1.1                          A bill for an act 
  1.2             relating to telecommunications; regulating 
  1.3             governmental cable operators; amending Minnesota 
  1.4             Statutes 1998, sections 238.01; and 238.081, 
  1.5             subdivision 9; proposing coding for new law in 
  1.6             Minnesota Statutes, chapter 238. 
  1.7   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.8      Section 1.  Minnesota Statutes 1998, section 238.01, is 
  1.9   amended to read: 
  1.10     238.01 [DECLARATION OF LEGISLATIVE FINDINGS AND INTENT.] 
  1.11     Upon investigation of the public interest associated with 
  1.12  cable communications, the legislature of the state of Minnesota 
  1.13  has determined that while cable communications serve in part as 
  1.14  an extension of interstate broadcasting, that their operations 
  1.15  also involve public rights-of-way, municipal franchising, and 
  1.16  vital business and community service, which are of state 
  1.17  concern; that while said operations must be subject to state 
  1.18  oversight, they also must be protected from undue restraint and 
  1.19  regulation so as to assure development of cable systems with 
  1.20  optimum technology and maximum penetration in this state as 
  1.21  rapidly as economically and technically feasible; that the 
  1.22  municipalities and the state would benefit from valuable 
  1.23  educational and public services through cable communications 
  1.24  systems; that the cable communications industry must provide the 
  1.25  opportunity for minority participation and benefit which its 
  1.26  diversity promises; that the public and the business community 
  2.1   would benefit if served by cable channels sufficient to meet the 
  2.2   needs of producers and distributors of program and other 
  2.3   communication content services; that the cable communications 
  2.4   industry is in a period of rapid growth and corporate 
  2.5   consolidation and should proceed in accord with regional and 
  2.6   statewide service objectives; that these objectives should 
  2.7   encourage areawide service where consistent with the public 
  2.8   interest and discourage concentration of control and ownership 
  2.9   when not in the public interest; and that many municipalities 
  2.10  lack the necessary resources and expertise to plan for and 
  2.11  secure these benefits and to protect subscribers and other 
  2.12  parties to the public interest in franchise negotiations. 
  2.13     There is, therefore, a need to develop a state cable 
  2.14  communications policy; to promote the rapid development of the 
  2.15  cable communications industry responsive to community and public 
  2.16  interest and consonant with policies, regulations and statutes 
  2.17  of the federal government; to assure that cable communications 
  2.18  companies provide adequate, economical and efficient service to 
  2.19  their subscribers, the municipalities within which they are 
  2.20  franchised and other parties to the public interest; to 
  2.21  encourage the endeavors of public and private institutions, 
  2.22  municipalities, associations and organizations in developing 
  2.23  programming for public interest; and to provide minorities with 
  2.24  the fullest opportunity to make effective use of the medium. 
  2.25     It is the intent of the legislature in this chapter to 
  2.26  oversee development of the cable communications industry in 
  2.27  Minnesota; to review the suitability to practices for 
  2.28  franchising cable communications companies to protect the public 
  2.29  interest; to set standards for cable communications systems and 
  2.30  franchise practices; to assure channel availability for 
  2.31  municipal services, educational television, program diversity, 
  2.32  local expression and other program and communications content 
  2.33  services; to assure that municipal franchising results in 
  2.34  communication across metropolitan areas and in neighborhood 
  2.35  communities in larger municipalities; to provide guidance to 
  2.36  community organizations and municipalities in franchise 
  3.1   negotiations; and, to stimulate the development of diverse 
  3.2   instructional, educational, community interest and public 
  3.3   affairs programming with full access thereto by cable 
  3.4   communications companies, educational broadcasters and public 
  3.5   and private institutions operating closed circuit television 
  3.6   systems and instructional television fixed services. 
