, Inc. ("MAS") National Cable Television Association, Inc. ("NCTA") Texas, Michigan, Illinois, Colorado Communities ("TMIC Communities") Joint Motion to Dismiss or Deny Michigan Coalition to Protect Public Rights of Way from Telecommunications, Encroachments, Michigan Municipal League, Michigan Townships Association, United States Conference of Mayors, National League of Cities, National Association of Counties, City of Los Angeles, California, City of Chicago, Illinois, Michigan Communities ("PROTEC") Replies Anaheim, California Public Utilities Department, City of Long Beach, California, City of Manassas, Virginia ("Anaheim et al.") City of Richmond, Virginia, City of New York, New York, National Association of Teleco mmuni cations Officer s and Adviso rs, Americ an Public Works Associ ation ("Rich mond et al.") City of Troy, Michigan ("City") Comcast Communications, Inc., Jones Intercable, Marcus Cable, Scripps Howard Cable, Multi media Cablev ision, Inc., Classic Comm unicati ons, Inc., Cable Televis ion Associ ation of Georgi a, Florida Cable Teleco mmuni cations Associ ation, New Jersey Cable Teleco mmuni cations Associ ation, Ohio Cable Teleco mmuni cations Associ ation, South Carolin a Cable Televis ion Associ ation, Tennes see Cable Teleco mmuni cations Associ ation ("Com cast") Cox Communications, Inc. ("Cox") Michigan Cable Television Association ("MCTA") Michigan Coalition to Protect Public Rights of Way from Telecommunications Encroachment s, Michigan Municipal League, Michigan Townships Association, United States Conference of Mayors, National League of Cities, National Association of Counties, City of Los Angeles, California, City of Chicago, Illinois, and Michigan Communities ("PROTEC") National Cable Television Association ("NCTA") North Central Suburban Cable Commission, North Suburban Cable Communications Commission, Quad Cities Cable Communications Commission, Burnsville/Eagan Cable Communications Commission, Sherburne/Wright Counties Cable Communications Commission, South Washington County Cable Commission, City of Columbia Heights, Minnesota Association of Community Telecommunications Advisors ("Minnesota Authorities")* TCI Cablevision of Oakland, Inc. ("TCI") Texas, Michigan, Illinois, Colorado Communities ("TMIC Communities") * Joint Reply Comments include Motion to Dismiss or Deny APPENDIX B Chapter 62 -- Telecommunications Ordinance -- Troy, MI (12-18-95) 1. Legislative Findings The City of Troy has the authority to grant Licenses and Franchise for Telecommunications Systems offering public or private line video, data or voice services using or crossing a street, highway, rights-of-way or easements in the City. This Ordinance is intended to minimize the disruption to the streets, highways, rights-of-way and easements and to require those who seek to construct a Telecommunication System to cooperate in the construction and the restoration of streets, highways, rights-of-way and easements of both overhead and underground lines. The City finds that it has too many unsightly overhead lines and poles in some sections of the City. They are proliferating, adversely affecting the public safety, detracting from property values and reaching maximum safe capacity of poles and underground spaces. The City further finds that public health, safety and welfare is better served by requiring installation of new utility lines and wires in underground conduit wherever practical. 2. Purpose The purpose of this ordinance is to regulate the granting of Licenses and Franchises of Telecommunication Systems other than cable television systems. 3. Definitions Unless the context specifically indicates otherwise, the meaning of the terms used in this Ordinance shall be as follows: (1) City means the City of Troy, Michigan. (2) Telecommunication Services include regulated and unregulated services offering to customers the transmission of 2-way interactive communication and associated usage. (3) Telecommunication System is a system used or to be used to provide Telecommunication Service including public or private line video, data or voice service to another person, using or crossing a street, highway, rights-of-way or easements in the City other than cable television service offered pursuant to a Franchise granted under Chapter 63 of the City Code, as amended. (4) Franchise is a non-exclusive, limited authorization to transact local business for the construction, maintenance and operation of a Telecommunication System in the City awarded by ordinance in the form of contract and accepted by the Grantee. (5) Grantee is any holder of a Telecommunication System License or Franchise granted pursuant of this ordinance. (6) Gross Revenue shall mean all receipts collected by the Grantee for all telecommunication and related operations and services within the corporate limits of the City as well as any other revenue arising from operation or possession of this Franchise regardless of where billed. "Gross revenue" shall also include: (a) Access charges paid to the Grantee by other carriers. (b) The leases or re-sales of lines or circuit paths to third parties. (c) All Telecommunications Service revenues charged on a flat rate basis. (d) All Telecommunications Services charged on a usage sensitive or mileage basis. (e) All revenues from local services. (f) All revenues from authorize rental of conduit space. (g) All revenues from authorized rentals of any portion of Grantee's Systems, including plant, facilities, or capacity leased to others. (h) All other revenues collected from Grantee's telecommunication business pursued within the City, excluding third party billing arrangements not related to Grantee's telecommunication business. (i) Recoveries of bad debts previously written off and revenues from the sale or assignment of bad debts. Unrecovered bad debts charged off after diligent, unsuccessful efforts to collect are excludible from Gross revenues from telecommunication business. "Gross revenue" does not include revenue uncollected from customers (bad debts) and sale or lease of customer service equipment, taxes, interconnection fees paid by Grantee to other telecommunications carriers, or other similar types of pass-through charges for which Grantee merely acts as a collecting agent and derives no economic benefit or "markup". (7) License is a written agreement granted by resolution for a Telecommunication System to use the rights-of-way easements, highways, streets, alleys, and other places in the City for wires, poles, pipes, conduits or other public utility facilities, but not to transact local business with another person. (8) Person is any individual, firm, partnership, association, corporation, company or organization. (9) Subscriber is any Person who contracts with the Grantee for, or is in any manner provided with, Telecommunication Services. 4. City Approval Required (1) No Person shall install, construct, maintain or otherwise operate a Telecommunication System in the City without a telecommunication License and no person shall transact local business on a Telecommunication System in the City without a Franchise. (2) This ordinance shall apply to any existing cable television system operating pursuant to a Franchise awarded by the City which the Franchisee uses to transact local business operating a Telecommunication System. However, this ordinance exempts any existing institutional network operated by TCI of Oakland County, Inc., until the original TCI term of the Franchise expires, except to the extent that TCI or any other entity uses such network for commercial non-cable services. (3) Before offering or providing any Telecommunication Service, the Grantee shall obtain any and all regulatory approvals, permits, authorizations or licenses for the offering of provision of such Telecommunication Services from the appropriate federal, state and local authorities, if required, and shall submit to the City, upon the written request of the City, evidence of all such approvals, permits, authorizations or licenses. (4) Nothing in this ordinance shall be construed as a waiver of any codes, ordinances or regulations of the City or the City's right to require Grantee or persons utilizing the Telecommunication Service to secure appropriate permits or authorizations for such use. No fee or charge may be imposed upon a Grantee for any such permit or authorization, other than the standard fees or charges generally applicable to all persons for such permits or authorizations. Such standard fee or charge shall not be offset against the annual License fee or Franchise fee a Grantee is required to pay to the City under section 9 of this ordinance. (5) Issuance (1) The City may grant one or more Licenses and Franchises for a Telecommunication System in the City subject to this Ordinance. (2) The City specifically reserves the right to grant, at any time, such additional Licenses and Franchises for a Telecommunication System as it deems appropriate. Additional Licenses and Franchises shall not be deemed to modify, revoke, terminate or damage any rights previously granted to any other Grantee. (3) In the event a License application is filed proposing to install facilities within a Franchise territory which overlaps in whole or in part an existing area, a copy shall be served by the applicant by certified mail upon the current Grantee(s). Applicant shall notify Grantee of existing overlapping territory. Proof that a copy of the application has been served upon the current Grantee(s) shall be provided to the City. No application for overlapping territory shall be processed until proof of service has been furnished to the City. It is not the intent of this Ordinance to either require or prohibit overbuilding. (4) Applications for a new, renewed or amended Franchises shall be made in such form as the City may prescribe by resolution. New, renewed or amended Franchises which expand the scope of service shall be accompanied by a non- refundable $5,000 partial repayment of the Franchise formation fee. 6. Duration Any License or Franchise and the rights, privileges, authority, and responsibilities established shall take effect and be in force from and after final acceptance. It shall continue in force and effect for a period established by the License or Franchise not exceeding fifteen (15) years, provided within thirty (30) days after the date of the City's final acceptance of a License of Franchise, the Grantee files with the City Clerk its unconditional acceptance of the License or Franchise, all required letters of credit, construction surety and insurance certificates, and pays to the City Clerk all reasonable costs actually incurred by the City in preparing, considering and awarding the License of Franchise, including legal, engineering, technical, publication and other expenses, to wit: the franchise, formation fee described in Section 9. If a Grantee fails to timely comply with this section, it shall acquire no rights, privileges, or authority whatsoever from the City. The City Manager may extend the term of a License or Franchise for a period not exceeding one (1) year by written agreement with a Grantee on reasonable and necessary terms. 7. Penalty Violation of any of the terms of this Chapter shall be a misdemeanor punishable by a fine of up to Five Hundred ($500.00) Dollars or ninety (90) days in jail or both, not excluding (in addition to) civil damages. 8. Rate Regulation The rates and charges of a Grantee subject to Franchise for the provision of Telecommunication Services and for related services (such as equipment rental, deposits, disconnect fees, and late payment fees) shall be subject to regulation by the City to the full extent authorized by federal or state law. The City may from time to time elect not to regulate Grantee rates and charges, and any such election shall not waive the City's rights to regulate in the future. Changes to rates and charges shall only be made after notice, hearing and other requirements provided by law. 9. Franchise Formation and Annual Fee Payments by Grantee (1) For the reason that the streets, highways and rights-of-way or easements to be used by Grantee in the operation of its Telecommunication System within the boundaries of the City are valuable public properties, some of which are acquired and maintained by the City at great expense to its taxpayers, and that the grant to Grantee of the use of said streets, highways, rights-of-way or easements is a valuable property right without which Grantee would be required to invest substantial capital in right-of-way costs and acquisitions, a Grantee shall pay: (a) A Franchise formation fee (i) for Franchises $10,000.00; or, (ii) for Licenses of $2,000.00; and (b) An annual fee equal to lesser (i) 5% of it gross revenue, or (ii) an amount determined as set forth in subsection (2). (2) The fee to be charged to a Grantee under clause (ii) of subsection 1(b) shall be Grantee's allocated share of the following amounts: The estimated actual cost (excluding acquisition costs incurred by the City as a consequence of permitting Grantee to occupy a portion of the public rights-of-ways and in mediating disputes between the citizens of the City and Grantee. The estimated actual costs referred to in subsection 2(b) shall be calculated every three years by the City Finance Director and shall be subject to approval by the City Council following a public hearing. The costs referred to in subsection (b) shall be allocated among all of the Grantees based on their per linear foot (not number of lines or capacity) of the Telecommunication Systems located upon over, across or under the roads, bridges, streets, rights-of-way and easements in the City. The annual fee required by subsection (1) may be determined using: (a) A percentage of gross revenues not exceeding five (5%) per cent; or (b) $0.40 per linear foot of underground