By: Carona	S.B. No. 1087
	(In the Senate - Filed March 2, 2011; March 16, 2011, read
	first time and referred to Committee on Business and Commerce;
	April 4, 2011, reported adversely, with favorable Committee
	Substitute by the following vote:  Yeas 8, Nays 1; April 4, 2011,
	sent to printer.)
	COMMITTEE SUBSTITUTE FOR S.B. No. 1087	By:  Carona

	A BILL TO BE ENTITLED
	AN ACT
	relating to state-issued certificates of franchise authority to
	provide cable service and video service.
	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
	SECTION 1.  Subsection (a), Section 66.003, Utilities Code,
	is amended to read as follows:
	(a)  An entity or person seeking to provide cable service or
	video service in this state [after September 1, 2005,] shall file an
	application for a state-issued certificate of franchise authority
	with the commission as required by this section.  An entity
	providing cable service or video service under a franchise
	agreement with a municipality is not subject to this subsection
	with respect to such municipality until the franchise agreement is
	terminated under Section 66.004 or until the franchise agreement
	expires[, except as provided by Section 66.004].
	SECTION 2.  Section 66.004, Utilities Code, is amended by
	amending Subsections (a), (c), and (f) and adding Subsection (b-1)
	to read as follows:
	(a)  A cable service provider or a video service provider
	that currently has or had previously received a franchise to
	provide cable service or video service with respect to a
	municipality may [such municipalities is not eligible to] seek a
	state-issued certificate of franchise authority to provide service
	to the municipality under this section [chapter as to those
	municipalities until the expiration date of the existing franchise
	agreement, except as provided by Subsections (b) and (c)].
	(b-1)  Beginning September 1, 2011, a cable service provider
	or video service provider that was not allowed to or did not
	terminate a municipal franchise under Subsection (b) may elect to
	terminate all unexpired municipal franchises and seek a
	state-issued certificate of franchise authority for each area
	served under a terminated municipal franchise by providing written
	notice to the commission and each affected municipality before
	January 1, 2012.  A municipal franchise is terminated on the date
	the commission issues a state-issued certificate of franchise
	authority to the provider for the area served under that terminated
	franchise.
	(c)  A cable service provider [that serves fewer than 40
	percent of the total cable customers in a municipal franchise area
	and] that elects under Subsection (b) or (b-1) to terminate an
	existing municipal franchise is responsible for remitting to the
	affected municipality before the 91st day after the date the
	municipal franchise is terminated any accrued but unpaid franchise
	fees due under the terminated franchise.  If the cable service
	provider has credit remaining from prepaid franchise fees, the
	provider may deduct the amount of the remaining credit from any
	future fees or taxes it must pay to the municipality, either
	directly or through the comptroller.
	(f)  Except as provided in this chapter, nothing in this
	chapter is intended to abrogate, nullify, or adversely affect in
	any way the contractual rights, duties, and obligations existing
	and incurred by a cable service provider or a video service provider
	before the date a franchise expires or the date a provider
	terminates a franchise under Subsection (b-1), as applicable,
	[enactment of this chapter,] and owed or owing to any private
	person, firm, partnership, corporation, or other entity including
	without limitation those obligations measured by and related to the
	gross revenue hereafter received by the holder of a state-issued
	certificate of franchise authority for services provided in the
	geographic area to which such prior franchise or permit applies.
	All liens, security interests, royalties, and other contracts,
	rights, and interests in effect on September 1, 2005, or the date a
	franchise is terminated under Subsection (b-1) shall continue in
	full force and effect, without the necessity for renewal,
	extension, or continuance, and shall be paid and performed by the
	holder of a state-issued certificate of franchise authority, and
	shall apply as though the revenue generated by the holder of a
	state-issued certificate of franchise authority continued to be
	generated pursuant to the permit or franchise issued by the prior
	local franchising authority or municipality within the geographic
	area to which the prior permit or franchise applies.  It shall be a
	condition to the issuance and continuance of a state-issued
	certificate of franchise authority that the private contractual
	rights and obligations herein described continue to be honored,
	paid, or performed to the same extent as though the cable service
	provider continued to operate under its prior franchise or permit,
	for the duration of such state-issued certificate of franchise
	authority and any renewals or extensions thereof, and that the
	applicant so agrees.  Any person, firm, partnership, corporation,
	or other entity holding or claiming rights herein reserved may
	enforce same by an action brought in a court of competent
	jurisdiction.