  3.7      Additionally, it is the intent of the legislature to ensure 
  3.8   fair competition in the provision of cable service in this 
  3.9   state, consistent with the procompetitive policies of the 
  3.10  "Telecommunications Act of 1996," Public Law Number 104-104, 110 
  3.11  Statutes 56, for the purposes of providing the widest possible 
  3.12  diversity of entertainment, information, and news sources to the 
  3.13  general public; advancing the unfettered exercise of rights 
  3.14  under the first amendment to the United States Constitution to 
  3.15  free speech and the free flow of information; enhancing the 
  3.16  development and widespread use of technological advances in the 
  3.17  provision of cable service; encouraging improved customer 
  3.18  service at competitive rates; providing competitive neutrality 
  3.19  in the regulation and taxation of cable services; and allowing 
  3.20  the general public full and timely information, and the 
  3.21  opportunity to participate in decisions, respecting the 
  3.22  provision and funding of cable services by political 
  3.23  subdivisions.  
  3.24     Sec. 2.  [238.041] [NOTICE.] 
  3.25     (a) Notice required under this chapter must be published in 
  3.26  a newspaper of general circulation within the jurisdictional 
  3.27  boundaries of the political subdivision at least twice before 
  3.28  the hearing date, the first publication occurring not less than 
  3.29  30 days, and the second occurring not more than seven days, 
  3.30  before the hearing date.  The publications must be made in the 
  3.31  body type of the newspaper under headlines in 18-point type.  
  3.32  The chief legal officer of the political subdivision shall 
  3.33  review the notice before forwarding it for publication, to 
  3.34  ensure that the notice is legally accurate and sufficient. 
  3.35     (b) A document required under this section to be available 
  3.36  for public inspection and copying must be filed, and made 
  4.1   conveniently available to the public for inspection and copying, 
  4.2   in the office of the clerk of the political subdivision or, if 
  4.3   no such office exists, such other office as the political 
  4.4   subdivision shall specify. 
  4.5      Sec. 3.  Minnesota Statutes 1998, section 238.081, 
  4.6   subdivision 9, is amended to read: 
  4.7      Subd. 9.  [FRANCHISING NONPROFIT OR MUNICIPALLY OWNED 
  4.8   SYSTEM.] Nothing contained in this section prohibits a 
  4.9   franchising authority from franchising a nonprofit or 
  4.10  municipally owned system.  The municipality or nonprofit entity 
  4.11  is considered an applicant for purposes of this section, subject 
  4.12  to sections 238.50 to 238.59. 
  4.13                    GOVERNMENTAL CABLE OPERATOR 
  4.14     Sec. 4.  [238.50] [LEGISLATIVE REQUIREMENTS, ORGANIZATION, 
  4.15  LIMITATIONS.] 
  4.16     Subdivision 1.  [APPLICABLE REGULATORY PROVISIONS.] No 
  4.17  political subdivision or its affiliate may provide cable service 
  4.18  over a cable system except as provided under sections 238.041, 
  4.19  238.081 to 238.11, 238.17, 238.18, 238.43, and 238.50 to 238.59. 
  4.20     Subd. 2.  [INCORPORATION, ORGANIZATION.] No governmental 
  4.21  cable operator may provide, within the jurisdictional boundaries 
  4.22  of a political subdivision, cable service over a cable system 
  4.23  unless the governmental cable operator is incorporated and 
  4.24  organized under this chapter and the political subdivision or 
  4.25  its affiliate is the sole shareholder or the sole member of the 
  4.26  governmental cable operator.  
  4.27     Subd. 3.  [LOCAL AUTHORIZATION.] No governmental cable 
  4.28  operator may be formed by a political subdivision or its 
  4.29  affiliate except upon legislative action of the political 
  4.30  subdivision expressly authorizing that formation in compliance 
  4.31  with this section. 
  4.32     Subd. 4.  [APPROPRIATION REQUIREMENT.] No public money of 
  4.33  the political subdivision may be used in the formation of a 
  4.34  governmental cable operator except pursuant to an appropriation, 
  4.35  in the same or related legislative action under subdivision 3, 
  4.36  from the unrestricted fund balance of the political subdivision 
  5.1   for the exclusive purpose of making a loan to, or contribution 
  5.2   to the capital of, the governmental cable operator. 
