HB2812 - 472R

Be it enacted by the Legislature of the State of Arizona:

Section 1. Section 9-505, Arizona Revised Statutes, is amended to read:

START_STATUTE9-505. Definitions

In this article, unless the context otherwise requires:

1. "Area of jurisdiction" means that part of a city or town, or that part of the unincorporated area of a county, or both when applied to a cable television system within parts of more than one jurisdiction, for which a license is issued.

2. "Cable operator" means a person that is issued a license by the licensing authority to construct, operate and maintain a cable television system in public streets, roads and alleys.

3. "Cable service" means the transmission to subscribers of video programming or other programming service and subscriber interaction, if any, that is required for the selection or use of the video programming or other programming service.

2. 4. "Cable television system" means any facility that, in whole or in part, receives directly, or indirectly over the air, and amplifies or otherwise modifies the signals transmitting programs broadcast by one or more television or radio stations and distributes such signals together with such other signals as authorized by the federal communications commission and the licensing authority, by wire or cable to subscribing members of the public who pay for such service, but the term shall not include: consisting of a set of closed transmission paths and associated signal generation, reception and control equipment that is designed to provide cable service that includes video programming and that is provided to multiple subscribers within a community. Cable television system does not include:

(a) Any such A facility that serves fewer than fifty subscribers.

(b) Any such A facility that serves only the residents of one or more apartment dwellings under common ownership, and commercial establishments located on the premises of such apartment dwellings subscribers without using any public street, road or alley.

(d) A facility of a common carrier that is subject, in whole or in part, to 47 United States Code sections 201 through 276, except that the facility is considered a cable television system, other than for purposes of 47 United States Code section 541(c), to the extent the facility is used in the transmission of video programming directly to subscribers, unless the extent of the use is solely to provide interactive on-demand services.

(e) An open video system that complies with 47 United States Code section 573.

(f) A facility of an electric utility that is used solely for operating its electric utility system.

3. 5. "Existing cable television systems system" means a cable television system in operation on April 1, 1974, a cable television system under construction on April 1, 1974, or a cable television system which had received authorization for construction as of April 1, 1974.

6. "Gross revenues" means all cash, credits, property of any kind or nature, or other consideration, less related bad debt not to exceed one and one-half per cent annually, that is received directly or indirectly by the cable operator, its affiliates, subsidiaries or parent or any person, firm or corporation in which the cable operator has a financial interest or that has a financial interest in the cable operator and that is derived from the cable operator’s operation of its cable system to provide cable service in the area of jurisdiction. Gross revenues include all revenue from charges for cable service to subscribers and all charges for installation, removal, connection or reinstatement of equipment necessary for a subscriber to receive cable service, and any other receipts from subscribers derived from operating the cable system to provide cable service, including receipts from forfeited deposits, sale or rental of equipment to provide cable service, late charges, interest and sale of program guides. Gross revenues also include all income the cable operator receives from the lease of its facilities located in the public streets, roads and alleys, unless services that the lessee provides over the leased facilities are subject to a transaction privilege tax of the licensing authority. Gross revenues do not include revenues from commercial advertising on the cable system, the use or lease of studio facilities of the cable system, the use or lease of leased access channels or bandwidth, the production of video programming by the cable operator, the sale, exchange, use or cablecast of any programming by the cable operator in the area of jurisdiction, sales to the cable operator’s subscribers by programmers of home shopping services, reimbursements paid by programmers for launch fees or marketing expense, license fees, taxes or other fees or charges that the cable operator collects and pays to any governmental authority, any increase in the value of any stock, security or asset, or any dividends or other distributions made in respect of any stock or securities.

4. 7. "Intergovernmental contract" means the joint exercise of powers authorized by title 11, chapter 7, article 3.

5. 8. "License" means that ordinance or resolution which contains the right, authority or grant, given by a licensing authority enabling the license holder a person to construct, operate and maintain a cable television system.

6. 9. "Licensing authority" means the board of supervisors of a county or the governing body of an incorporated city, including a charter city, or town.

10. "Other programming service" means information that a cable operator makes available to all subscribers generally.

11. "Video programming" means programming that is provided by, or generally comparable to programming provided by, a broadcast television station. END_STATUTE

Sec. 2. Section 9-506, Arizona Revised Statutes, is amended to read:

START_STATUTE9-506. Authority to issue license; limitations

A. For the purpose of authorizing and regulating the construction, operation and maintenance of cable television systems, the licensing authority of a city, including a charter city, or town for an incorporated area, or the licensing authority of the county for unincorporated areas, either individually or jointly by intergovernmental contract, may issue a license to any person to use public streets, roads and alleys, and shall impose conditions, restrictions and limitations upon the use of such public streets, roads and alleys, and upon the construction, operation and maintenance of cable television systems.

B. Subject to the limitations of this section, any such a licensing authority may adopt resolutions or ordinances implementing and controlling the license or joint license, issue a license containing other terms and conditions and impose a license fee on gross revenues. The license issued by a licensing authority may contain provisions, and may establish a permit fee, not to exceed the limits established by the federal communications commission. IN addition to the limitations of this section, the license is subject to the limits established by the communications act of 1934, as amended (47 United States Code sections 151 through 615b) and the federal communications commission.