and $0.25 per linear foot of overhead lines, wires, cables, poles, conduits and like structures, erections and fixtures upon, over, across, or under the roads, bridges, streets, public rights-of-way and easements in the City. (3) Miscellaneous fee considerations: (a) Grantees sharing the same conduit shall each pay a full fee. (b) Grantees sending signals over another Grantee's existing line or a line that is leased to another and upon which fees are already paid are not subject to additional fees. (c) Grantees using the same line to provide cable television service and to provide Telecommunications Services shall be subject to both a cable television franchise fee and all fees set by this Chapter. (4) Grantee shall pay to the City for each quarter an amount equal to one fourth (1/4) of the minimum annual fee, calculated on the basis of a twelve-month compensation year. Grantee shall forward by check or money order an amount equal to the quarterly payment by noon of the twenty-fifth day of the calendar month immediately following the close of the calendar quarter for which the payment is calculated. Any necessary prorations shall be made. (5) In the event any quarterly payment is made after noon on the date due, Grantee shall pay a late payment penalty of the greater of: (i) $100 or (ii) simple interest at ten percent (10%) annual percentage rate of the total amount past due. Acceptance of money under this Section shall not in any way limit or inhabit any of the privileges or rights of the City, whether under this Franchise ordinance or otherwise. (6) In the event the 5% of gross revenue option is utilized, Grantee shall file annually with the City Manager no later than ninety (90) days after the end of the Grantee's fiscal year, a statement of revenues (for that year) attributable to the operations of the Grantee's Telecommunication System within the City. Said statement shall be prepared in compliance with general accepted accounting practices and auditing standards. This statement of revenues shall present a detailed breakdown of Gross Revenues and uncollectible accounts for the year. This statement of revenues shall be certified by an officer of the Grantee whose statement shall accompany the statement of revenues. Any transactions which have the effect of circumventing payment of required Franchise fees and/or evasion of payment of Franchise fees by non-collection or non-reporting of Gross Revenues, bartering, or any other means which evade the actual collection of revenues for business pursued by Grantee are prohibited. (7) License and Franchise fees shall be in addition to any other tax, charge, fee or payment due the City by a Grantee. 10. New Developments (1) Grantee may, from time to time, implement new services and developments allowed by law. A Grantee may not provide cable television services as defined by the U.S. Cable Communication Policy Act of 1984. (2) In addition to those matters required in a Franchise, Grantees make the following express acknowledgements: (a) That the City has the right to make reasonable amendments to this ordinance which do not materially increase any financial, economic or performance burden to the detriment of a Grantee during the term of other License or Franchise upon ninety (90) days notice to the Grantee, or without notice with respect to an emergency amendment. It further recognizes and agrees that the City shall in no way be bound to renew or extend the License or Franchise at the end of any License or Franchise term and that it may be deemed a mere licensee at the expiration thereof. (b) That a Grantee shall have no recourse whatsoever against the City for any loss, cost, expense or damage arising out of the failure of City to have the authority to grant all or any part of a License or Franchise. A Grantee expressly acknowledges that on accepting a License or Franchise it did so relying on its own investigation and understanding of the power and authority of the City. (c) By acceptance of a License or Franchise a Grantee acknowledges that it has not been induced to enter into a License or Franchise by any understanding or promise or other statement, whether verbal or written, by or on behalf of City or by any other third person concerning any term or condition of a License or Franchise not expressed in this Ordinance. (d) Grantee further acknowledges by the acceptance of a License or Franchise that it has carefully read its terms and conditions, and does accept all of the risks of the meaning of such terms and conditions. (3) However, if any such state or federal law or regulation shall require a Grantee to perform any service, or shall allow a Grantee to perform any service, or shall prohibit a Grantee from performing any service, in conflict with the terms of the License or Franchise or of any law or regulation of the City, then as soon as possible, a Grantee shall notify the City of the point of conflict believed to exist between such regulation or law and the laws and regulations of the City or the License and Franchise. Notwithstanding such conflict, the grantee shall comply with the terms of the License or Franchise unless released by the City. (4) If any provision of a License or Franchise is held by any court of competent jurisdiction to be invalid as conflicting with any federal or state law, rule or regulation now or hereafter in effect, or is held by such court to be modified in any way in order to conform to the requirements of any law, rule or regulation, said provision may be considered a separate, distinct and independent part of the License or Franchise, and such holding shall not affect the validity and enforceability of all other provisions if the City so determines. In the event that such law, rule or regulation is subsequently repealed, rescinded, amended or otherwise changed, so that the provision which had been held invalid or modified is no longer in conflict with the law, rules or regulations said provision shall return to full force and effect and shall be binding on the parties. (5) If the parties determine that a material provision of a License or Franchise is affected by action of a court or of the state or federal Government, the parties shall have the right to modify any of the provisions to such reasonable extent as may be necessary to carry out the full intent and purpose of the License and Franchise. 11. Liability (1) A Grantee shall indemnify and hold harmless the City as set forth in the License or Franchise at all times during the life of a License or Franchise and will pay all damages and penalties which the City may be required to pay as a result of granting a License or Franchise to Grantee. (2) A Grantee shall at all times during the life of a License or Franchise carry and require its contractors and subcontractors to carry out public liability, property damage, worker's disability, and vehicle insurance in such form and amount as shall be determined by the City as set forth in the License or Franchise. All required insurance coverage shall provide for thirty (30) day notice to the City in the event of material alteration or cancellation of such coverage prior to the effective date of such material alteration or cancellation. Failure of the Grantee to provide appropriate insurance certificates to the City within sixty (60) days after the execution of a License or Franchise shall render the License or Franchise null and void. 12. General Capability (1) Further, if the Grantee of a Franchise, provides a new service, facility, equipment, fee or grant to any other community which it serves within the State of Michigan, the same shall be provided in or to the City. City shall waive this requirement in a Franchise upon an affirmative demonstration that such service would be undesirable, impractical, infeasible or uneconomical in the City due to population, density or other relevant factors. (2) The Grantee of Franchise shall allow the City to access the Telecommunication System from any city buildings, police stations, fire stations, other public buildings, each school licensed by the State of Michigan, and each pubic library within 500 feet of the Telecommunication System on fees, terms and conditions set forth in the Franchise. (3) Only in the event of a state or national emergency or other urgent community need, a Grantee of a franchise shall, upon request of City, make available its facilities to the City for the duration of the emergency. (4) To the extent feasible, and subject to reasonable availability and agreement among the franchises concerning maintenance, access and security, a Telecommunication System shall be interconnected with other Telecommunication Systems within the City for the purpose of facilitating the provision of universal service in the City. Interconnecting may be done by direct cable or fiber optical connection, microwave link, satellite, or other appropriate method. The cost of such interconnection shall be equally shared by each Grantee. A Grantee shall not impose any discriminatory or punitive interconnection fee on a non- Subscriber. A Grantee shall not refuse or delay access service or be unreasonable in connecting another Grantee to the Telecommunication System or refuse or delay access service by any person to another Telecommunication System. 13. Conditions of Street Occupancy A Grantee shall not commence construction upon, over, across, or under the roads, bridges, streets, rights-of-way or easements in the City without first obtaining a construction permit as required under Chapter 33 of the City Code, as amended, which shall apply to the construction of a Telecommunication System. 14. Technical and Construction Standards (1) Each Grantee shall construct, install and maintain its Telecommunication System in a manner consistent and in compliance with all applicable laws, ordinances, construction standards, governmental requirements, and technical standards established by the Federal Communications Commission or state agency. (2) In any event, the Telecommunication System shall not endanger or interfere with the safety of persons or property within the City or other areas where the Grantee may have equipment located. (3) All working facilities, conditions, and procedures, used or occurring during construction of the System shall comply with the standards of the Occupational Safety and Health Administration. (4) Construction, installation and maintenance of a Telecommunication System shall be performed in an orderly and workmanlike manner, and in close coordination with public and private utilities serving the City following accepted industry construction procedures and practices and working through existing committees and organizations. (5) All cable and wires shall be installed, where possible, parallel with electric and telephone lines, and multiple cable configurations shall be arranged in parallel and bundled with due respect for engineering consideration. (6) A Grantee shall join the Miss Dig program. (7) When Grantee meets recognized engineering standards and the City, at its option, requests additional linear line footage, then the Grantee shall not be subject to the linear foot fee for such additional footage. 15. Maps, Records and Reports (1) A Grantee shall annually provide the City with current maps of its existing and proposed installations in standardized format for use with the City's G.I.S. data system unless no changes have occurred in the previously submitted map. (2) The Grantee of a Franchise shall annually file with the City Clerk fifteen copies (15) of its annual financial reports, including its annual income statement, a balance sheet, and a statement of its properties devoted to Telecommunication System operations. A Grantee shall submit such reasonable information as may be requested by the City with respect to its property and revenues, expenses or operations within the City. All information provided to the City shall be maintained by the City as proprietary and confidential. (3) An accurate and comprehensive file shall be kept by a Franchise Grantee of all Subscriber and user complaints regarding the Telecommunication System. A procedure shall be established by the Grantee by the time of installation of the system to quickly and reasonable remedy complaints to the satisfaction of the City. Complete records of Grantee's actions in response to all complaints shall be kept. These files and records shall remain open to the public during normal business hours. (4) Grantee shall submit to the City such other reasonable information or reports in such form and at such times as the City may request. (5) In the event the 5% of gross revenue option is utilized, subject to the privacy rights of Grantee, this Ordinance, federal and state laws and regulations, a Franchise Grantee shall keep open books and records relating to the financial operations of the Telecommunication System provided to the City. The City shall have the right to inspect, during normal business hours, upon a two-day notice, all books, records, maps, plans, service complaint logs, performance test result and other like materials of the Grantee which relate to the financial operation of the Telecommunication System. Access to the aforementioned records shall not be denied by the Grantee on the basis that the records contain proprietary information, provided that City maintains such information as proprietary and confidential. (6) a. Subject to the privacy rights of Grantee and this Ordinance and to federal and state laws and regulations, a Franchise Grantee shall keep open all non-financial books and records relating to the operations of the Telecommunication System provided to the City. The City shall have the right to inspect, during normal business hours, upon a two-day notice, all books, records, maps, plans, service complaint logs, performance test results and other like materials of the Grantee which relate to the operation of the Telecommunication Systems. Access to the aforementioned records shall not be denied by the Grantee on the basis that the records contain proprietary information, provided that City maintains such information as proprietary and confidential. b. A Grantee shall allow the City to make inspections of any of the Grantee's Telecommunications Systems within the City's boundaries at any time upon one (1) day notice or, in case of emergency, upon demand without notice. (7) The refusal of the Grantee to file any of the records or reports and inspections required to be provided to the City under this section shall be deemed a material breach, and shall subject the Grantee to all penalties and remedies, legal or equitable, which are available to the City. (8) Any material, false, misleading statement, or representation knowingly made by the Grantee in any report shall be deemed a material breach of the License of Franchise, and shall subject the Grantee to all penalties and remedies, legal or equitable, which are available to the City. 16. Waiver A Grantee agrees not to oppose intervention by the City in any suit or proceeding to which the Grantee is a party relating to the City's Franchise or License. A Grantee agrees to abide by all provisions of this Ordinance and its License and Franchise. 