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Background for Buncombe County Cable TV Franchise Renewal
20 July 2000
Ms. Wanda Green
Thanks for the opportunity to share some thoughts with you about negotiating a strong cable TV franchise renewal. We learned a lot in the City of Asheville and Black Mountain franchise renewals. We are also members of the Alliance for Community Media, a national organization of local governments and PEG access centers based in Washington, D.C.
As Alliance members, we have access to some of the leading cable-franchise renewal experts, such as Joe Van Eaton and Susan Buske. I've also enclosed a recent copy of the ACM magazine, "Community Media Review."
I have divided my concerns and recommendations into three parts: 1. General Observations, 2. Economic Development, and 3. Community Development.
1. General Observations: As you know, cable companies are very adept negotiators, and they can be quite clever in taking advantage of municipalities which, for obvious reasons, cannot afford a resident expert on telecommunications law. As a result, I have too often witnessed local government officials relying on the technical expertise of the cable company staff, as if they were neutral, disinterested parties. Obviously, this gives the cable company a huge negotiating advantage over local governments.
This negotiating tactic is often observed when a cable official uses technical jargon to obfuscate or deflect a question. In the Asheville negotiations, for example, the cable manager often described the wonders of "fiber optics." Everything he said about the potential speed and capacity of fiber was true. What he didn't say, however, is that fiber's performance is based on the quality and capacity of the hardware hooked up to the fiber lines.
Cable companies typically deploy "state of the art" hardware in the flagship (big city) franchises, where they can get the highest return on investment. Meanwhile, they deploy older, lower-capacity hardware in their smaller franchises.
This is why, in the Asheville renewal, Intermedia limited the "state of the art" clause to "similar" Intermedia franchises, while specifically excluding their franchises in Gainesville, Ga. and Nashville, Tenn. (page 15, City Ordinance No. 2500).
The reason? The Nashville and Gainesville systems were re-built to a higher-standard "state of the art" speed and capacity, and Intermedia would not commit to making a similar investment in its Asheville system. Unfortunately, the City of Asheville did not contest this limited definition of "state of the art." This has serious economic development implications for our community (especially the business community), which I will discuss later.
Another general observation has to do with the length of the contract. As you may know, Intermedia originally proposed a 17-year contract with the city of Asheville. After we called attention to problems with the contract, including the contract length, the city re-opened negotiations and the company eventually offered a 12-year contract term.
Our consultants, Joe Van Eaton and Susan Buske, believe that any contract of more than 10 years is too long, given the rapid pace of change in the telecommunications industry. They currently are negotiating contracts in the 5-7 year range.
Another area in which the city caved into the cable company is in the Performance Penalty. Many local governments today are requiring a $1,000-a-day penalty if the operator is not complying with the contract. The city's penalty is only $150-a-day. This sum is simply inadequate given the deep pockets of most cable companies.
2. Economic Development: The cable business is no longer simply delivering TV channels into the home. Cable companies are gearing up to provide digital broadband services, thereby giving local phone monopolies some badly needed competition. As a result, forward-thinking communities are using their cable franchise renewals to ensure that cable companies do indeed compete with the local phone company.
However, cable companies are picking and choosing where to deploy their most advanced infrastructure. Obviously, most of their infrastructure investment will go to densely populated, urban communities, where cable companies can get the highest return on investment. Smaller and mid-size communities are at-risk for prolonged delays in the deployment of broadband infrastructure, unless pressure is applied in the renewal process to ensure that the company intends to serve the local business community.
In a May 1 op-ed in the Philaldephia Inquirer, public-interest telecom advocate Jeff Chester notes that Montgomery County, MD. and Portland, Oregon recently "negotiated franchise agreements with broadband network providers that contain important public-interest concessions. These include setting aside portions of the bandwidth for noncommercial use, securing support for community applications, and installing high-speed connections for civic organizations." (I've enclosed a copy of the op-ed.)
Indeed, we may want to use the Portland contract as a template for negotiations here in Buncombe County. That contract can be found online at <http://www.mhcrc.org/tcifran.htm>.
3. Community Development: Community education and community development are greatly enhanced with public access TV. Our community is home to several hundred non-profit organizations and agencies with important stories to tell.
Public access TV is a powerful resource for the local non-profit community. Public access allows local agencies and organizations to "tell their story," thereby raising public awareness and boosting fundraising and volunteer recruitment, especially among the region's increasingly youthful and active retired citizens.
Most of all, public access allows local non-profits to extend the reach of their community education efforts -- and, most importantly, to communicate with hard-to-reach citizens most in need of public health and social-service information.
Research shows that cable TV, despite its cost, is an "essential" service in many lower-income homes. Public access cable TV, therefore, is a powerful medium for reaching low-income citizens most in need of social services and public health information.
Without public access, local non-profit agencies and organizations would remain largely unknown and invisible to many citizens, especially those who do not read the local newspaper. It's important to remember that the Education Access and Government Access channels are not available to the non-profit community. Only local schools and colleges can use the E-channel, and only government agencies can use the G-channel.
It's true that, on occasion, programming which some viewers may consider controversial could appear on public access. Yet there are three basic mechanisms for protecting local governments and elected officials from complaints about such programming.
First, by granting oversight to a local non-profit agency, local governments can distance themselves from programming decisions.
