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     STATE AND LOCAL REGULATION.  Cable television systems generally are
operated pursuant to nonexclusive franchises granted by a municipality or other
state or local government entity in order to cross public rights-of-way. Federal
law now prohibits local franchising authorities from granting exclusive
franchises or from unreasonably refusing to award additional franchises. Cable
franchises generally are granted for fixed terms and in many cases include
monetary penalties for non-compliance and may be terminable if the franchisee
failed to comply with material provisions.
     The specific terms and conditions of franchises vary materially between
jurisdictions. Each franchise generally contains provisions governing cable
operations, service rates, franchising fees, system construction and maintenance
obligations, system channel capacity, design and technical performance, customer
service standards, and indemnification protections. A number of states,
including Connecticut, subject cable systems to the jurisdiction of centralized
state governmental agencies, some of which impose regulation of a character
similar to that of a public utility. Although local franchising authorities have
considerable discretion in establishing franchise terms, there are certain
federal limitations. For example, local franchising authorities cannot insist on
franchise fees exceeding 5% of the system's gross cable-related revenues, cannot
dictate the particular technology used by the system, and cannot specify video
programming other than identifying broad categories of programming.
     Federal law contains renewal procedures designed to protect incumbent
franchisees against arbitrary denials of renewal. Even if a franchise is
renewed, the local franchising authority may seek to impose new and more onerous
requirements such as significant upgrades in facilities and service or increased
franchise fees as a condition of renewal. Similarly, if a local franchising
authority's consent is required for the purchase or sale of a cable system or
franchise, such local franchising authority may attempt to impose more
burdensome or onerous franchise requirements in connection with a request for
consent. Historically, most franchises have been renewed for and consents
granted to cable operators that have provided satisfactory services and have
complied with the terms of their franchise.
     Under the 1996 Telecom Act, cable operators are not required to obtain
franchises for the provision of telecommunications services, and local
franchising authorities are prohibited from limiting, restricting, or
conditioning the provision of such services. In addition, local franchising
authorities may not require a cable operator to provide any telecommunications
service or facilities, other than institutional networks under certain
circumstances, as a condition of an initial franchise grant, a franchise
renewal, or a franchise transfer. The 1996 Telecom Act also provides that
franchising fees are limited to an operator's cable-related revenues and do not
apply to revenues that a cable operator derives from providing new
telecommunications services.