	Overview: The Environment Today

When awarding franchises for the use of public rights of way to offer cable television service, many local jurisdictions have required the cable companies to set aside some of their channel capacity for public access, educational, or governmental (collectively, PEG) use and to provide financial support for those PEG access channels. PEG channels are not mandated by federal law. But the Cable Communications Policy Act of 1984 ( P.L. 98-549 ) amended the Communications Act to explicitly allow franchising authorities to require cable operators to set aside channel capacity for PEG use and to provide adequate facilities or financial support for those channels. These PEG provisions have been a primary vehicle for fostering in cable systems the long-standing U.S. media policy goal of localism. The environment for PEG channels has been roiled by a number of public policy and budgetary changes at the federal, state, and local level and by technological changes in cable networks. More than 100 PEG access centers—which provide community groups and individuals free access to video production facilities and equipment, training, and programming time—have closed since 2005, and others are threatened by severe funding cuts. Not all PEG access centers and PEG channels are facing this bleak environment, however; many continue to have stable funding sources. In the past few years, 21 states have enacted laws allowing cable systems to obtain statewide franchises. Some of these laws have abrogated or phased out PEG provisions in existing local franchise agreements that required the franchisees to set aside channels, provide financial or in-kind support, or provide studio facilities —or cable companies have interpreted the laws to allow them to reduce or eliminate PEG support. But some local jurisdictions that have long provided such support for PEG operations are facing budget shortfalls that are forcing them to reduce their PEG funding. Traditional cable providers are migrating in stages from analog to digital transmission of their programming, so not all programming has yet been shifted to digital transmission. Some PEG advocates and local jurisdictions claim AT&T is offering PEG programming in an inferior and discriminatory fashion that does not meet the requirements of local franchise agreements or the Communications Act. AT&T responded that U-verse is not a cable service subject to those requirements, but that in any case it meets all those requirements and would be required to deploy its IP network inefficiently in order to meet requirements developed for traditional cable architecture. Legislation That Had Been Introduced in the 112th Congress: H.R. 1746 , which sought to mitigate the impact of provisions in state franchising laws that may reduce resources and support for PEG access centers and also to sustain consumer access to PEG channels. If a state enacted a law affecting cable system franchising requirements relating to support for PEG use of a cable system, a cable operator would owe to any local government subdivision in which the operator provides cable service an amount to be determined by the subdivision but not to exceed the greatest of: (a) the amount of support provided in the last calendar year ending before the effective date of the state legislation; (b) the average annual amount of support provided over the term of the franchise under which the cable operator was operating before the effective date of the state law; (c) the amount of support that the cable operator is required to provide to the subdivision under the state law; or (d) an amount of support equal to 2% of the gross revenues of the cable operator from the operation of the cable system to provide cable services in the subdivision. This would prohibit a cable operator from migrating PEG channels to a digital tier while continuing to offer commercial channels on an analog tier and then charging analog customers for a set-top box to obtain the PEG channels. NCTA claimed the CAP Act would increase cable company costs and lead to higher cable rates, and that since these requirements would not have applied to satellite operators the cable companies would have been placed at a competitive disadvantage.
The environment for public, educational, and governmental (PEG) cable channels has been roiled by public policy and budgetary changes at the federal, state, and local levels and by technological changes in cable networks. More than 100 PEG access centers—which provide community groups and individuals free access to video production facilities and equipment, training, and programming time—have closed since 2005, and more may close when provisions in recently enacted state laws that eliminate requirements for cable companies to provide funding support take effect. Many PEG access centers, however, continue to have stable funding sources.
When awarding franchises for the use of public rights of way to offer cable television service, many local jurisdictions required the cable companies to set aside some of their channel capacity for PEG use and to provide financial support for those PEG access channels. Those channels are not mandated by federal law. But the Cable Communications Policy Act of 1984 amended the Communications Act to explicitly allow franchising authorities to require cable operators to set aside channel capacity for PEG use and to provide adequate facilities or financial support for those channels. These PEG provisions have been a primary vehicle for fostering in cable systems the long-standing U.S. media policy goal of localism.
Several recent developments are affecting the amount of financial support from cable providers and local governments for the PEG channels. In recent years, 21 states have enacted laws allowing cable systems to obtain statewide franchises. Some of these laws have abrogated or phased out PEG-related provisions in local franchise agreements requiring the franchisees to set aside channels, provide financial support, or provide studio facilities. In addition, the Federal Communications Commission (FCC) has adopted rules that may limit the amount of PEG financial support for non-capital costs that local franchise authorities can require of cable providers. Also, some local jurisdictions that have funded PEG operations are now facing budget deficits that are leading them to reduce or eliminate their PEG funding.
Driven by technological changes, some cable operators have begun to offer PEG channels in a fashion that may reduce consumer access to, and the quality of, those channels, and may raise consumer costs to obtain PEG channels. As traditional cable providers are migrating from analog to digital transmission of programming, some subscribers must obtain set-top boxes to receive PEG programming. AT&T's U-verse service uses a different platform for PEG channels than for commercial channels. It is more difficult for subscribers, especially the visually impaired, to access the PEG channels, and PEG programming cannot be recorded on a DVR, leading some to claim the service does not meet requirements in franchise agreements or in the Communications Act. AT&T responds that it meets all requirements and it is inappropriate to require it to deploy its network inefficiently to meet rules developed for traditional cable architecture.
One bill introduced in the 112th Congress, the Community Access Preservation (CAP) Act (H.R. 1746), would have allowed local jurisdictions in states that pass state franchise laws to require cable companies to provide PEG support equal to the greater of the amount required under the state law, the historical support required prior to enactment of the state law, or 2% of the gross cable revenues of the cable operator. That PEG support would not have been included in the statutory cap on franchise fees of 5% of revenues. The bill would have prohibited cable operators from charging subscribers for set-top boxes needed to receive PEG channels that are migrated from analog to digital tiers. The cable industry opposed the bill, claiming it would raise costs and rates and place cable operators at a competitive disadvantage with satellite television operators.