	SECTION 3.  Subsections (a) and (b), Section 66.005,
	Utilities Code, are amended to read as follows:
	(a)  The holder of a state-issued certificate of franchise
	authority shall pay each municipality in which it provides cable
	service or video service a franchise fee of five percent based upon
	the definition of gross revenues as set forth in this chapter.  That
	same franchise fee structure shall apply to any unincorporated
	areas that are annexed by a municipality after the effective date of
	the state-issued certificate of franchise authority.  The franchise
	fee paid by the holder of a state-issued certificate of franchise
	authority shall not be deemed a state or local tax.
	(b)  The franchise fee payable under this section is to be
	paid quarterly, within 45 days after the end of the quarter for the
	preceding calendar quarter.  Each payment shall be accompanied by a
	summary explaining the basis for the calculation of the fee.  A
	municipality may review the business records of the cable service
	provider or video service provider to the extent necessary to
	ensure compensation in accordance with Subsection (a), provided
	that the municipality may only review records that relate to the
	48-month period preceding the date of the last franchise fee
	payment.  Each party shall bear the party's own costs of the
	examination.  A municipality may, in the event of a dispute
	concerning compensation under this section, bring an action in a
	court of competent jurisdiction.
	SECTION 4.  Section 66.006, Utilities Code, is amended to
	read as follows:
	Sec. 66.006.  IN-KIND CONTRIBUTIONS TO MUNICIPALITY.
	(a)  Until the expiration or termination of the incumbent cable
	service provider's agreement, the holder of a state-issued
	certificate of franchise authority shall pay a municipality in
	which it is offering cable service or video service the same cash
	payments on a per subscriber basis as required by the incumbent
	cable service provider's franchise agreement.  All cable service
	providers and all video service providers shall report quarterly to
	the municipality the total number of subscribers served within the
	municipality.  The amount paid by the holder of a state-issued
	certificate of franchise authority shall be calculated quarterly by
	the municipality by multiplying the amount of cash payment under
	the incumbent cable service provider's franchise agreement by a
	number derived by dividing the number of subscribers served by a
	video service provider or cable service provider by the total
	number of video or cable service subscribers in the municipality.
	Such pro rata payments are to be paid quarterly to the municipality
	within 45 days after the end of the quarter for the preceding
	calendar quarter.
	(b)  On the expiration or termination of the incumbent cable
	service provider's agreement, the holder of a state-issued
	certificate of franchise authority shall pay a municipality in
	which it is offering cable service or video service one percent of
	the provider's gross revenues, as defined by this chapter, or at the
	municipality's election, the per subscriber fee that was paid to
	the municipality under the expired or terminated incumbent cable
	service provider's agreement, in lieu of in-kind compensation and
	grants.  Payments under this subsection shall be paid in the same
	manner as outlined in Section 66.005(b).
	(c)  All fees paid to municipalities under this section are
	paid in accordance with 47 U.S.C. Sections 531 and 541(a)(4)(B) and
	may be used by the municipality as allowed by federal law.
	(c-1)  The holder of a state-issued certificate of franchise
	authority shall include with a fee paid to a municipality under this
	section a statement identifying the fee.
	(c-2)  If a municipality uses fees paid to the municipality
	under this section for a purpose described by 47 U.S.C. Section
	542(g)(2)(C), the fees[; further, these payments] are not
	chargeable as a credit against the franchise fee payments
	authorized under this chapter.  If the municipality uses the fees
	for another purpose, the fees are chargeable as a credit against the
	franchise fee payments authorized under this chapter.
	(c-3)  A municipality that receives fees under this section:
	(1)  shall maintain revenue from the fees in a separate
	account established for that purpose;
	(2)  may not commingle revenue from the fees with any
	other money;
	(3)  shall maintain a record of each deposit to and
	disbursement from the separate account, including a record of the
	payee and purpose of each disbursement; and
	(4)  not later than January 31 of each year, shall
	provide to each certificate holder that pays a fee to the
	municipality under this section a detailed accounting of the
	deposits to and disbursements from the separate account made in the
	preceding calendar year.
