Request By:
Ms. Patsy Judd
Executive Director
Kentucky CATV Association
Box 414
Burkesville, Kentucky 42717
Opinion
Opinion By: Robert F. Stephens, Attorney General; By: Charles W. Runyan, Assistant Deputy Attorney General
On behalf of the Kentucky CATV Association, you request our opinion as to whether counties in Kentucky have the authority to issue cable television franchises. You also ask whether or not it is constitutional for a county to regulate the rates of cable TV systems doing business in the county.
In answer to your first question, we concluded in OAG 77-111, copy enclosed, that a fiscal court has the authority under § 164 of the Kentucky Constitution to grant franchises involving cable television operations.
The franchise power exists by virtue of the fact that cable television [cable and wire] is constructed over county road systems, over which the fiscal court has jurisdiction.
Warfield Natural Gas Co. v. Lawrence County, 300 Ky. 410, 189 S.W.2d 357 (1945); and
Ray v. City of Owensboro, Ky., 415 S.W.2d 77 (1967).
Now let us consider the question as to the power of fiscal court to regulate the rates of such cable television systems in the county.
Only the nature of a franchise of this kind can enable us to analyze properly this issue. In City of Owensboro v. Top Vision Cable Co. of Ky., Ky., 487 S.W.2d 283 (1972) 287, the court wrote that "we are also of the opinion that a franchise is an agreement between the granting authority and the holder and partakes of the usual incidents of a contract." The defining and granting of a franchise is the exercise of a legislative function of the sovereignty.
Kentucky Utilities Co. v. Board of Comr's, 254 Ky. 527, 71 S.W.2d 1024 (1934) 1026.
The franchise price is determined by the award and contract douments, after bidding procedure. Under § 164, Constitution, the franchise period cannot exceed 20 years; and the award is made to the "highest and best bidder" in open competition. This affords local governmental unit flexibility in arriving at reasonable terms and conditions. But the terms must be fair to the governmental unit, the utility, and the public.
It is our opinion that counties, through fiscal court, generally have the authority to establish in the contract of franchise reasonable provisions for service and rates under § 164, Kentucky Constitution, as are calculated to effectuate the purposes for which it is granted.
Christian-Todd Telephone Co. v. Commonwealth, 156 Ky. 557, 161 S.W. 543 (1913) 545; and
Kentucky Utilities Co. v. Bd. of Comr's, 254 Ky. 527, 71 S.W.2d 1024 (1934) 1028.
A Nevada United States District Court, in TV Pix, Inc. v. Taylor, 304 F.Supp. 459 (1968), pointed out that appropriate state regulation of cable TV, which was deemed to involve primarily local facilities and services, in the absence of federal legislative intervention, is not proscribed by the commerce clause of the constitution (federal). The court said that matters of service and rates of cable TV are not of the character demanding national uniformity such that state action would be entirely inadmissible. On the contrary, it said, these are subjects lending themselves naturally to local control and supervision. Thus, until and unless the Federal Communications Commission intervenes by way of rates regulations, the power of the fiscal court to agree on such rates by way of the franchise contract is a valid one. See
United States v. Southwestern Cable Co., 392 U.S. 157, 20 L. Ed. 2d 1001, 88 S. Ct. (1968), in which the court held that under the Federal Communications Act [47 U.S.C. § 152(a) and § 303(r)] the Federal Communications Commission has authority to regulate community antenna television (CATV) systems, such regulatory authority extending to all interstate communication by wire or radio. Apparently the F.C.C. has refrained from getting into the business of directly regulating rates to subscribers and the award of CATV franchises. 1 F.C.C.2d 453, par. 32. Cf. 47 C.F.R. part 76, p. 463 et seq. , § 76.1 et seq. , relating to cable television service under F.C.C. regulations. In 47 C.F.R. § 76.31 it is provided that franchise fees shall be no more than three percent (3%) of the franchisee's gross subscriber revenues per year from cable television operations in the community. A franchise fee in the range of three (3) to five(5) percent of such revenues may be approved by the F.C.C. if reasonable upon showings: (1) by the franchisee, that it will not interfere with the effectuation of federal regulatory goals in the field of cable television, and (2) by the franchising authority, that it is appropriate in light of the planned local regulatory program.
The Public Service Commission has for many years interpreted KRS 278.010(3) to not include cable television under its regulatory authority.