Second, all producers of programming must sign a contract taking full responsibility and liability for content that may violate local, state or federal laws. (In almost 20 years of operation, public access TV in Austin, Texas had only one instance of a program that resulted in a possible violation. The producer -- not the public-access organization or the local government-- took full responsibility.)
Third, any programming that some viewers might find objectionable can always be scheduled in the middle of the night when most viewers are not watching.
Public access TV can also complement existing efforts to attract and create jobs related to the budding film and video industry in western North Carolina.
First, public access creates superb internship possibilities for film and video students in local schools and colleges. (Public access can also attract experienced volunteers, especially retired video professionals, to support video production programs in local schools.)
Second, public access creates work for local film and video-makers, as some larger non-profit organizations -- such as United Way agencies -- will hire professional videographers to produce their access programming.
Buncombe County has all the ingredients for a first-class public access operation, thereby providing a venue for the wealth of local talent and information resources that reside in our rich and diverse non-profit community. We envision a wide range of programming. Here are just a few of the likely sources:
Obviously, the list of likely contributors to public access programming in Buncombe County is too long to enumerate here. But you get the picture.
Schools, churches, parents, teachers and concerned citizens have long been concerned about the negative influence of violent and sensational TV piped into our homes from Hollywood and Madison Avenue. With public access TV, local citizens and non-profit groups can show our children that another world exists. It's the world of homegrown heroes and high-achievers, right in our own backyard!
In short, Buncombe County is well positioned to finish the job of creating public access TV, which the city began two years ago. If the county can negotiate annual operating funds for public access -- to supplement the $340,000 in equipment money secured by the city in 1998 -- the stage would be set for a countywide, public-access consortium.
Of course, the cable company will vigorously and cleverly resist any attempt to force them to give back money to the local community. Their primary tactic for avoiding these refunds is to create the illusion that any money for public access will be "passed through" in the form of a "tax" on cable TV subscribers.
Years ago, when cable rates were regulated, there was a grain of truth in this argument. But today, cable rates are completely unregulated -- and cable TV is a virtual monopoly. Therefore, cable companies are free to charge whatever the market will bear.
For example, if Buncombe County were to forego its franchise fee payments from the cable company (5 percent of gross revenue), would subscribers see a 5 percent reduction in their bills? Not likely.
Cable companies would simply pocket the additional 5 percent and continue to charge whatever they can get away with. [Note: Cable companies have sophisticated financial models showing how much they can charge before substantial numbers of subscribers start switching to satellite-dish options.]
Franchise fees, therefore, are simply the "cost of doing business." So too are funds negotiated for public access. Indeed, with local governments prohibited by federal law from collecting franchise fees in excess of 5 percent of gross revenues, the only other means of local compensation is funding for public access.
Local governments who do not negotiate substantial contributions to public access are, in effect, giving the cable monopoly a free ride. [see chart of recent franchise renewals.]
SUMMARY: We learned a lot from the City of Asheville's cable renewal negotiations with Intermedia two years ago, and from Black Mountain's franchise transfer last year. Please know that our community has a small but knowledgeable group of concerned citizens willing to help in the county's negotiations with Charter. We look forward to working with you.
E. Internet Services. In the event that Franchisee elects to provide high speed Internet access services by cable modems in the City, then at such time that Franchisee begins to provide such Internet services to its subscribers on a commercial basis, Franchisee shall provide free Internet access service and a free cable modem to each school and public library located within the Franchise Area and which are passed by the activated feeder cable for as long as Franchisee decides, in its sole discretion, to continue to provide such Internet services to its Subscribers in the Franchise Area. Such Internet access service and modem shall be provided when Internet services to Franchisee's Subscribers become available in the Cable System node in which the school or public library is located and within thirty (30) days of a written request from the school or public library for such Internet access service and modem.
13. STATE OF THE ART.
A. Requirements. The Franchisee shall offer Subscribers within the Franchise Area the same broad categories of video programming and similar capacity (including, but not limited to, facilities and equipment) for Cable Services, which are made available to either of the following:
1 . an average of at least three (3) other communities in North Carolina which have a Cable System franchise with the same or a comparable term (within three years, more or less), up to 5,000 Subscribers more or less than the existing number in Asheville, a similar number of cable plant miles, and similar or less stringent local laws, rules and regulations concerning the operation of a Cable System-, or
2. any other communities in North Carolina, South Carolina, Georgia and/or Tennessee which are served by a Cable System owned and operated by the Franchisee with the same or a comparable term (within three years, more or less), up to 5,000 Subscribers more or less than the existing number in Asheville, a similar number of cable plant miles, and similar or less stringent local laws, rules and regulations concerning the operation of a Cable System; provided, however, the City acknowledges that the Nashville, Tennessee Area, and Gainesville, Georgia, are served by Cable Systems owned and operated by Franchisee and each has a 750 MHz Cable System as of the effective date of this Franchise and that Franchisee shall not be obligated to rebuild the 550 MHz Cable System as described in Section 10 of the Franchise to a 750 MHz Cable System if those are the only communities which meet the criteria set forth herein above and have a 750 MHz Cable System during the term of this Franchise.
Outcomes of Recent Cable Franchise Renewals
-- Iowa City, Iowa (21,000 subs) receives $1.5 million over 10 years.
-- Mountain View, CA (16,000 subs) receives $2.6 million over 10 years.
(Source: The Buske Group)