Request By:
Hon, Tipton Baker
Harlan County Judge/Executive
P.O. Box 944
Harlan, Kentucky 40831
Opinion
Opinion By: Steven L. Beshear, Attorney General; By: Charles W. Runyan, Assistant Deputy Attorney General
Some questions have been raised in Harlan County concerning cable television. You stated the questions as follows:
"We have a group that is wanting Fiscal Court to franchise a system, which they feel we can do the following two things: (1) Require the cable operators to perform at a certain designated level, meeting FCC Guidelines. This, I believe, we can do. (2) They believe we can control the rate that the cable operators charge. I feel we could only be able to assure customers under similar circumstances the same charge, but would have nothing to say about the cable operators base rate, etc."
The fiscal court's authority to grant a cable television franchise is found in § 163 and § 164 of the Kentucky Constitution. Section 164 reads:
"No county, city, town, taxing district or other municipality shall be authorized or permitted to grant any franchise or privilege, or make any contract in reference thereto, for a term exceeding twenty years. Before granting such franchise or privilege for a term of years, such municipality shall first, after due advertisement, receive bids therefor publicly, and award the same to the highest and best bidder; but it shall have the right to reject any or all bids. This section shall not apply to a trunk railway.
The franchise power exists where 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) 79 and also see KRS 67.080, 67.083, and KRS Chapters 178 and 179.
Of course, the franchise must be let out on competitive bids, pursuant to § 164 of the Constitution, i.e., to the "highest and best bidder" . Willis v. Davis, Ky., 534 S.W.2d 255 (1976) 256, 257.
The Court wrote in City of Owensboro v. Top Vision Cable Co. of Ky., Ky., 487 S.W.2d 283 (1972) 287, that a cable TV franchise is an agreement or contract 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 court, in Ray v. City of Owensboro, above, stated that "The purpose of the section (§ 163, Ky. Const.) was to give the city control of the streets, alleys and public grounds and to make it possible for the city to provide the services of these utilities to its inhabitants." (Emphasis added).
The franchise price is determined by the award and contract documents, after bidding procedure. The award to the highest and best bidder in open competition affords the fiscal court flexibility in arriving at reasonable terms and conditions of the franchise contract. But the terms must be reasonable and fair to the county government, the utility, and the public.
SERVICE AND RATES OF THE UTILITY RECEIVING THE FRANCHISE
It is our opinion that the fiscal court has the authority to establish in the franchise contract reasonable provisions for the service and rates, under §§ 163 and 164 of the 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. Also see Akers v. Floyd County Fiscal Court, Ky., 556 S.W.2d 146 (1977). There must be some reasonable relationship between the regulation and the avowed purpose to be accomplished. Schoo v. Rose, Ky., 270 S.W.2d 940 (1954). The court ruled, in City of Campbellsville v. Taylor County Telephone Co., 229 Ky. 843, 18 S.W.2d 305 (1929) 308, that it was proper for the franchise to provide the conditions under which, and the rates for which, the service should be rendered.
The case of United States v. Southwestern Cable Co., 392 U.S. 157, 20 L. Ed. 2d 1001, 88 S. Ct. 1994 (1968), held that under the Federal Communications Act [47 U.S.C. § 152(a) and & 303(r)] the FCC has the authority to regulate community antenne television (CATV) systems, such regulatory authority extending to all interstate communication by wire or radio. However, the FCC has apparently refrained from getting into the business of directly regulating rates to subscribers and the award of CATV franchises. 47 C.F.R. Part 76. See also Akers v. Floyd County Fiscal court, Ky., 556 S.W.2d 146 (1977).
It is our opinion that the franchise contract's requiring the cable operator to perform at a level which would meet applicable FCC guidelines would be reasonable and valid. See 47 CFR § 76.1 et seq., for applicable rules or regulations. See also 4 FCC 2d 236 (1966).
It is also our opinion that the fiscal court can provide for reasonable rates covering charges to subscribers.
The FCC has provided in 47 CFR § 76.31 that franchise fees (here the fee to the county) shall be no more than three (3) percent of the franchisee's gross revenues per year from all cable services in the community. If the franchise fee is in the range of 3 to 5 percent of such revenues, the fee shall be approved by the commission if reasonable upon showings: (a) by the franchisee, that it will not interfere with the effectuation of federal regulatory goals in the field of cable television, and (b) by the franchising authority, that it is appropriate in light of the planned local regulatory program.