	(d)  Cable services to community public buildings, such as
	municipal buildings and public schools, [The following services]
	shall continue to be provided by the cable provider that was
	furnishing services pursuant to its municipal cable franchise
	[until January 1, 2008, or] until the expiration or termination
	[term] of the franchise; and [was to expire, whichever is later, and
	thereafter as provided in Subdivisions (1) and (2) below:
	[(1)]  institutional network capacity, however defined
	or referred to in the municipal cable franchise but generally
	referring to a private line data network capacity for use by the
	municipality for noncommercial purposes, shall continue to be
	provided at the same capacity by the cable provider that was
	furnishing services pursuant to its municipal cable franchise until
	the date of expiration or termination of the franchise, whichever
	is later, for municipalities with a population greater than one
	million as of January 1, 2012 [as was provided to the municipality
	prior to the date of the termination, provided that the
	municipality will compensate the provider for the actual
	incremental cost of the capacity; and
	[(2)     cable services to community public buildings,
	such as municipal buildings and public schools, shall continue to
	be provided to the same extent provided immediately prior to the
	date of the termination].  On [Beginning on January 1, 2008, or] the
	expiration or termination of the franchise agreement, [whichever is
	later,] a provider that provides the cable services as described by
	this section may deduct from the franchise fee to be paid to the
	municipality an amount equal to the actual incremental cost of the
	cable services if the municipality requires the cable services
	after that date.  Such cable service generally refers to the
	existing cable drop connections to such facilities and the tier of
	cable service provided pursuant to the franchise at the time of the
	expiration or termination.
	SECTION 5.  Subsections (c) and (h), Section 66.009,
	Utilities Code, are amended to read as follows:
	(c)  If a municipality did not have the minimum number of PEG
	access channels as of September 1, 2005, as set out in Subdivisions
	(1) and (2) based on its population as of that date, the cable
	service provider or video service provider shall furnish:
	(1)  up to three PEG channels for a municipality with a
	population of at least 50,000; and
	(2)  up to two PEG channels for a municipality with a
	population of less than 50,000.
	(h)  Where technically feasible, the holder of a
	state-issued certificate of franchise authority that is not an
	incumbent cable service provider and an incumbent cable service
	provider, including an incumbent cable service provider that holds
	a state-issued certificate of franchise authority issued under
	Section 66.004(b-1), shall use reasonable efforts to interconnect
	their cable or video systems for the purpose of providing PEG
	programming.  Interconnection may be accomplished by direct cable,
	microwave link, satellite, or other reasonable method of
	connection.  The holder [Holders] of a state-issued certificate of
	franchise authority and the incumbent cable service provider
	[providers] shall negotiate in good faith, and the incumbent cable
	service provider [providers] may not withhold interconnection of
	PEG channels.
	SECTION 6.  (a)  A municipality that received fees described
	by Subsection (c), Section 66.006, Utilities Code, as amended by
	this Act, before September 1, 2011, shall, on September 1, 2011,
	transfer any fees that have not been disbursed to a separate account
	as required by Subsection (c-3), Section 66.006, Utilities Code, as
	added by this Act.
	(b)  The change in law made by this Act in adding
	Subdivisions (3) and (4), Subsection (c-3), Section 66.006,
	Utilities Code, applies only to transfers, deposits, and
	disbursements made on or after the effective date of this Act.  A
	transfer, deposit, or disbursement made before the effective date
	of this Act is governed by the law in effect on the date the
	transfer, deposit, or disbursement was made, and the former law is
	continued in effect for that purpose.
	SECTION 7.  This Act takes effect only if House Bill No. 259
	or House Bill No. 3675 or similar legislation by the 82nd
	Legislature, Regular Session, 2011, is enacted and becomes law that
	imposes an assessment on providers of subscription video services
	and allows subscription video service providers to claim a credit
	against the assessment for fees paid to municipalities pursuant to
	a municipal franchise or state-issued certificate of franchise
	authority and provides that at least 25 percent of the revenue
	generated by the state assessment on providers of subscription
	video services be distributed to municipalities and counties.  If
	legislation described by this section is not enacted by the 82nd
	Legislature, Regular Session, 2011, or does not become law, this
	Act has no effect.
	SECTION 8.  Except as provided by Section 7 of this Act, this
	Act takes effect October 1, 2011.
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