  5.3      Subd. 5.  [FINDINGS REQUIRED BEFORE ACTION.] No legislative 
  5.4   action may be taken for the purposes of sections 238.081 and 
  5.5   238.50 to 238.59 without the legislative authority of that 
  5.6   political subdivision first finding all of the following: 
  5.7      (1) the provision of cable service by the governmental 
  5.8   cable operator will promote the competitive provision of 
  5.9   improved cable service to citizens of the political subdivision; 
  5.10     (2) the appropriation of public money for the purpose of 
  5.11  having cable service provided by the governmental cable operator 
  5.12  will be of greater general benefit to the community than any 
  5.13  other authorized use of that money; and 
  5.14     (3) the governmental cable operator will be self-sustaining 
  5.15  after receipt of the appropriated money. 
  5.16     Subd. 6.  [PUBLIC HEARING.] Legislative action under this 
  5.17  section also must be preceded by a public hearing concerning the 
  5.18  findings of the feasibility study prescribed in section 238.51.  
  5.19  The hearing must be held by the legislative authority not more 
  5.20  than 60 days after the filing of the feasibility study according 
  5.21  to section 238.51.  The legislative authority shall publish 
  5.22  notice of the hearing according to section 238.041.  The notice 
  5.23  must state the time and place of the hearing and contain a 
  5.24  summary of the conclusions of the feasibility study, including, 
  5.25  but not limited to, the estimated amount of public money to be 
  5.26  loaned or contributed by the political subdivision to the 
  5.27  operator as authorized under sections 238.081 and 238.50 to 
  5.28  238.59, as well as a statement that the study is available for 
  5.29  public inspection and copying according to section 238.041 and a 
  5.30  statement of the location and office hours of the relevant 
  5.31  office. 
  5.32     Subd. 7.  [AFFILIATE REVENUES PROHIBITED.] On and after the 
  5.33  effective date of this section, no revenues of an affiliate of a 
  5.34  political subdivision may be used in the formation or operation 
  5.35  of a governmental cable operator. 
  5.36     Subd. 8.  [EXEMPTION FOR EXISTING OPERATOR.] This section 
  6.1   does not apply to a governmental cable operator operating before 
  6.2   the effective date of this section. 
  6.3      Sec. 5.  [238.51] [FEASIBILITY, FUNDING, PROCEDURES.] 
  6.4      Subdivision 1.  [GOVERNMENTAL AUTHORIZATION 
  6.5   REQUIRED.] Neither a political subdivision nor its affiliate may 
  6.6   fund a feasibility study for the purposes of sections 238.50 to 
  6.7   238.59, except upon legislative action expressly authorizing the 
  6.8   study and appropriating from the unrestricted fund balance of 
  6.9   the political subdivision public money sufficient to pay all 
  6.10  costs of conducting the study and preparing and presenting a 
  6.11  report on the study and its conclusions.  Legislative action 
  6.12  must not be taken without the legislative authority first 
  6.13  finding that there is a substantial likelihood that the 
  6.14  standards specified in section 238.52 are observed.  
  6.15     Subd. 2.  [NOTICE, HEARING.] Legislative action under 
  6.16  section 238.50 must be preceded by a public hearing on the 
  6.17  question of the legislative action.  The legislative authority 
  6.18  shall publish notice of the hearing pursuant to section 
  6.19  238.041.  The notice must state the time and place of the 
  6.20  proposed ordinance or resolution and a summary of it, including 
  6.21  the amount of the proposed appropriation. 
