The Federal Communications Commission’s new rules for local video franchises are likely to be challenged on two fronts: in the courts by the cable industry and in Congress by the new Democratic leadership.

As expected, the FCC decided yesterday to make it easier for telecom service providers to get local video franchises, passing regulations that require municipalities to act on video franchise requests within 90 days and limiting both the fees and the restrictions they can impose.

Almost immediately, Rep. Edward Markey (D-Mass.) who will become chairman of the House Subcommittee on Telecommunications and the Internet called the decision “an early Christmas present for the Bell telephone utilities” and “a lump of coal for many communities around the country,” and promised a Congressional review.

“Overall, I believe the haste with which the Commission has acted may lead to problematic and unintended consequences,” he said in a prepared statement. “In some instances, the Commission may be acting without clear legal authority and in others, by promulgating rules without a consistent, balanced policy for all marketplace participants. Finally, efforts in communities across the country to bolster localism through public access channels and to utilize institutional networks for important municipal functions may be put in jeopardy by novel interpretations of the Cable Act which undermine the financial basis for such services.”

Kyle McSlarrow, president and CEO of the National Cable & Telecommunications Association, the industry organization of cable TV operators, challenged the legality of the FCC’s ruling, given that it doesn’t create a level playing field for existing cable operators with the newcomers to video.

“We don’t believe the Commission has the legal authority to establish separate regimes for incumbents and new entrants in today’s highly competitive marketplace,” he said in a statement.

McSlarrow also pointed to what he said the FCC order didn’t do – which was to endorse AT&T’s assertion that, because its IPTV service is Internet Protocol-based, it isn’t subject to TV franchise rules. AT&T has filed suit against municipalities in California and in Illinois over its assertion that it doesn’t need a standard local franchise to offer the new service.

FCC Commissioner Michael Copps, a Democrat who voted against the measure, said he expects it to be challenged on legal grounds, because it “up-ends” the traditional balance of federal-state-local governments by creating a federal rule that pre-empts local laws.

“Many people questioned, and continue to question, the Commission’s legal authority to do what it is doing today,” said Copps in his statement. “It is clear that those questions remain and that the Commission has been asked by those with oversight powers to more conclusively demonstrate our authority to undertake the actions we initiate today. I believe it is the better course of wisdom in so far-reaching a proceeding, in light of the concern being expressed by those with oversight responsibilities of this Commission, to thoroughly answer those questions, to lay out the basis of our claimed legal authority, and to explain what legal risks this action entails before taking action. Under the circumstances, proceeding on such a controversial decision today does not put an end to this issue. It only invites more delay, more confusion, and more possibility of legal challenge.”

The FCC voted 3-2 along party lines. FCC Chairman Kevin Martin said afterward that the rise in cable prices shows the need for competition in the video service business, and the new rules will accelerate the pace at which telecom service providers can offer that competition.

“Telephone companies are investing billions of dollars to upgrade their networks to provide video,” he said in his statement. “As new providers began actively seeking entry into video markets, we began to hear that some local authorities were making the process of getting franchises unreasonably difficult, despite clear statutory language. The record collected by the Commission in this proceeding cited instances where local franchising authorities sat on applications for more than a year or required extraordinary in kind contributions such as the building of public swimming pools and recreation centers.”

Martin also stressed that expanding broadband deployment remains a priority of his administration and the streamlined rules will enable that.

The FCC order prohibits “unreasonable build-out requirements,” which could become the focus of complaints from consumer groups, who remain anxious that the telecom service providers will cherry-pick the neighborhoods in which they choose to compete, leaving some consumers with no choices and higher cable rates.

Martin said he is not opposed to built-out rules which require operators to continually expand their footprint over a period of years until all areas are served.