17. Sale or Transfer of Rights of Franchises (1) Neither the Franchise nor any of Grantee's interest therein or in the facilities shall be sold, assigned, transferred, pledged, leased, sublet, hypothecated or mortgaged in any manner, in whole or in part, to any person or entity, nor shall title thereto, either legal or equitable, or any right or interest therein, or any property or assets relating to this Franchise or the facilities, pass to or vest in any person or Franchise or the facilities, pass to or vest in any person or entity, without the prior written consent of the City, which consent shall not be unreasonably withheld or delayed. Grantee shall not otherwise provide service to a person or entity who the City contends is required to obtain a franchise from the City and who lacks such franchise. Nothing herein shall prevent Grantee from assigning its rights and obligations to an affiliate (defined as any entity directly owned by Grantee or a parent entity of Grantee) or subsidiary of Grantee upon notice to the City. Any assignment or transfer to a subsidiary or affiliate of Grantee shall not relieve Grantee of its liability thereunder. Further, nothing herein shall prevent or prohibit Grantee or any of its parents, subsidiaries or affiliates, from granting a security interest in the Franchise or the facilities arising form a financing transaction. The grant or waiver of any one or more of said consents shall not render unnecessary any subsequent consent or consents, nor shall the grant of any said consent constituent a waiver of any other rights of the City. In the event of foreclosure proceeding pursuant to the enforcement of a security interest granted by Grantee, or any parent or subsidiary of Grantee, the City shall have the right to approve the purchaser of the Franchise and/or the facilities at a foreclosure sale, which approval shall not be unreasonably withheld or unduly delayed. The prohibition against sales, assignments, transfer and similar actions shall also fully apply to any transfer of control of Grantee ("Control") and such transfer of Control shall also require the prior written approval of the City which approval shall not be unreasonably withheld or unduly delayed. (2) No Franchise nor any part or portion of its interest in the Franchise may be sold, transferred or assigned until the facilities, equipment and personnel which the Grantee has proposed in the current Franchise application to provide and install pursuant to the Franchise are one hundred (100%) percent completed and operational for a minimum period of three (3) years except to Grantee's parent, affiliate or subsidiary. (3) Any attempted transfer of the Franchise, facilities, Control or similar action by Grantee in violation of this Section shall be ineffective and void and shall constitute a material event of default by Grantee. 18. Construction and Performance Guarantee and Letter of Credit A Grantee shall, prior to construction and within thirty (30) days of execution of a License or Franchise, file with the City Clerk, a letter of credit or cash deposit in a reasonable amount set by the terms of the License or Franchise based upon the construction cost of the lines to be installed upon, over, across, or under the roads, bridges, streets, rights-of-way or easements in the City. The Grantee and the City Engineer may make arrangements for the periodic release of the cash deposit or letter of credit in proportionate amounts as progress is made, as provided in Chapter 33. 19. Termination In addition to all other rights and powers reserved or pertaining to the City, the City reserves as an additional and as a separate and distinct remedy the right to terminate a License or Franchise and all rights and privileges of a Grantee in any of the following events or for any of the following reasons: (1) A Grantee fails after thirty (30) days prior written notice to comply with any of the provisions of the License or Franchise or has, by act or omission, violated any term or condition; or (2) A Grantee becomes insolvent, unable or unwilling to pay its debts, or is adjudged bankrupt; or (3) All or part of a Grantee's facilities are sold under an instrument to secure a debt and are not redeemed by Grantee within ninety (90) days from such sale; or (4) A Grantee attempts to or does practice any fraud or deceit in its conduct or relations with the City under the License or Franchise; and (5) City condemns all of the property of a Grantee within the City by the lawful exercise of eminent domain. (6) The Grantee abandons the Telecommunication System or fails to seek renewal of its License or Franchise. (7) No termination, except for reason for condemnation, shall be effective unless or until the City shall have adopted a resolution setting forth the cause and reason for the revocation and the effective date, which resolution shall not be adopted without thirty (30) days prior notice to Grantee and an opportunity for Grantee to be heard on the proposed resolution. 20. Removal (1) Upon expiration or termination of License or Franchise, if the License or Franchise is not renewed, the Grantee may remove any underground cable from the streets which has been installed in such a manner that it can be removed without trenching or other opening of the streets along the extension of cable to be removed. Except as otherwise provided, the Grantee shall not remove any underground cable or conduit which requires trenching or other opening of the streets along the extension of cable to be removed. The Grantee shall remove, at its sole cost and expense, any underground cable or conduit by trenching or opening of the streets along the extension or otherwise which is ordered to be removed by the City based upon a determination, in the sole discretion of the City, that removal is required in order to eliminate or prevent a hazardous condition or promote future utilization of the streets for public purposes. Any order by the City to remove cable or conduit shall be mailed to the Grantee not later than thirty (30) calendar days following the date of expiration of the License or Franchise. A Grantee shall file written notice with the City Clerk not later than thirty (30) calendar days following the date of expiration or termination of the License or Franchise of its intention to remove cable and a schedule for removal by location. The schedule and timing of removal shall be subject to approval and regulation by the City. Removal shall be completed not later than twelve (12) months following the date of expiration of the License or Franchise. Underground cable and conduit in the streets and rights-of-way which is not removed shall be deemed abandoned and title shall be vested in the City. (2) Upon expiration, termination or revocation of a License or Franchise, if the License or Franchise is not renewed, a Grantee, at its sole expense, shall unless relieved of the obligation by the City, remove, from the streets all above ground elements of the Telecommunications System, including but not limited to pedestal mounted terminal boxes, and lines attached to or suspended from poles. (3) Grantee shall apply for and obtain such encroachment permits, Licenses, authorizations or other approvals and pay such fees and deposit such security as required by applicable law or ordinance of the City, shall conduct and complete the work of removal in compliance with all such applicable law or ordinances, and shall restore the streets and rights-of-way to the same condition they were in before the work of removal commenced. The work of removal shall be completed not later than twelve (12) months. 21. Continuity of Service It shall be the right of all Subscribers to receive all available services insofar as their financial and other obligations to the Grantee of a Franchise are honored. In the event that the Grantee elects to overbuild, rebuild, modify or sell the Telecommunication System or the City terminates, revokes or fails to renew a Franchise within a reasonable time, a Grantee shall do everything in its power to ensure that all Subscribers receive continuous, uninterrupted service regardless of the circumstances. In the event of a change of Grantee, the current Grantee shall cooperate with the new Grantee in maintaining continuity of service to all Subscribers. In the event that interruption of service is required by a Grantee for modification, repairs or the like, the interruption shall be as brief as possible and at times when the impact on Subscribers is at a minimum. Records of such interruption shall be kept. 22. Acceptance of Agreement and Incorporation of Application and Ordinance by Reference Upon execution of a License or Franchise by a Grantee, the Grantee agrees to be bound by all of its terms and conditions and accepts unconditionally the Franchise and promises to comply with and abide by all of their terms, provisions and conditions. A Grantee also agrees to provide all services set forth in its application and proposal, and, by its acceptance of the License or Franchise, a Grantee specifically grants and agrees that its application and proposal is thereby incorporated by reference and made a part of the License or Franchise. In addition, a Grantee specifically agrees that this Ordinance of the City is incorporated by reference and made a part of the License or Franchise. In the event of a conflict between the application and proposal of the Grantee, the Ordinance, and the License or Franchise, the Ordinance shall prevail. 23. Severability If any section, subsection, sentence, clause, phrase or word of the License or Franchise is for any reason held invalid or unconstitutional by any court of competent jurisdiction, such portion shall be deemed a separate, distinct and independent provision, and such holding shall not render invalid nor terminate the License or Franchise. 24. Tampering and Fraudulent Connections or Sales (1) No person, whether or not a Subscriber or user to the Telecommunication System, may intentionally or knowingly remove or damage or cause to be damaged any wire, cable, conduit, equipment, or apparatus of the Grantee, or to commit any act with an intent to cause such removal or damage, or tap, tamper with, or otherwise connect any wire or device to a wire, cable, conduit, equipment and apparatus, or appurtenances of the Grantee with the intent to obtain a signal or impulse from the Telecommunication System without authorization from or compensation to the Grantee, or obtain Telecommunications Service, or sell, rent, offer or advertise for sale, rental or use any instrument, apparatus, device or plans, specifications, or instructions for making or assembling the same to connect to the Grantee's Telecommunication System which intent to cheat or defraud the Grantee of any lawful charge to which it is entitled. (2) The prohibitions, penalties and remedies set forth in this section are in addition to any prohibitions, penalties and remedies for theft of service provided by state and federal law. 25. Equal Application The provisions of this ordinance shall be imposed upon and enforce against all Telecommunication Systems in the City requiring a License or Franchise under state law from the City. 26. Compliance with Law All Grantees and the City shall comply with all laws, rules, regulations and orders in the exercise and performance of their rights and obligations under this ordinance and under any Franchise. 