  6.22     Subd. 3.  [STUDY COMPONENTS.] A feasibility study under 
  6.23  this section must address all of the following:  
  6.24     (1) the public purposes to be served by providing cable 
  6.25  service to all or some of the residents of the political 
  6.26  subdivision by a governmental cable operator; 
  6.27     (2) the nature and likelihood of improvements and 
  6.28  detriments to providing cable service to the residents that are 
  6.29  expected to result, directly or as the result of enhanced 
  6.30  competition, from providing cable service by a governmental 
  6.31  cable operator; 
  6.32     (3) the projected costs of establishing, equipping, and 
  6.33  operating a cable system and providing cable service to the 
  6.34  residents of the political subdivision by a governmental cable 
  6.35  operator; 
  6.36     (4) the amounts, sources, and terms of required financing, 
  7.1   including the amounts, timing, and terms of any loans or capital 
  7.2   contributions to the governmental cable operator by the 
  7.3   political subdivision; 
  7.4      (5) the projected operating results, supported by a 
  7.5   marketing study, of the governmental cable operator for each of 
  7.6   its first five years of operation or until it is projected to be 
  7.7   financially self-sustaining, whichever is later; 
  7.8      (6) the managerial, technical, financial, and legal 
  7.9   capabilities of the governmental cable operator to provide 
  7.10  competitive cable service; 
  7.11     (7) the governmental cable operator's compliance with 
  7.12  applicable federal, state, and local laws; and 
  7.13     (8) a conclusion regarding whether a governmental cable 
  7.14  operator formed by the political subdivision or its affiliate 
  7.15  would provide cable service that is competitive in technology, 
  7.16  programming, rates, and customer service and would be 
  7.17  financially self-sustaining. 
  7.18     Subd. 4.  [PUBLIC AVAILABILITY.] Upon completion, the 
  7.19  feasibility study must be filed and available for public 
  7.20  inspection and copying. 
  7.21     Sec. 6.  [238.52] [APPLICATION FOR ADDITIONAL FUNDING.] 
  7.22     Subdivision 1.  [APPLICATION REQUIRED.] After the formation 
  7.23  of a governmental cable operator under this section, no other 
  7.24  public money of the political subdivision may be provided for 
  7.25  loan or contribution to the capital of the governmental cable 
  7.26  operator except upon the application of the governmental cable 
  7.27  operator. 
  7.28     Subd. 2.  [PUBLIC HEARING, NOTICE.] Legislative action 
  7.29  under this section must be preceded by public hearing on the 
  7.30  question of the legislative action.  The governing body of the 
  7.31  political subdivision shall publish notice of the hearing.  The 
  7.32  notice must state the time and place of the hearing and contain 
  7.33  a statement of the amount of the proposed appropriation, a 
  7.34  statement that the application is available for public 
  7.35  inspection and copying, and a statement of the location and 
  7.36  office hours of the relevant office. 
  8.1      Subd. 3.  [APPLICATION CONTENTS.] The application by the 
  8.2   governmental cable operator for additional public funding must 
  8.3   include all of the following: 
  8.4      (1) specification of the amount of additional funding 
  8.5   requested; 
  8.6      (2) specification in reasonable detail of the purposes and 
  8.7   cost to which that additional funding will be applied; 
  8.8      (3) comparative, audited financial statements for the 
  8.9   governmental cable operator, including balance sheets and 
  8.10  statements of results of operations and cash flow, for its two 
  8.11  most recently completed fiscal years; 
  8.12     (4) the projected operating results, supported by a 
  8.13  marketing study, of the governmental cable operator, assuming 
  8.14  additional funding is loaned or contributed, for each of its 
  8.15  following three years of operation or until it is projected to 
  8.16  be financially self-sustaining, whichever is later; and 
  8.17     (5) if any part of the additional funding is to be made by 
  8.18  loan, specification of the applicable interest rate and terms of 
  8.19  repayment. 
  8.20     Subd. 4.  [PUBLIC AVAILABILITY.] The application for 
  8.21  additional public funding must be filed with and available for 
  8.22  public inspection and copying at least 30 days before the public 
  8.23  hearing.  The governing body shall publish notice of the time 
  8.24  and place of the public hearing, together with a statement of 
  8.25  the amount of additional public funds to be loaned or 
  8.26  contributed by the political subdivision to the governmental 
  8.27  cable operator, a statement that the application for additional 
  8.28  public funding is available for public inspection and copying in 
  8.29  accordance with section 238.041, and a statement of the location 
  8.30  and office hours of the relevant office. 
