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BACKGROUND Local entities within California have traditionally had the authority to regulate, in accordance with federal, state and local law, certain aspects of the provision of video service, including the authority to award local franchises. Pleasanton has exercised its authority in this area since about 1985 with the adoption of an ordinance to grant cable television franchises (Ord. 1224). In 2006, the State Legislature adopted the Digital Infrastructure and Video Competition Act of 2006 (DIVCA), which became effective January 1, 2007. The purpose of DIVCA is to streamline the franchising process for video service providers and to allow for the convergence of technologies. For instance, telephone companies —such as AT&T — have developed integrated products that use existing telephone networks to provide cable -like services, and cable companies —like Comcast —are using their networks to provide telephone services. This technology allows telephone, cellular phone, audio, Internet, and video services to be provided by one company. To facilitate the rollout of such integrated services, the Legislature thus enacted DIVCA. DIVCA substantially changed California law by establishing a statewide franchising procedure for video service providers to be administered by the California Public Utilities Commission (CPUC). DIVCA establishes that the CPUC is the sole authority to award franchises for the provision of video services, and preempts local franchising authority. Further, DIVCA establishes limited authority of local entities to exercise control over state franchise holders. Consequently, the City is now prohibited by DIVCA from awarding new local franchises or regulating state franchise holders, except to the extent permitted by DIVCA, which heretofore the City could have done pursuant to the terms of the Chapter 6.52 of the Pleasanton Municipal Code (Cable System Regulatory 0 rd i nance). While DIVCA constitutes a change relative to the local involvement in the regulation of video programming, it does contain a number of provisions designed to make franchising agencies, like the City of Pleasanton, more or less whole. Thus, the City will receive the equivalent franchise fees from state franchise holders, and state franchise holders will be required to provide public, educational and governmental channel access and support upon the City's adoption of an ordinance implementing such fees. In addition, DIVCA acknowledges that local agencies, like the City, retain control of public rights -of -way and are the lead agency for purposes of the California Environmental Quality Act (CEQA) for projects proposed in its jurisdiction. Presently, there are two state franchise holders operating in the City of Pleasanton. AT &T received a state franchise on March 30, 2007, and it began offering its U -Verse service pursuant to that state franchise after March 30, 2007. The City's incumbent cable provider, Comcast, which operates pursuant to a franchise agreement (renewed in 2001) with the City (which agreement expires on June 1, 2011), received a state franchise on January 2, 2008; under DIVCA, Comcast was entitled to seek the state franchise beginning January 2, 2008 due to AT &T's entry into the video programming market in Pleasanton. Page 2 of 5