In Montgomery County v. FCC, (1) the United States Court of Appeals for the Sixth Circuit held that while the FCC's "mixed-use" rule and interpretation of the term "franchise fee" were arbitrary and capricious, the FCC was not required to invalidate "most-favored-nation" clauses. The Court also held that the FCC made a good faith effort to comply with the Regulatory Flexibility Act ("RFA"). Though local franchising authorities have objected to these FCC's regulations for the past decade, this case marks the first time the Court has granted in part a local government's petition for review. (2)
In the 1950's, the American public began to have widespread access to cable television. (3) The Communications Act of 1934 ("the Act") gave the FCC the ability to regulate state and local franchising authorities in regards to cable franchises, and, in 1968, the Supreme Court "affirmed the FCC's regulatory authority over cable television[.]" (4) In 1984, Congress passed the Cable Act, (5) which preserved a role for local franchising authorities ("LFAs") by giving franchising discretion to states and localities. (6) Under the Cable Act, the FCC shared regulatory authority over cable with LFAs, who had "retained discretion to decide whether to grant cable franchises to applicants in their communities." (7)
Section 621 of the Cable Act requires cable companies to receive a franchise prior to offering service and gives LFAs the ability to dole out these franchises. (8) In 1992, Section 621 was amended (9) by Congress to prevent LFAs from monopolizing jurisdictions. (10) In 2006, the FCC implemented the "First Order," which set out the FCC's statutory interpretations of Section 621 and procedural compliance guidelines. (11) In the First Order, the FCC declined to preempt state regulations, and only addressed "decisions made by county- or municipal-level franchising authorities." (12) However, the First Order did lay out "reasonableness" guidelines for I-Nets (13) and Public Educational and Governmental ("PEG") facilities, and calculation guidelines for franchise fees. (14) The First Order also preempted "most-favored-nation clauses" (15) which LFAs used to require new cable providers to meet expectations that incumbent providers were exempt from, and limited "LFAs' jurisdiction... only to the provision of cable services over cable systems[,]" so that mixed-use networks no longer fell under LFAs' control. (16)
In 2007, the FCC...