  8.31     Subd. 5.  [LOANS, CONTRIBUTIONS, CHARGES; LIMITATIONS.] (a) 
  8.32  To the extent authorized under law, a political subdivision may 
  8.33  make loans and contributions to the capital of a governmental 
  8.34  cable operator only in cash or in a form of property having fair 
  8.35  market value in the aggregate not exceeding the unrestricted 
  8.36  fund balance of the political subdivision at the time of the 
  9.1   loan or contribution.  The loan or contribution may not be 
  9.2   financed, in whole or in part, with debt or any obligation of 
  9.3   the political subdivision or its affiliates, whether the 
  9.4   obligation is payable from general tax revenues or is secured by 
  9.5   the full faith and credit of the political subdivision or 
  9.6   otherwise.  No political subdivision or its affiliates may 
  9.7   guarantee any obligation of the governmental cable operator or 
  9.8   pledge property or revenues, whether public property or 
  9.9   otherwise or general tax revenues or otherwise, as security for 
  9.10  any obligation of the governmental cable operator. 
  9.11     (b) No political subdivision or its affiliates may make a 
  9.12  loan to, provide services to, or permit the use of property it 
  9.13  owns by, a governmental cable operator except under a written 
  9.14  agreement that provides for repayment of the loan, payment for 
  9.15  those services, or use at the fair market rate and that 
  9.16  establishes other terms and conditions as would exist in an 
  9.17  arms-length transaction for making the repayment of the loan, 
  9.18  the provision of those services, or the use of that property by 
  9.19  an unaffiliated third party.  
  9.20     (c) No political subdivision or its affiliates, directly or 
  9.21  indirectly, by any device or method, may charge or receive a 
  9.22  different amount from a governmental cable operator than it 
  9.23  charges or receives from any other person for a like and 
  9.24  contemporaneous right, interest, privilege, use, or service 
  9.25  under substantially the same circumstances and conditions.  No 
  9.26  political subdivision or its affiliate, directly or indirectly, 
  9.27  by any device or method, may use any sovereign authority it has 
  9.28  under the laws of this state for the benefit of a governmental 
  9.29  cable operator in preference to any other person similarly 
  9.30  situated. 
  9.31     (d) Nothing in paragraph (a), (b), or (c) applies to a 
  9.32  loan, contribution, guarantee, pledge, provision of services, or 
  9.33  use of property authorized and in effect or rendered before the 
  9.34  effective date of this section.  
  9.35     Sec. 7.  [238.53] [PUBLIC UTILITIES COMMISSION AS 
  9.36  FRANCHISING AUTHORITY.] 
 10.1      Notwithstanding any law to the contrary, a political 
 10.2   subdivision may not be the franchising authority for a 
 10.3   governmental cable operator of which the political subdivision 
 10.4   is the shareholder or member.  The public utilities commission 
 10.5   is the sole franchising authority for such a governmental cable 
 10.6   operator regarding the provision of cable service over a cable 
 10.7   system constructed or operated within the jurisdictional 
 10.8   boundaries of the political subdivision, which political 
 10.9   subdivision or its affiliate is the shareholder or member of the 
 10.10  governmental cable operator.  The commission is vested with the 
 10.11  power and jurisdiction to supervise and regulate governmental 
 10.12  cable operators pursuant to this section consistent with the 
 10.13  Telecommunications Act of 1996, Public Law Number 104-104, 110 
 10.14  Statutes 56.  
 10.15     Sec. 8.  [238.54] [MUNICIPALLY OWNED FRANCHISE.] 
 10.16     A governmental cable operator shall not provide cable 
 10.17  service over a cable system in this state without first 
 10.18  obtaining a franchise from the commission pursuant to commission 
 10.19  order.  The application for the franchise must be in a form 
 10.20  prescribed by the commission.  In determining whether to grant 
 10.21  or deny a franchise to a governmental cable operator, the 
 10.22  commission shall consider all of the following factors: 
 10.23     (1) the technical, managerial, and financial capabilities 
 10.24  of the governmental cable operator to provide cable service over 
 10.25  a cable system; 
 10.26     (2) the quality of cable service to be offered by the 
 10.27  governmental cable operator; 
 10.28     (3) the technical and performance quality of the equipment 
 10.29  to be used; 
 10.30     (4) the proposed rates to subscribers of the governmental 
 10.31  cable operator; and 
 10.32     (5) any other factors determined pertinent by the 
 10.33  commission. 
