Los Angeles October 10, 2007 Michael Morris Video Franchising & Broadband Deployment Communications Division California Public Utilities Commission DIGITAL INFRASTRUCTURE & VIDEO COMPETITION ACT ROLE OF THE CALIFORNIA PUBLIC UTILITIES COMMISSION

DIVCA’s GOALS Create a fair and level playing field for all market competitors that does not disadvantage or advantage one service provider or technology over another. Promote the widespread access to the most technologically advanced cable and video services to all California communities in a nondiscriminatory manner regardless of socioeconomic status. Protect local government revenues and their control of public rights-of- way. Require market participants to comply with all applicable consumer protection laws. Complement efforts to increase investment in broadband infrastructure and close the digital divide.

STATE FRANCHISING AUTHORITY COMMISSION’S RESPONSIBILITIES Issue and renew 10-year state franchises Enforce build out and nondiscrimination requirements  Holders submit data regarding households offered service (video and broadband), subscribers and demographic data annually Annual reports to legislature and governor Protect against cross-subsidization

STATE FRANCHISING AUTHORITY FRANCHISING PROCESS Video providers are not utilities  No protests or interveners $2000 application fee Confirm Technical, Managerial, Financial Qualifications  Bond requirement ($100,000 to $500,000)  $100,000/20,000 households Affidavit re lawful operation Definition of franchise territory Demographic information re households/low income by census block group List of affected local entities

STATE FRANCHISING AUTHORITY FRANCHISING PROCESS Ministerial process Within 30 days – determine if application is complete If incomplete – notify applicant  Restart 30-day clock If complete – issue franchise within 14 days or it is deemed issued Notify affected local entities

STATE FRANCHISING AUTHORITY FRANCHISING PROCESS Proposed rules were released in January – final vote on March 1 st  Modification and Resolution changing forms  Phase II underway (small LECs; additional data requirements)  Phase III to examine certain procedural questions Established a Video Franchising Team and began accepting applications for state franchises on March 2 nd The Commission has approved franchises for Verizon, AT&T and Cox and Wave  Verizon application received March 2 nd ; franchise granted March 8 th  AT&T application received March 7 th ; franchise granted March 30 th  Cox application received April 11 th ; franchise granted April 27 th  Wave application received August 9 th ; franchise granted Sept. 7th

STATE FRANCHISING AUTHORITY BUILD OUT REQUIREMENTS Holders may not discriminate against or deny access to service to any group of potential residential subscribers because of the income of the residents in the local area in which the group resides Holders or their affiliates with fewer than 1,000,000 telephone customers satisfy this section if they offer video service to all customers within their telephone service area within a reasonable time, as determined by the Commission  Phase II proposes “safe harbor” equal to large LEC test Holders or their affiliates with more than 1,000,000 telephone customers shall provide access to its video service percent of the customer households in the holder’s telephone service area within two years after it begins providing video service, and to a number at least equal to percent of those households within five years (see fine print)

STATE FRANCHISING AUTHORITY NONDISCRIMINATION REQUIREMENTS State franchisee may not discriminate against or deny access to service to any group of potential residential subscribers because of the income of the residents A holder with more than 1,000,000 telephone customers satisfies this requirement if all of the following conditions are met:  Within three years after it begins providing video service, at least 25 percent of households with access to the holder’s video service are low-income households, and within five years, 30% are low-income  It provides service to community centers in underserved areas, as determined by the holder, without charge, at a ratio of one community center for every 10,000 video customers.

STATE FRANCHISING AUTHORITY COMPLAINTS Local governments may bring complaints alleging violations of the build out or nondiscrimination requirements  or the Commission may open an investigation on its own motion  public hearings are required The Commission may suspend or revoke the franchise The Commission may impose a fine not to exceed 1 percent of the holder’s total monthly gross revenue received from provision of video service in the state each month from the date of the decision until the date that compliance is achieved

DIVCA LOCAL ENTITY RESPONSIBILITIES Franchise fees Customer service standards  ½ of fines to Digital Divide Account CEQA review Encroachment permits Emergency alert PEG channels/support