27. Most-Favored Communities Clause (1) In the event a Franchise Grantee enters into an agreement with a public entity in Oakland County, Macomb County or Wayne County, excluding Detroit, and agrees to a formula or method for determining franchise fees which if applied in the City would yield greater revenues than the formula or method set forth in the franchise for the right to operate a Telecommunication System, the Grantee shall grant a pro rata credit to its Troy subscribers so as to cause a redistribution of the excess to Troy subscribers. (2) Telecommunication services to the City shall be charged at a rate no higher than that charged to any other governmental, public or private subscribers. APPENDIX C 1. Section 253(a); Prohibition on Barriers to Entry 1. TCI asserts that the challenged provisions of the Telecommunications Ordinance violate section 253(a) by prohibiting, or having the effect of prohibiting, entities from providing telecommunications service in the City. For example, the requirement that an entity obtain a franchise before providing telecommunications service violates section 253(a), according to TCI, because it leaves the City "poised to grant certain entities franchises to do business and deny franchises to others." TCI argues that the conditions that are placed on the granting of a franchise further demonstrate that the Telecommunications Ordinance violates section 253(a): the franchise requirement under the Telecommunications Ordinance poses a formidable barrier to entry into the local exchange market. From the $10,000 formation fee and the annual gross revenues surcharges and other fees, to the "most favored nation" clause, the waiver of legal recourse against the City, and other obligations and limitations on the applicant's legal rights, the Ordinance exacts a heavy toll on new entrants seeking authority to provide telecommunications services in Troy. 2. As described above, TCI generally contends that the City's authority to manage use of the public rights-of-way by telecommunications and cable service providers does not empower Troy to impose its Telecommunications Ordinance. TCI claims that the Troy Telecommunications Ordinance violates section 253 both because it stands as a barrier to entry under section 253(a), and because it exceeds the scope of the City's rights-of-way management authority under section 253(c). TCI further argues that, while section 253 reserves to local governments the authority to "manage the public rights of way or to require fair and reasonable compensation from telecommunications providers, on a competitively neutral and nondiscriminatory basis," this reservation extends only to such health and safety functions as regulating time or location of excavations; placement of facilities; and street repairs that are necessitated by excavations." According to TCI, municipal authority over the "management of rights-of-way does not empower municipalities to adopt sweeping telecommunications ordinances like Troy's. TCI also asserts that in any case, Troy's ordinance is neither competitively neutral nor nondiscriminatory. 3. In support of its arguments, TCI asserts that a potential provider of telecommunications service, MCI, cancelled its plans to install telecommunications facilities in the City because the Telecommunications Ordinance "poses such a significant entry barrier . . . ." As noted above, MCI itself asserts that, "[u]sing its newly enacted [Telecommunications Ordinance], and asserting the power to exercise franchising authority thereunder, Troy has . . . precluded MCI's local telecommunications affiliate, MCI Metro, from entering the City's local telecommunications exchange market." MCI also argues that the franchising requirement, by itself, violates section 253(a): The authority to franchise telecommunications carriers includes the authority to deny a franchise. Because the denial of a franchise plainly prohibits an entity from providing telecommunications service, it violates Section 253(a). 4. Comcast asserts that section 253(a) "broadly prohibits" all barriers to entry to the telecommunications field imposed by state or local governments. According to Comcast: "Any condition that makes entry more costly, burdensome, or time-consuming can constitute a barrier to entry." Comcast contends that in other contexts, the Commission has found that provisions of the kind contained in the Telecommunications Ordinance constitute barriers to entry. Comcast cites to our ruling regarding state certification requirements that authorize cable operators to provide institutional network services, where we stated: Any state regulation which treats certification as more than a ministerial act would be considered a de facto entry barrier, i.e., a public need showing . . . or burdensome service provision regulation . . . . 5. In addition, Comcast cites our finding in 1994 that local cable franchising is "the most important policy-relevant barrier to competitive entry in local cable markets." Comcast adds: Clearly, if Title VI-type franchising requirements have historically stood as a barrier to entry in the cable market, then imposition of the same basic scheme on telecommunications providers would stand as just as formidable a barrier to entry into the telecommunications markets -- even greater given the government-imposed monopoly protection provided local exchange carriers for nearly a century. 6. Comcast asserts that we need not examine each provision of the Telecommunications Ordinance separately because regardless of the impact of an individual provision, "the scheme created by such ordinances does effectively prohibit entry, and thus must be preempted." Similarly, NCTA asserts that the various provisions of the Telecommunications Ordinance, separately or taken as a whole, have the purpose or effect of restricting entry into the local telecommunications market. According to NCTA, the Telecommunications Ordinance, if upheld, will have this effect because other local governments in Michigan will enforce similar ordinances. NCTA asserts that, "[t]he resulting death by a thousand cuts that would be inflicted on [competitive local exchange carriers] would surely be a barrier to entry violative of the 1996 Act." The various provisions of the Telecommunications Ordinance violate section 253(a) without regard to whether they constitute management of the rights-of-way, according to NCTA, because there is "no indication that the reservation of State and local authority over rights-of-way management in Section 253(c) was intended as an exception to" section 253(a). 7. While acknowledging that a local government cannot specifically prohibit a party from providing telecommunications service, either expressly or by the grant of an exclusive franchise to another party, the City contends that section 253(a) grants local governments substantial latitude to impose conditions on those seeking to provide service. According to the City: "Simply because a legal requirement may impose a cost to transact business does not transform that requirement into a prohibition against entry." With respect to the instant case, the City argues that the Telecommunications Ordinance: does not prohibit any party from providing telecommunications service, nor does it grant any party an exclusive franchise, which would effectively prohibit other parties from providing service. Thus, on its face, the Ordinance is fully consistent with Section 253(a) of the [Communications] Act, which precludes only the prohibition or effective prohibition of the ability of an entity to provide telecommunications service. 8. The City does not dispute that its Telecommunications Ordinance imposes costs on telecommunications providers, as do "geography, construction, and other considerations." According to City, however, "none of these factors constitute[s] a 'prohibition' or 'effective prohibition' on the ability of a party to provide service." The City further argues: "While it is conceivable that a state or city could enact conditions on the use of rights-of-way that are so onerous that no party could conceivably meet them, thereby constituting an effective prohibition of entry, this is not the situation in Troy." The City contends that its recent grant of a telecommunications franchise to another provider, MFS, "is prima facie evidence that the [Telecommunications] Ordinance does not effectively prohibit the ability of a party, and in the case of MFS[,] a new entrant, to provide telecommunications service in Troy." The decision by an entity not to comply with the Telecommunications Ordinance, and thus not to provide service in Troy, does not mean that the Telecommunications Ordinance prohibits that entity from providing service, according to the City. 9. TCI and others overstate the onerousness of some of the individual provisions of the Telecommunications Ordinance, according to the City. The City points out that under the express terms of Section 12(4), a telecommunications provider is required to interconnect with other providers "only to the extent feasible." Further, the City notes that the most favored nation provision of Section 12(1) is subject to waiver if compliance is "undesirable, impractical, infeasible, or uneconomic." The rate regulation provisions of Section 8 cannot be barriers to entry in violation of federal law, according to the City, because they are made expressly subject to state and federal law. 10. In support of the City, PROTEC argues that TCI has been prohibited from providing telecommunications service only by its own failure to seek a telecommunications franchise. Since TCI has not applied for a franchise, it cannot claim to have been harmed by the Telecommunications Ordinance, according to PROTEC. Invoking the judicial concept of standing, PROTEC asks us to dismiss TCI's Petition because there is no injury for the Commission to redress. 11. Anaheim et al. claims that the Telecommunications Ordinance poses no barrier "to an activity that TCI is undertaking (or even proposing to undertake)," in light of TCI's assertion that it does not intend to provide telecommunications service. Richmond et al. contends that the failure to apply for a franchise is fatal to TCI's attempt to prove that the franchise requirement has prohibited it from providing service. More generally, Richmond et al. contends that TCI provides "absolutely no evidence" that any provision of the Telecommunications Ordinance has the effect of prohibiting it from providing telecommunications service. Richmond et al. recommends that we establish a "high threshold" for determining what types of state and local regulation satisfy section 253(a), rather than invite "a constant barrage of petitions to determine whether 'business' terms, 'management' terms, 'regulatory' requirements and other local requirements prohibit or effectively prohibit the provision of telecommunications services in violation of Section 253(a)." 2. Scope of Local Government Authority Under Sections 253(b) and (c) 12. With respect to the scope of local authority under section 253, TCI contends that Congress sought to limit local government regulation of telecommunications service to reasonable measures designed to protect the physical integrity of public rights-of-way. By way of example, TCI states that Chapter 33 of the City Code, the Right-of-Way Ordinance, is a valid exercise of municipal authority under section 253(c) and "provides . . . an excellent demarcation point between legitimate rights-of-way management and the franchise-like requirements of Troy's telecommunications Ordinance." TCI contends that its construction of section 253(c) as a limitation of local government jurisdiction finds support in the same passage from the Conference Report that Troy relies on in arguing the validity of its Telecommunications Ordinance: The conferees intend that, to the extent permissible under State or local law, telecommunications services, including those provided by a cable company, shall be subject to the authority of a local government to, in a non-discriminatory and competitively neutral way, manage its public rights-of-way and charge fair and reasonable fees. 13. The alleged limitation on a municipal government's right-of-way authority under section 253(c) is reinforced, according to TCI, by section 253(b), which reserves to the states, and only the states, the authority to impose regulations governing universal service, public safety and welfare, quality of telecommunications services, and consumer protection. According to TCI, Congress specifically rejected the House version of this provision, which would have sanctioned the authority of "State or local" governments to impose such regulations, in favor of the Senate's State-only savings clause. "Troy's Telecommunications Ordinance embraces the very functions -- such as universal service and service quality -- that Congress specifically reserved to the States. As a purported exercise of municipal authority to manage public rights-of-way, the Ordinance does not pass muster." 14. For example, TCI contends that conditioning the provision of telecommunications service on the requirement that the provider first obtain a franchise exceeds the City's right-of-way management power. Likewise, requirements relating to interconnection, rates, and services bear no relation to the occupation, use, or management of rights-of-way, according to TCI. With respect to interconnection, TCI argues that Section 12(4) of the Telecommunications Ordinance is preempted by section 251 of the Communications Act. To the extent that the municipal interconnection requirement is related to ensuring universal service, TCI claims that section 253(b) reserves authority over that issue to the state, thus precluding local regulation. TCI likewise challenges what it terms the "most favored nation" clause of Section 12(1) of the Telecommunications Ordinance, under which a telecommunications provider may be required to provide in the City any "new service, facility, equipment, fee or grant" provided in another Michigan community. TCI states that this provision "clearly constitutes regulation of services . . . and thus violates Section 253(c)." 