 10.34     Sec. 9.  [238.55] [FRANCHISE APPROVAL.] 
 10.35     The commission, in an order granting a franchise under 
 10.36  sections 238.53 to 238.59, shall set the terms of the franchise 
 11.1   consistent with the policy specified in sections 238.01 and 
 11.2   238.50 to 238.59.  In setting terms consistent with that policy, 
 11.3   the commission shall consider all relevant factors or 
 11.4   objectives, including, but not limited to, all of the following: 
 11.5      (1) terms and conditions of franchises issued to other 
 11.6   cable operators providing cable service over cable systems 
 11.7   constructed and operated within the jurisdictional boundaries of 
 11.8   the political subdivision; 
 11.9      (2) maintenance of just and reasonable rates, rentals, and 
 11.10  charges; 
 11.11     (3) encouragement of innovation and technological advances; 
 11.12     (4) promotion of diversity and options; 
 11.13     (5) recognition of market forces; 
 11.14     (6) protection of consumers; 
 11.15     (7) promotion of the public welfare through public 
 11.16  welfare-enhancing provisions; and 
 11.17     (8) recognition of efficient business practices. 
 11.18     Sec. 10.  [238.56] [ADDITIONAL REQUIREMENTS.] 
 11.19     In addition to the requirements of section 238.08, the 
 11.20  terms of the franchise must include all of the following: 
 11.21     (1) a franchise fee determined as a percentage of the gross 
 11.22  revenues of the government cable operator from the provision of 
 11.23  cable services within the jurisdictional boundaries of the 
 11.24  political subdivision; 
 11.25     (2) customer service requirements and consumer protection 
 11.26  provisions; and 
 11.27     (3) obligations with respect to or in lieu of providing: 
 11.28     (i)  public, educational, and governmental access 
 11.29  facilities and reduced-cost services to public, educational, or 
 11.30  governmental entities commensurate with the interests of the 
 11.31  community and the policy specified in section 238.01; and 
 11.32     (ii) cable service to all households in the franchise area. 
 11.33     Sec. 11.  [238.57] [FRANCHISE FEES.] 
 11.34     Franchise fees paid under sections 238.53 to 238.59 must be 
 11.35  deposited into the state treasury to the credit of the general 
 11.36  revenue fund.  Fee amounts paid into the general revenue fund, 
 12.1   but not spent by the commission to administer sections 238.53 to 
 12.2   238.59, must be credited ratably by the commission, after first 
 12.3   deducting any deficits accumulated from previous years, to each 
 12.4   political subdivision having within its jurisdictional 
 12.5   boundaries a governmental cable operator with a franchise 
 12.6   pursuant to sections 238.53 to 238.59.  The political 
 12.7   subdivision shall not use money received under sections 238.53 
 12.8   to 238.59 for a loan or capital contribution to a governmental 
 12.9   cable operator except in accordance with those sections. 
 12.10     Sec. 12.  [238.58] [RULES.] 
 12.11     The commission shall adopt rules to carry out sections 
 12.12  238.53 to 238.59.  The rules shall include procedures for 
 12.13  addressing subscriber and community complaints regarding a 
 12.14  franchisee under sections 238.53 to 238.59 and periodic 
 12.15  reporting, auditing, and inspection requirements for franchisees.
 12.16     Sec. 13.  [238.59] [CONFORMITY WITH FEDERAL LAW.] 
 12.17     Nothing in sections 238.081 and 238.50 to 238.58 authorizes 
 12.18  regulation, as a common carrier or utility, of a cable system 
 12.19  providing cable service to the extent that the regulation is 
 12.20  prohibited by United States Code, title 47, section 541, 
 12.21  subsection (c).