C. Other than the license fee on gross revenues authorized by this article and transaction privilege taxes as provided in this subsection, a licensing authority may not levy a tax, rent, fee or charge, however denominated, on a cable operator for the use of the public streets, roads or alleys to provide cable service or levy a tax, fee or charge on the privilege of engaging in the business of providing cable service in the area of jurisdiction. Taxes, rents, fees and charges include all access channel support except as provided in subsection D of this section, rental, application, construction, permit, inspection, inconvenience and other fees and charges related to a cable operator’s use of the public streets, roads and alleys. In addition, the following apply:

1. Any transaction privilege taxes otherwise authorized by law to be levied on the business of providing cable service or in relation to use of the public streets, roads or alleys to provide cable service may be levied on a cable operator if the taxes are levied only on gross revenues and the rate of the taxes is subject to paragraph 3 of this subsection. This subsection does not authorize the imposition of transaction privilege taxes on interstate telecommunications services.

2. The license fee and any transaction privilege taxes levied on gross revenues constitute a franchise fee within the meaning of 47 united states code section 542(g)(1).

3. Under no circumstances may the total of the rates of the license fee and of any transaction privilege taxes on gross revenues levied or assessed by a licensing authority for the privilege of providing cable service and related use of the public streets, roads or alleys to provide cable service exceed a rate of five per cent, except during the transition period for certain licenses as provided in subsection H of this section.

4. A cable operator shall pass on to subscribers any reduction in the amount of fees, taxes or other charges paid by a cable operator and itemized to subscribers that results from the implementation of this amendment to this section.

D. A licensing authority may not require a cable operator to provide in-kind services, make in-kind payments or pay a fee in addition to the monetary license fee levied or assessed as provided in this section as part of or as a condition of issuing a license to provide cable service, except that:

1. A licensing authority may require a cable operator to provide channel capacity to transmit programming over which the cable operator exercises no editorial control except as authorized by 47 United States Code section 531(e). The channel capacity shall be limited to not more than two channels of public, educational or governmental access programming in the basic service tier of the cable television system and not more than two channels of noncommercial governmental programming, at least one of which may be programmed by the federal government, in the digital programming tier of the cable television system. If channel capacity is required, the programming shall be specified in the license and the cable operator may require that the channels regularly display an unobtrusive logo or other suitable identifier of the cable operator as set forth in the license.

2. A licensing authority may require a cable operator to provide the basic service tier of cable service at no monthly service charge to offices and facilities of the licensing authority.

3. The value of any channel capacity provided pursuant to paragraph 1 of this subsection, including any capital costs and charges for or in support of its use, and of basic service provided pursuant to paragraph 2 of this subsection may not be offset against the license fee levied or assessed under this section.

E. This section does not prohibit a cable operator from agreeing to provide in-kind services or make in-kind payments in the area of jurisdiction that are prohibited by subsection D of this section if the agreement with the licensing authority is not part of, or entered into as a condition of being issued, a new, renewed or amended license to provide cable service. An agreement that requires in-kind cable service or payments shall set forth the total annual fair market value of the in-kind cable service and payments, which shall be less than or equal to and offset against the license fee levied or assessed annually pursuant to this section. The license shall authorize the cable operator to retain license fees and taxes collected from its subscribers in the amount of this offset. In-kind cable services and payments include any channel capacity and all capital costs and charges for or in support of the use of any channel capacity that the cable operator agrees to provide under this subsection.

F. Notwithstanding subsection c of this section, a licensing authority may require that a cable operator:

1. Bear reasonable costs that are associated with damage caused to public streets, roads and alleys by construction, maintenance and operation of its facilities in the public streets, roads and alleys and that are imposed on a competitively neutral and nondiscriminatory basis in relation to costs borne by telecommunications corporations under section 9-582, subsection C.

2. Pay fines, fees, charges or damages for breach of the terms and conditions of the license.

G. This section does not affect the authority of a licensing authority to manage the public streets, roads and alleys within its boundaries or to exercise its police powers.

H. A license that is in effect on the effective date of this amendment to this section, including one that is later renewed or extended for a term that begins before July 1, 2007, is enforceable in accordance with its terms and conditions as of July 1, 2007 and is not subject to the provisions of this amendment to this section. If a license that is in effect on the effective date of this amendment to this section is later extended or renewed for a term that begins after June 30, 2007, the extended or renewed license is subject to the provisions of this amendment to this section, effective on the first day of the renewal or extension term, unless the term begins before January 1, 2008, in which case the limitation in subsection C, paragraph 3 of this section on the rates of the license fee and of any transaction privilege taxes on gross revenues is:

1. Five per cent, if the gross effective rate is five per cent or less.

2. If the gross effective rate is more than five per cent, five per cent plus the following percentage:

(a) In the first year of the extension or renewal term, the gross effective rate minus five per cent, multiplied by two-thirds.

(b) In the second year of the term, the gross effective rate minus five per cent, multiplied by one-third.

I. For purposes of subsection H of this section, "gross effective rate" means one hundred per cent multiplied by the fraction in which the numerator is the sum of all taxes, fees and charges of the licensing authority that the cable operator itemized to subscribers and paid to the licensing authority under the license for the twelve calendar months immediately preceding the effective date of this amendment to this section and the denominator is the cable operator's gross revenues for that period in the area of jurisdiction. END_STATUTE

Sec. 3. Legislative findings

The legislature finds and determines that this act is necessary as a matter of statewide concern to ensure that counties, cities, including charter cities, and towns issue licenses to cable operators to use the public streets, roads and alleys on terms and conditions, including fees, taxes and other charges levied and assessed for use of the public streets, roads and alleys, that are equitable. The public policy of this state is that this act be enforced to the fullest extent permitted by federal law.