15. Consistent with its position that section 253(b) authorizes only state regulation consistent with its terms, TCI further argues that substantive telecommunications regulation by local governments is not protected by the limited exception of subsection (b), and is a barrier to entry that the Commission must preempt under section 253(d). TCI argues: The proliferation of local telecommunications ordinances would create a substantial barrier to entry, in violation of section 253 of the Communications Act. If cities are permitted to adopt and enforce telecommunications ordinances, notwithstanding 80 or more years of State regulation of telecommunications, a competitive local exchange carrier certified by a State public utility commission would be required to obtain dozens of additional regulatory approvals from local governments before it could compete with incumbent carriers in their service territories. Local ordinances would not even necessarily be consistent from city to city, and a competitor would likely be forced to obtain multiple permits to serve a single metropolitan area. In tens of thousands of municipalities throughout the country, competitors will be discourage from offering services and the 1996 Act's procompetitive objectives will be frustrated. The Commission can and must act decisively to prevent the creation of this regulatory thicket so that consumers are not deprived of the benefits of choice, innovation, and lower prices intended by Congress. 16. TCI urges that the Commission has the duty under section 253(d) to preempt "any statute, regulation, or legal requirement" imposed by a "State or local government" that prohibits or has the effect of prohibiting any entity from providing intrastate or interstate telecommunications services. According to TCI, Congress did not reserve any authority to local governments to regulate telecommunications. To the contrary, local telecommunications ordinances create an entry barrier and must be preempted. TCI also argues that state law that permits delegation of telecommunications authority to local governments is likewise preempted by the 1996 Act. 17. TCI claims that section 253(c) also renders invalid Section 3(6) of the Telecommunications Ordinance, which defines "gross revenues," for purpose of calculating the annual franchise fee, as including "all receipts collected by the [Franchisee] for all telecommunication and other related operations and services within the corporate limits of the City as well as any other revenue arising from operation or possession of this franchise regardless of where billed." According to TCI, this provision "violates Section 253(c) by imposing fees based on revenues from the provision of services, including services unrelated to the system, not on a measure that would indicate impact on right-of-way use." Similarly, TCI argues that City-imposed rate regulation and customer service obligations do not constitute management of rights-of-way and therefore violate section 253(c). 18. Hyperion contends that in its service territories, fees associated with telecommunications ordinances often do not appear to bear any relationship to the costs of public management of local rights-of- way. Adelphia asserts that "Congress' use of the term 'manage' reflects that Section 253(c) provides only a very limited role for local authorities in the telecommunications market." Section 253(c) limits local governments "to exercising management power over issues directly affecting the physical occupation of the rights-of-way, such as scheduling and overseeing street cuts," according to Adelphia. Likewise, NCTA contends that section 253(c) extends "only to such core decisions on rights-of-way matters as the hours during which construction may occur, what kind of excavation equipment would be used, and the amount of reimbursement due for damage done to the rights-of-way." Thus, according to NCTA, section 253 "remove[s] from cities whatever authority they may have previously had to establish telecommunications regulatory schemes." 19. Comcast agrees that pursuant to section 253, "the sole power reserved for local authorities is" the power to manage the physical occupation, use and maintenance of public rights-of-way. Comcast and other commenters refer to the list of activities we identified in the open video systems rulemaking as being within the scope of local authority over rights-of-way including: þ coordination of construction schedules, þ establishment of standards and procedures of reconstructing lines across private property þ determination of insurance and indemnity requirements, þ establishment of rules for local building codes, þ scheduling common trenching and street cuts, þ repairing and resurfacing construction damaged streets, þ keeping track of the various systems using the rights-of-way to prevent interference among facilities. In support of the contention that these are the only types of activities that local governments are entitled to address under section 253(c), Comcast asserts that section 253(c) permits local governments to manage only public rights-of-way, not telecommunications services or providers. According to Comcast, this use of the term "manage" in Section 253(c) demonstrates that local authorities are not allowed to "regulate" telecommunications providers' service offerings, customer service standards, pricing, interconnection with other providers, service to different areas, or sale or transfer of their systems, among other things. 20. This alleged restriction on local regulation of telecommunications service is particularly significant when the provider is the incumbent cable operator, according to Comcast, because the cable operator already has installed facilities in the public rights-of-way and compensated the local government accordingly. The mere transmission of a new signal over existing bandwidth on facilities already in place would not raise any issue within the local authority's power, according to Comcast. In this context, Comcast asserts, "any claim for imposing further regulation would be based solely on the introduction of the new telecommunications service, and therefore, would be outside the municipality's power under section 253." 21. Further, Comcast contends that local governments may not regulate in the areas identified in section 253(b), such as universal service and consumer protection, because those matters are reserved for state regulation. According to Comcast, "any state law purporting to delegate subsection (b)-type powers to local authorities would be in direct conflict with the 1996 Act and thus preempted." 22. MCI agrees that by using two separate subsections to identify the authority reserved to state and local governments, Congress indicated its intention to restrict local authority to those matters identified in subsection (c). According to MCI: "Had Congress intended to permit localities to exercise the functions of [section] 253(b), it would have simply drafted a single [sub]section entitled 'State and Local Government Authority.'" 23. Cox argues that: "Sections 253(b) and (c) are not meant to carve out exceptions to the general prohibition on barriers to entry in Section 253(a). To the contrary, they are meant to establish limits of state and local regulatory authority under Section 253(a)." The Competition Policy Institute ("CPI"), a participant in the Commission's Public Forum on the use and management of public-rights-of-way, refers to these subsections as "extremely limited exceptions" to the broad prohibition in section 253(a). According to CPI, the Senate Report indicates that "these provisions should not allow states and cities to circumvent the prohibition in subsection (a)." CPI later elaborated that the Commission should declare that section 253(a) is a broad provision that allows the Commission to preempt any provision that "may" have the effect of prohibiting "any service. CPI argues, in contrast to some industry participants, that it does not believe that subsections (b) and (c) provide the Commission with grounds for preemption independent of subsection (a). Rather, CPI submits they are "savings clauses" that protect a State or city action that violates (a) as long as it meets the strict requirements of those subsections. In this case, CPI maintains, "the city cannot take advantage of the 'savings clause' in subsection (c) because the city's actions -- such as regulating interconnection and imposition of a "most favored nation" provision -- are not related to the management of its rights-of-way." 24. AT&T urges the Commission to make clear that municipal authority under the 1996 Act is limited and that certain activities do not fall within the section 253(c) exception. AT&T states that attempts by municipalities improperly to expand their province beyond permitted management of the public rights-of- way have frustrated and are continuing to frustrate AT&T's ability to implement local service as well as its ability to expand its existing interstate and interLATA service. AT&T notes that in Kentucky, for example, the carrier is prevented from installing fiber optic cable for the provision of interstate and intrastate long distance service by a city's insistence that AT&T obtain a license to provide local service within the town and be subject to a gross receipts tax as a precondition to installation of such cable on existing poles. According to AT&T, In certain Illinois municipalities, AT&T's construction of facilities necessary to provide local and other services has been frustrated by ordinances that apply, among other things, license and franchise requirements, excessive fees, record-keeping and other administrative and procedural requirements unrelated to right-of-way use, and excessive cash or other "credit" requirements to new entrants but not the incumbent LEC. AT&T argues that introduction of local competition will be hampered unless the Commission clarifies that municipal authority over telecommunications services is strictly limited to non-discriminatory, competitively neutral management of public rights-of-way. 25. The City contends that TCI and others have overstated the extent to which section 253 limits the permitted scope of local government authority over telecommunications service. Specifically, the City contends that its jurisdiction is not limited to the matters identified in section 253(c). For example, the City argues that section 253(b) delineates other broad areas of permitted regulation, including advancing universal service, protecting public safety and welfare, ensuring the continued quality of telecommunications services, and safeguarding the rights of consumers. Although by its express terms section 253(b) preserves only state jurisdiction over these matters, the City contends that it has been delegated the state's authority as to all such matters. "Thus, Troy's Ordinance also falls within the permitted areas of regulation under Section 253(b)," the City asserts. 26. The City further contends that it has jurisdiction to reach matters not within the scope of Sections 253(b) or (c). The City contends that when a state or local government regulates a matter that falls outside of sections 253(b) and (c), such regulation is subject to the limitation of section 253(a), which forbids a state or local government from imposing any regulation that prohibits, or has the effect of prohibiting, entities from providing telecommunications service. By contrast, when a state or local government regulates matters covered by sections 253(b) or (c), the limitation of section 253(a) does not apply, the City argues. The City explains that, under the express language of the statute, nothing in section 253 affects the power preserved to states and local governments in subsection (c). Therefore, subsection (c) is not limited by subsection (a). The contention of opposing commenters that section 253(a) is preeminent over Section 253(c) and limits the authority of state and local governments to manage their rights of way, is at odds with the plain language of the statute, according to the City. 27. In sum, the City suggests that sections 253(b) and (c) contain neither a grant nor a limitation of state and local authority. While Congress expressly recognized state and local regulatory authority over matters covered by sections 253(b) and (c), it did so as a means of exempting such regulation from the prohibition contained in section 253(a), according to the City. In other words, the City contends that sections 253(b) and (c) are not exceptions to section 253(a), but rather are "safe harbors" for municipal activities. As to regulation of matters not covered by sections 253(b) and (c), the City contends section 253 affects state and local authority only to the extent of making such regulation subject to section 253(a). 28. Relying on this construction of section 253, the City defends each of the challenged provisions of its Telecommunications Ordinance as falling within its jurisdiction to manage the rights-of- way, to obtain fair and reasonable compensation for the use of the rights-of-way, and to regulate the provision of telecommunications service. The City thus contends that the franchise requirement of Section 4(1) is a valid exercise of the City's authority under state law. The interconnection requirement of Section 12(4) complies with section 253(c), according to the City, as reasonable compensation to the citizens and city of Troy in exchange for the use of their rights of way. Further, the City notes that the interconnection requirement is designed to promote universal service, which it contends is a permitted area of regulation under Section 253(b), delegated to the city under the Michigan Constitution . 29. According to the City, section 253(b) also protects the "most favored nation" provision of Section 12(1) of the Telecommunications Ordinance, under which a franchisee can be required to upgrade its services, or increase the amount of its franchise fee, to match any service or fee provided in another Michigan community. "As permitted under Section 253(b) and authorized under the Michigan Constitution, this provision safeguards the rights of Troy's citizens to quality service in exchange for the use of the city's rights-of-ways," according to the City. 30. The City denies TCI's assertion that Sections 8 and 27(2) of the Telecommunications Ordinance constitute rate regulation that falls outside the scope of the City's authority. The City asserts that Section 8, under which the City reserves the authority to regulate rates to the extent permitted by federal and state law, cannot violate federal law since the provision expressly recognizes the supremacy of federal law. Section 27(2), which requires a franchisee to charge the City for service at the lowest rate given to any subscriber, does not dictate a specific rate, does not place a maximum limit on rates, and therefore is not rate regulation, according to the City. The City argues that section 253(c) specifically recognizes the authority of local governments to receive compensation for the use of the rights-of-way, thus authorizing the franchise fee provisions of Sections 3(6) and 27(1), just as section 253(b) allows the City, as delegatee of the State, to regulate in the area of consumer protection, thus authorizing the customer service requirements of Section 15(3) of the Telecommunications Ordinance. 31. TCI replies that section 253(a) invalidates any local regulation that has the effect of prohibiting an entity from providing telecommunications service, even if the regulation relates to management of rights-of-way. According to TCI, accepting the City's construction of section 253(c) as a safe harbor exception to section 253(a) "would effectively strip the Commission of any authority to preempt municipal telecommunications regulation that created a barrier to entry but was ostensibly premised on municipal right-of-way authority." 32. Municipal commenters support the City's contention that sections 253(b) and (c) do not define the limits of state and local government regulation over telecommunications. Richmond et al. argues that section 253(c) merely identifies the functions of a local government that are not subject to the prohibition of section 253(a), and in no way establishes the boundaries of local authority. Likewise, North Central contends that the only effect of sections 253(b) and (c) is to create "safe harbors" in which state and local governments may regulate without being subject to section 253(a). The establishment of these safe harbors "does not prohibit State or local governments from doing anything," according to PROTEC. 33. Municipal commenters also agree with the City that the challenged provisions of the Telecommunications Ordinance fall within the scope of the City's jurisdiction, either as specifically recognized by sections 253(b) and (c), or otherwise. Several commenters argue that, because the Telecommunications Ordinance only regulates entities using the public rights-of-way, each of its provisions constitute an exercise of rights-of-way management under section 253(c). Richmond et al. suggests that the entire Telecommunications Ordinance is protected by section 253(c) because each requirement can be deemed compensation for the use of the rights-of-way. According to Richmond et al., "nothing in Section 253(c) suggests that 'compensation' must include only monetary compensation." PROTEC asserts that the distinction drawn by TCI and others between managing the placement of facilities in the rights-of-way, and regulating the provider that uses those rights-of-way, is illusory. According to PROTEC, "Section 253 draws no such fine distinction between the rights-of-way and the user of the rights-of-way." As for individual provisions of the Telecommunications Ordinance, PROTEC argues that many of the provisions challenged by the cable industry in fact relate to "physical occupation issues," and thus fall within even a narrow reading of the rights-of-way management authority preserved by section 253(c). 34. State and local rights-of-way management and telecommunication service competition are the subjects of the Commission's Local and State Government Advisory Committee's ("LSGAC"), first advisory recommendation, issued June 27, 1997. The recommendation is intended to reflect the Committee's views on these matters "prior to any action on Troy." It is divided into "First Principles" and "Committee Actions." Among the first principles is the principle that, "State and local governments are trustees of the public's rights-of-way. Rights-of-way are real estate property rights of substantial economic value and interest to local communities. The public has a right to fair compensation for occupancy of and use of its property." The Commission, in contrast, is responsible for setting national standards and rules governing the conduct of the "interstate telecommunications marketplace to assure fair and open competition that favors neither incumbents nor new entrants." LSGAC acknowledges that, "State, local and FCC officials share the common goals of bringing true and effective competition in telecommunications services to all our citizens as quickly as possible while minimizing the adverse effects on other essential community needs, costs and interest." 3. Competitive Neutrality and Nondiscrimination 35. TCI contends that the City has not required Ameritech, the incumbent local exchange carrier in Troy, to obtain a telecommunications franchise. According to TCI: "Under any interpretation of Section 253, right-of-way management must be nondiscriminatory and competitively neutral. The City has failed to honor either requirement." In response to the suggestion that Ameritech may be exempted from local franchising by reason of a franchise that the state issued in the early part of this century, TCI argues, "[r]egardless of the basis for Ameritech's exemption, the fact that only [competitive local exchange carriers] must comply with [the Telecommunications Ordinance] renders the measure discriminatory and anti- competitive in violation of the 1996 Act." 36. TCI further contends that Section 12(1) of the Telecommunications Ordinance is inherently discriminatory. That section provides that if a franchisee provides a "new service, facility, equipment, fee or grant to any other community . . . within the State of Michigan, the same shall be provided in or to the City." According to TCI, "by imposing greater burdens on one provider over others, Section 12(1) is not competitively neutral and nondiscriminatory, as required by Section 253(c)." 37. Other industry commenters agree with TCI that the City has violated section 253(b) and (c) by failing to apply the Telecommunications Ordinance to Ameritech. NCTA suggests that discriminatory application of the Telecommunications Ordinance violates section 253(a) as well, reasoning that requiring a new entrant to pay a franchise fee equal to 5% of its gross revenues, while imposing no such fee on the incumbent, "would make it nearly impossible for the competition to enter the market." 38. MCTA reports that in response to a request made under the Michigan Freedom of Information Act for all licenses and/or franchises issued to Ameritech under the Telecommunications Ordinance, the City produced only a cable franchise agreement between the City and Ameritech New Media. Acknowledging that the City has imposed the Telecommunications Ordinance on another entrant, MFS, the MCTA asserts: Far from establishing a non-discriminatory and evenhanded application of [the Telecommunications Ordinance], this fact unequivocally establishes that Troy is applying its ordinance in a discriminatory manner. All new and potential entrants are being required to comply, but Ameritech . . . is not. 39. MCTA suggests that the City may have refrained from subjecting Ameritech to the Telecommunications Ordinance based on an interpretation of state law. According to MCTA, Ameritech claims to have been granted a franchise by the state before the Michigan Constitution was amended to give municipalities franchising authority. MCTA believes that Troy is assuming that "the contract clause of the Michigan and federal constitutions prohibits Troy's right to impair or regulate Ameritech's existing franchise." MCTA contends that regardless of such issues of state law, section 253 prohibits municipalities from exempting incumbent local exchange carriers from regulations applicable to new entrants. 40. AT&T requests that the Commission make clear that the following activities, inter alia, are not permissible right-of-way management functions under section 253(c), or otherwise violate the Act because they are not competitively neutral and nondiscriminatory:  Grandfathering of situations in which the ILEC has no franchise or certification requirement and pays no compensation to the municipality for use of the public way, yet new entrants are required to obtain a franchise or certification and compensate the municipality for use of the rights-of- way.  Grandfathering the ILEC at a compensation level lower than that paid by new entrants. 41. In a subsequent ex parte filing, David A. Svanda, a member of the Michigan Public Service Commission, avers that the State of Michigan has been a leader in the drive to expand competition into the local telecommunications market. [T]his expanded competition holds the promise of improved services at lower prices to Michigan's business and residential consumers. The key to competition is the removal of barriers to entry and the establishment of a 'level playing field' . . . [T]his will be extremely difficult to do in a patchwork environment of franchise fees and other requirements imposed unevenly on competitors by local governments. According to the Svanda Letter, to impose fees and conditions unrelated to costs caused will be a significant impediment to those attempting to compete with incumbent providers. This is especially true in situations where incumbent providers are claiming exemption from the fees and conditions imposed by local government on new entrants." 42. Attached to the Svanda Letter is a copy of a letter from Michigan Governor Engler to a number of communities in Michigan, including Troy, expressing the Governor's view on the issue of local control over telecommunications facilities. Governor Engler notes that the 1995 Michigan Telecommunications Act ("MTA") set parameters to encourage competition throughout the state similar to those set for the nation by the 1996 Act. The Governor states: A number of Michigan cities have chosen to enact local telecommunications ordinances. Many have chosen a very desirable approach that provides a level playing field for all telecommunications providers and does not include discriminatory franchise taxes. These ordinances allow fair and reasonable recovery of costs related to maintaining the right-of-way. These communities have recognized that the key to establishing an effective competitive environment is to ensure that all competitors are treated equally. That is why the new state and federal laws both require such treatment. I believe the overriding question is not of local control, but a question of removing potential barriers to competition and, thus, intra- and interstate commerce. The Governor's letter closes by urging the municipalities to resist the attempts by some to hide, under the rubric of "local control" of rights-of-way, what are actually efforts to impose discriminatory "franchise taxes," which ultimately are paid by telecommunications consumers in the form of higher rates. "I am concerned that the collective actions of a few could have the impact of paralyzing telecommunications infrastructure investments in our state, as well as your own community." 43. In its comments, Richmond et al. defends what it views as the City's decision to exempt Ameritech from the Telecommunications Ordinance, arguing that section 253 does not require the City to apply the same regulatory scheme to all telecommunications providers. Richmond et al. asserts that TCI has failed to show that it will be offering services comparable to those of Ameritech or that it will be subject to universal service obligations and other requirements faced by Ameritech. According to Richmond et al., the "competitively neutral and nondiscriminatory" provision applies only to telecommunications providers providing comparable services. Hence, it does not violate Section 253(c) to treat providers that provide different services differently for regulatory purposes. Such regulations do not undermine competition and are not discriminatory. 44. Richmond et al. further argues that it would be reasonable for a local government to distinguish between a telecommunications provider that offers service within the local government's jurisdiction and one that merely maintains facilities in that jurisdiction in order to offer service in some other community. Richmond et al. maintains that the requirement of nondiscrimination and competitive neutrality imposed by section 253(c) applies only to the amount of compensation charged for use of the rights-of-way, and does not apply to regulations designed to manage the rights-of-way. Compensation need not be uniform in order to be nondiscriminatory, according to Richmond et al. Richmond et al. asserts that consistent with section 253(c), a municipal government could require a monetary payment from one provider, while demanding in-kind compensation from another provider, as long as overall the compensation demanded of each provider was reasonable, competitively neutral, and non-discriminatory. 45. In its initial and reply comments, the City did not address the issues of lack of competitive neutrality and discrimination against new entrants vis-a-vis the City's treatment of Ameritech that were raised by TCI and other industry commenters. Later, during its presentation at the Commission's December 16, 1996 Public Forum, the City stated that the Ordinance applies equally to all providers of telecommunications services within Troy, including Ameritech, thus drawing no distinction between competitive local exchange carriers ("CLECs") and the incumbent local exchange carrier ("ILEC"). In a subsequent ex parte filing, the City states that it has not changed or amended the Ordinance since December 1995, when the Ordinance was initially enacted. The City also states that it believes that Ameritech currently is in violation of the Ordinance. Accordingly, as part of the City's effort to fully enforce the Ordinance, Troy has notified Ameritech of its non-compliance and has requested that Ameritech complete and submit a franchise application. In the event that Ameritech's failure to comply continues, the City is prepared to take further steps in ensure compliance. 46. Anaheim et al. characterize this situation as the "Incumbent Question," and state that it is not unique to Troy. "It is probably not an understatement to say that resolution of the question of whether to treat new providers in a manner equivalent to incumbents . . . has direct relevance for municipalities throughout the country." According to Anaheim et al., the 1996 Act's movement from a monopoly or quasi-monopoly regime to a competitive market structure, creates certain temporary, transitional market problems. "The Incumbent Question is, we believe, one such problem." Anaheim et al. explains that, normally, due process and other ordinary legal requirements applicable to local governments require that similarly situated carriers be treated in a similar manner. The problem posed by competitive entry into telecommunications, Anaheim et al. suggests, is that carriers generally commence providing service at different times, provide different types of services, in different locales, with different demands for public property and undertake service obligations under different state and local regulatory regimes. Anaheim et al. argues that the 1996 Act does not require that arrangements with new providers mirror those entered into years earlier. "Indeed, because incumbents and new entrants are seldom similarly situated, there should be no presumption that identical treatment is either appropriate or 'competitively neutral and non- discriminatory.'" 47. Anaheim et al. acknowledges that the problem of competitive neutrality as between incumbents and new entrants cannot be solved in one day, or one proceeding, because "the issue is fraught with a host of local and state statutory and regulatory requirements," but offers that the problem is solvable over the near term, provided appropriate guidelines are established. As to the situation in Troy, specifically, Anaheim et al. notes that the City has concluded that Ameritech and TCI must both comply with the City's Telecommunications Ordinance, and is already taking steps to ensure that all telecommunications providers will operate on the same basis. Given this circumstance, Anaheim et al. suggests that the Commission permit the Incumbent Question to first be addressed expeditiously by Troy or the State of Michigan, and should in other cases generally defer to such local authorities where they have stated the intention to address the issue. Troy should be given an appropriate period of time, for example, six to nine months, free from preemption, within which to resolve the Incumbent Question, presumably by bringing the incumbent provider under the City's Telecommunications Ordinance. Failing that, or if parties contest Troy's resolution of the matter, they may seek appropriate relief with the Commission. In the event Troy is unable act, then the Commission should take appropriate action. Anaheim et al. suggests that appropriate action in this circumstance would be preemption of any law or regulation underlying the Ameritech service agreement, not the Troy Telecommunications Ordinance, thereby leaving Ameritech subject to the Troy Ordinance under state law. 48. In a later filing, the City initially reiterates its fundamental position that the Commission lacks jurisdiction to address issues relating to the compensation required by Troy's Ordinance. Notwithstanding, to the extent that the Commission believes it has authority to determine whether the Troy Ordinance is competitively neutral and non-discriminatory, the Ordinance satisfies that standard because it applies to both TCI and Ameritech. At the same time, the City states that it agrees with Anaheim et al.'s proposed interim solution to the issue of whether a CLEC seeking to provide service must be permitted to do so on terms equivalent to the terms to which the ILEC is subjected. The City states that the Anaheim presentation recognized that the manner in which communities treat ILECs may be dependent on arrangements that have been in existence for nearly a century. The City concurs with the Anaheim suggestion that the incumbent question should, in the first instance, be resolved locally within a six to nine month period. "After that time period, parties contesting the issue could request relief from the Commission, which should then focus on preempting the ILEC's arrangement." The City also argues that the Commission's jurisdiction and any action it might take if it were to adopt this solution may extend only to matters outside the scope of section 253(c), and that the courts remain the appropriate venue for resolving disputes that arise under section 253(c). 49. LSGAC, in its advisory recommendation, states that the "Committee is prepared to participate in the development of suggestions to "level the playing field" to require incumbent operators to pay compensation for rights-of-way that embody fair valuation. The Committee asks that the Commission work with the Committee on possible actions the Commission might take to achieve the result that incumbent operators accept fair and modern valuation for use of the public rights-of-way." 50. TCI and representatives from MCI, United States Telephone Association ("USTA"), Association for Local Telecommunications Services ("ALTS"), CPI and Lucent Technologies ("Lucent") addressed several competitive issues raised by the Troy Ordinance, and responded to the "transitional" approach suggested by Anaheim et al. and the City in an joint ex parte presentation. As to the former, the presentation generally noted that the proliferation of local telecommunications ordinances would prevent the development of local competition, undermining one of the principal goals of the 1996 Act. USTA and ALTS stated that other municipalities' adoption of ordinances purporting to regulate telecommunications had already imposed substantial barriers to the provision of competitive new services. USTA indicated that preempting local ordinances that deter competitive entry and new services was among the most important policy goals of their respective members. In addition, TCI and the other participants argued that the establishment of municipal requirements for such matters of interconnection constitutes a barrier to entry prohibited by section 253(a) of the Communications Act . . . and that the discriminatory imposition of a municipal fee or other requirements to a competitor and not to incumbent carriers violates section 253(c) of the Communications Act even during a "transitional" period when the local government is seeking authority to impose the fee on the incumbent. 4. Scope of Municipal Authority Under Michigan State Law 51. TCI maintains that the City's Telecommunications Ordinance exceeds its authority under state law to manage public rights-of-way. TCI points out that under the 1908 Michigan Constitution, municipal governments are empowered to manage their streets and highways. However, the 1995 Michigan Telecommunications Act ("MTA") vests the state with jurisdiction over intrastate telecommunications services, and preempts local municipal ordinances that attempt to regulate telecommunications services. TCI states that the MTA bars municipal governments from using their rights-of-way management authority to charge permittees fees for anything other than the cost of maintenance and management of their public rights-of-way. TCI maintains that the Michigan Constitution limits Troy's management of its rights-of-way to issuing permits and other such functions and provides no basis for the City's current comprehensive telecommunications regulatory scheme. 52. In response, the City argues that the Michigan Constitution delegates to local municipalities both the right to control rights-of-way and the right to grant franchises to entities seeking to transact telecommunications business using those public rights-of-way. The City relies on Article VII, Section 29 of the Michigan Constitution for its authority to regulate telecommunications service. This provision states: No person, partnership, association or corporation, public or private, operating a public utility shall have the right to the use of highways, streets, alleys or other public places of any county, township, city or villages for wires, poles, pipes, tracks, conduits or other utility facilities, without the consent of the duly constituted authority of the county, township, city or village; or to transact local business therein without first obtaining a franchise from the township, city or village. Except as otherwise provided in this constitution the right of all counties, townships, cities and villages to the reasonable control of their highways, streets, alleys and public places is hereby reserved to such local units of government. 53. The City further states that pursuant to the Michigan Constitution, it is well within its rights to adopt the Telecommunications Ordinance in question. According to the City, under state law, before TCI, or any other entity that desires to provide telecommunications service to Troy, can engage in that service, the entity needs to obtain an appropriate franchise from the City. The City argues that the state of Michigan has delegated the franchising function for telecommunications service providers to its local governments. 54. MCTA argues that the constitutional provision relied upon by the City does not reference telecommunications service specifically, and the MTA defines "utility" so as to exclude telecommunications providers from applicable rules. It is therefore questionable whether telecommunications service constitutes a public utility service requiring a franchise in the State of Michigan. MCTA maintains, therefore, that the constitutional provision relied upon by the City does not give it franchising authority over telecommunications providers. 55. The City responds that the legislative history of the constitutional provision at issue demonstrates that the drafters intended to include telephone companies as "utilities." The City contends, accordingly, that the MTA is unconstitutional to the extent that it can be read to deprive municipalities of franchising authority over telecommunications providers. 5. Fair and Reasonable Compensation 56. TCI challenges the franchise fee provisions of the Telecommunications Ordinances as exceeding the "fair and reasonable compensation" to which the City is entitled under section 253(c) when authorizing the use of the public rights of way. Under Section 9 of the Telecommunications Ordinance, a franchisee must pay the lesser of (i) 5% of its gross revenues and (ii) a per linear foot charge of $0.40 for underground facilities and $0.25 for aerial facilities. As noted above, Section 3(6) defines gross revenues as "all receipts collected by the Grantee for all telecommunication and related operations and services within the corporate limits of the City as well as any other revenue arising from operation or possession of [a franchise] regardless of where billed." 57. TCI contends that section 253(c) prohibits the imposition of a revenue-based franchise fee. According to TCI, the Telecommunications Ordinance violates Section 253(c) by imposing fees based on revenues from the provision of services, including revenues unrelated to the system. TCI cites an opinion of the Illinois Supreme Court for the proposition that the fee imposed by a municipality for the use of the public rights-of-way cannot exceed "a measure that would indicate impact on right-of-way use." 58. MCI also contends that a franchise fee based on the provider's gross revenues bears no relation to the use of the rights-of-way and is therefore invalid under section 253(c). Hyperion argues that section 253(c) requires that fees bear a "compensatory relationship to maintenance of the public right of way . . . ." Adelphia suggests that a municipality is entitled to no additional compensation when a cable operator uses its existing facilities to offer telecommunications service, since the municipality is "already receiving compensation for those facilities' occupation of the rights-of-way." TCI, MCI, USTA, CPI, ALTS and Lucent also argue that efforts by local governments to impose fees and conditions on telecommunications providers unrelated to costs caused will be a significant impediment to competition. AT&T submits that "fair and reasonable" compensation cannot mean market-based pricing in the context of a monopoly input such as a public right-of-way. Instead, AT&T argues, a municipality may assess fees only to the extent required to recover an appropriate share of the city's costs occasioned by the use of the public right-of-way such as increased street repair and paving costs. 59. The City asserts that section 253(c) does not limit the compensation received to an amount sufficient only to cover the cost of maintenance of the rights-of-way. The City describes its franchise fee as "reasonable, publicly disclosed, non-discriminatory, and competitively neutral, and thus fully with the [C]ity's authority under Section 253(c)." The City contends that the imposition of a 5% franchise fee on gross revenues has been deemed reasonable in other contexts involving use of the public rights-of-way. The City notes that in adopting section 622(b) of the Communications Act, "Congress found that a franchise fee of up to 5% is appropriate compensation to a city for a cable system's use of its rights-of-way." The City states that in the 1996 Act "Congress determined that 5% of gross revenues is also appropriate compensation to a city for an open video system provider's use of the rights-of-way, even though no Title VI franchise may be imposed on an [open video system] provider." 60. The City notes that, to the extent TCI objects to a franchise fee that is based on gross revenues, TCI has the option of basing its fee on a fixed per linear foot charge for the use of the rights-of- way. Moreover, consistent with its overall construction of section 253, the City contends that the franchise fee complies with section 253(a) because it does not have the effect of prohibiting any entity from providing telecommunications service and therefore is not subject to scrutiny under section 253(c). 61. PROTEC agrees with the City that section 253(c) does not limit a franchise fee to the amount necessary to compensate the municipality for the cost of overseeing the franchisee's use of the rights-of-way. "Mere recoupment of expenses is hardly 'fair and reasonable compensation,'" according to PROTEC. PROTEC likens the City to a landlord renting private property and asserts that fair and reasonable compensation for the rental of property is not "restricted to recoupment of the owner's cost of managing a tenant's use of the property." Charging a fee based on the franchisee's gross revenues is fair and reasonable, according to PROTEC. 62. Richmond et al. notes that, like cable operators, open video system operators also are subject to a franchise fee based on gross revenues, and contends that the Commission has described such a fee as being compensation for the use of the public rights-of-way. Richmond et al. argues that the City's imposition of a revenue based franchise fee is consistent with these analogous provisions of federal law and therefore "must be deemed reasonable." 63. The TMIC Communities contend that establishing a franchise fee as a percentage of gross revenues "is a good market-based approach because the rent is based upon the economic value of the property rights in question, namely the income stream they generate." As in the case of a private property owner, a municipality should be able to impose a franchise fee that reflects the value of the property, in addition to holding the franchisee accountable for direct, out-of-pocket costs incurred by the municipality, according to the TMIC Communities. The TMIC Communities contend that a revenue-based franchise fee is the most prevalent measure of compensation for use of the public rights-of-way, not simply with respect to the provision of communications services such as cable and telephone, but also in the areas of gas and electric service. 6. Commission Jurisdiction to Preempt Under Section 253(d) 64. The City's overriding defense to TCI's Petition is its claim that the Commission lacks jurisdiction to preempt the Telecommunications Ordinance. The City characterizes the Telecommunications Ordinance as an exercise of the authority reserved to it by section 253(c) to manage its rights-of-way and to receive fair and reasonable compensation for the use of those rights-of-way. While TCI alleges that the Telecommunications Ordinance does not satisfy the standards set forth in section 253(c) for rights-of-way management, the Commission is not the proper forum for resolving such claims, according to the City. The City notes that under the express language of section 253(d), the Commission's preemption authority extends only to a state or local requirement "that violates subsection (a) or (b)" of section 253. The City argues that section 253(d) thus "gives the Commission no authority to preempt state or local government management of or compensation received for the use of their rights-of-way." 65. The City notes that a prior Senate version of section 253(d) would have permitted the Commission to preempt, without limitation, any violation of section 253. Following a proposed amendment that would have eliminated the Commission's preemption authority entirely, Senator Gorton offered a compromise amendment that omitted violations of subsection (c) from the scope of section 253(d), but left intact the Commission's authority to preempt other violations of section 253, according to the City. The Senate unanimously adopted Senator Gorton's amendment by voice vote, and that version of the bill became the final legislation. The City notes Senator Gorton's description of the impact of his amendment: There is no preemption . . . for subsection (c) . . . which preserves to local governments control over their public rights of way. It accepts the proposition . . . that these local powers should be retained locally, that any challenge to them take place in the Federal district court in that locality and the Federal Communications Commission not be able to preempt such actions. 66. The City argues that the House of Representatives joined in this view of Commission jurisdiction, noting the floor statement of one member of the House: As for the issue of FCC preemption, I am pleased that the committee agreed to support the Senate language which authorizes the Commission to preempt the enforcement only of State or local requirements that violate subsection (a) or (b), not (c). The courts, not the Commission, will address disputes under section 253(c). 67. According to the City, Troy's Telecommunications Ordinance and the actions Troy took with respect to TCI's permits all relate directly to the City's management of its rights-of-way. In support of this contention, the City notes that the Legislative Findings of the Telecommunications Ordinance state that it "is intended to minimize the disruption" of the public rights-of-way and to regulate "the construction and the restoration" of the rights-of-way by "those who seek to construct" telecommunications facilities. The City contends that the Commission must dismiss the Petition because the Commission lacks jurisdiction under section 253(d) to preempt any local regulation that relates to the management of and compensation for the use of the public rights-of-way. In further support of this contention, the City cites federal case law for the proposition that courts are reluctant to find federal preemption of matters traditionally governed by state law. The City cites section 2(b) of the Communications Act as a further restriction on the Commission's jurisdiction to regulate matters affecting intrastate communications. 68. Municipal commenters agree with the City's statutory analysis concerning the omission of subsection (c) from subsection (d). The TMIC Communities note that Senator Gorton proposed his amendment in response to a broader amendment proposed by Senator Feinstein that would have eliminated all Commission jurisdiction under section 253. As the TMIC Communities indicate, Senator Feinstein offered her amendment based on her concern that when faced with a challenge under section 253: cities will have to send delegations of city attorneys to Washington to go before a panel of telecommunications specialist[s] at the FCC, on what may be very broad questions of State or local government rights. . . . It should not be this way. Cities should have control over their streets. Counties should have control over their highways. 69. According to TMIC Communities, Senator Feinstein favored a procedure under which "the cable company may challenge the city or State action directly to the Federal court in the locality and the court will review whether the city or State acted reasonably under the circumstance." TMIC Communities state that Senator Gorton then offered his compromise amendment, ultimately adopted by voice vote, giving the Commission authority to preempt violations of subsections (a) or (b) only. According to the TMIC Communities, this legislative history "irrefutably establishes that Congress intended to and did deprive this Commission of any jurisdiction to hear the claims asserted by TCI." The TMIC Communities add: Local regulations which relate to the control of public rights-of-way or compensation for the use of public rights-of-way are simply not subject to FCC review. Challenges to these regulations must be brought in local courts, not before the FCC. 70. PROTEC asserts that the Telecommunications Ordinance can violate section 253(a) only if it is outside the City's authority under section 253(c). Citing the legislative history discussed above, PROTEC argues that the Commission's subsection (d) preemptive power can come into play only where subsection (c) does not apply, and the courts, not the Commission, must determine whether subsection (c) applies. The omission of subsection (c) from subsection (d), PROTEC claims, "takes the Commission completely out of the business of regulating disputes over state and local rights-of-way management and compensation requirements." The Commission's alleged lack of jurisdiction over matters arising under section 253(c) is not only mandated by the plain language of section 253(d), according to PROTEC, but is also a wise policy choice: Placement of facilities in the rights-of-way causes significant damage to very expensive infrastructure which is the lifeblood of any community. Different communities have devised different procedures for protecting the right-of-way, which may vary significantly depending on the geography of a particular locality, as well as other factors. These approaches are designed to reflect local circumstances, state laws, constitutions and charters, and once again, there is little reason for the Commission to suppose it can or should decide what the best method for protecting the rights-of-way might be. The Commission is not in a position to write a national local franchising ordinance, and should avoid doing so. 71. Similarly, PROTEC argues that a determination under section 253(c) of what constitutes fair and reasonable compensation for the use of public rights-of-way is likely to be affected by community- specific facts concerning rights-of-way value, by a particular community's existing franchise contracts, by state law, by local charters and by the differing regulatory obligations assumed by particular providers. Not only is Commission consideration of those matters prohibited by statute, it ought to be avoided by the Commission in any case. Were the Commission to become the arbiter of Section 253(c) disputes, it would have to resolve individual factual and state law matters relating to thousands of different communities across the nation. That is a burden the Commission lacks the resources and state law expertise to carry. And that is why Congress properly left those disputes to the courts. 72. TCI replies that the instant dispute does not involve section 253(c) because the "elaborate franchising requirements" of the Telecommunications Ordinance do not constitute rights-of-way management. TCI further asserts that the City is precluded by both federal state law from regulating in the areas identified in section 253(b). This leaves the Commission with jurisdiction to preempt the Telecommunications Ordinance under section 253(d), according to TCI. 73. TCI claims that the legislative history supports its view that "any exception to the FCC's preemptive authority for rights-of-way management should be narrowly construed." TCI quotes Senator Gorton, from the floor debate, as describing the impact of his amendment as removing from Commission oversight only "'purely local matters dealing with rights-of-way.'" TCI notes that Senator Gorton described those local matters as including "whether there are above-ground wires or underground wires, what kind of equipment ought to be used in excavations, [and] what hours excavations should take place. . . .'" TCI further quotes Senator Gorton's remark that: if, under section (b), a City or county makes quite different rules relating to universal service or the quality of telecommunications services -- the very heart of this bill -- then there should be a central agency at Washington, DC, which determines whether or not that inhibits the competition and the very goals of this bill . . . . 74. In addition, TCI restates its position that sections 253(a) and (d) require the Commission to preempt a local regulation that "impedes an entity's ability to offer telecommunications services," notwithstanding any purported justification for the regulation under section 253(c). Contending that the Telecommunications Ordinance is barrier to entry that cannot be saved under section 253(c) in any event, TCI argues that the issue of jurisdiction to decide section 253(c) matters never arises. 75. Other members of the cable industry concur with TCI's analysis. Comcast argues that even if the Commission lacks jurisdiction to review local regulation of the public rights-of-way, the Commission would still have inherent jurisdiction to make the threshold determination of what constitutes a valid management activity, and thus is within its jurisdiction. Exercising that authority should compel the Commission to conclude that the Telecommunications Ordinance "is completely unrelated to the management of the rights-of-way," and thus is subject to Commission preemption as a barrier to entry, according to Comcast. 76. Relying on the legislative history quoted by TCI above, NCTA asserts the limitation on the Commission's authority to preempt extends "only to such core decisions on rights-of-way matters as the hours during which construction may occur, what kind of excavation equipment would be used, and the amount of reimbursement due for damage done to the rights-of-way." Congress did not intend to prohibit Commission preemption of local regulatory requirements "where municipal activities ranged beyond these core issues." Cox adds that the issue of whether a cable operator must obtain a separate franchise to provide telecommunications services is "precisely the sort of fundamental issue arising under the [1996] Act that requires a uniform answer nationwide."