Wednesday, December 29, 2004

An Unsettling Conclusion

It’s been interesting to follow the several class action cases in Michigan that have claimed that franchise fees are actually unauthorized taxes under Michigan state law. Courts have ruled (correctly so) that franchise fees are not taxes. Some of those rulings are on appeal.

In a twist, the City of Warren decided to settle the lawsuit brought by three Warren residents. The settlement agreed that all franchise fees had to be used for cable TV or “communications services.” The communications services allows Warren to pay for such items as their website, newsletters and other printed material mailed to residents. The settlement prevents the city from using franchise fees for other services such as the library.

Rather than understanding that shifting resources from the general fund to a “communications fund” means that those newsletters, calendars, the website, etc. will now be paid for using franchise fees, the Council President suggests that the franchise fee be lowered to 2 or 3 percent. The reduction in revenue for the City will run 40 to 60 percent or from $1.7 million down to a low of $670,000. The lowered amount will gut the budget of the City’s own government channels by over 50 percent.

Warren currently operates four government channels that provide 200 hours of locally produced non-repeat programming each week. The channels also provide over 100 hours of election coverage each election year. A member of the communications commission stated that the City has an “excess” of franchise fee revenues, but given that only $300 hundred thousand a year is above and beyond what is currently being used by the government channels it would hardly seem that Warren has a substantial excess of franchise fees. Reducing the franchise fees from 5 to 3 percent would save Warren cable subscribers about a dollar a month (that’s for expanded and premium subscribers, it would be much less for basic subs).

There are good arguments on both sides regarding the use of franchise fees for cable related services only vs. for general fund. Cities have certainly been strained in the last few years to keep up with ever increasing demand for services. But to use this settlement as a reason to now deeply reduce funding for government access (especially access with such a stellar production track record) seems…well…unseemly.

And it can hardly be what Cynthia Pfaelert and Dowell and Dora Taylor (plaintiffs) meant by bringing the suit in the first place.

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Monday, December 27, 2004

Chilly Reception to Charter's Weather Plans

At 10 a.m. on December 27th, the temperature in Sault Ste. Marie was exactly zero. Just a week earlier on December 21st, it was even colder at the Sault Ste. Marie City Commission hearing. Seems their cable op, Charter Communications, offered to scale back the basic tier offering by six channels and reduce the monthly charge for basic by a whopping 99 cents as part of the new franchise agreement proposal.

One of the proposed channels to be eliminated was the Weather Channel. Makes sense given that Sault Ste. Marie sports a moderately temperate climate this time of year of snow, freezing rain, ice and more snow. Heaven knows the residents don't need to actually find out what weather is headed their way.

A man after my own heart, Commissioner William Munsell, said of the proposed agreement "This is crap."

It's not like Charter is completing eliminating the Weather Channel it's just that if citizens want to get it they'll have to pony up almost $46 a month for expanded basic. And there's not a darn thing that local government can do about that rate.

City Attorney Steve Cannello explained to the Evening News that "The cable lobby has done a better job than the municipal government lobby in the congress."

Makes sense.

Let's see, Cable Lobby = $65 billion a year income vs. Municipal Lobby = a few organizations like National Association of Telecommunications Officers and Advisors, League of Cities, Association of Counties, Mayor's groups and Municipal Lawyers thrown in here and there.

Cable Lobby = 24/7 on Capitol Hill, at the FCC, at the statehouses, on the golf course, opening day at Camden Yards, lavish receptions at the Russell Building, and of course those pesky checks for campaigns.

It's not a done deal yet. Seems the Commission has appointed Munsell and another Commissioner, Verna Lawrence, to meet with Charter representatives about the proposed agreement. My guess is there's probably more in the proposed franchise that is unacceptable to the Commission than just the elimination of the Weather Channel from the basic tier. But the Commission shouldn't have to endure being forced into a corner just because the cable guys got their way with deregulation. One of the key issues in the rewrite of the Telecom Act has got to be rate regulation on all the tiers, not just basic, putting the power back into the hands of local government in the interest of its citizens.

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Thursday, December 23, 2004

Oh Mecklenburg, Oh Mecklenburg...

It is rare that a municipality denies a cable franchise renewal. Most towns and counties do not have the resources to go through the lengthy legal process (and perhaps even court) that follows a denial. For that reason, many will throw up their hands and acquiesce to the deal the cable operator throws on the table. It’s frustrating but these municipalities have no real choice in the matter, the cable ops have very deep pockets and can drag out a negotiation forever if they choose.

Mecklenburg County, North Carolina, has taken a bold step in denying a franchise renewal to Time Warner. Charlotte also known as “Queen City,” boasts itself as a “world class city with small town charm,” and touts welcoming events such as the “Newcomer Welcome Fair.” Knowing some of the regulators involved in this decision I can vouch that they did not take it lightly and did everything they could to achieve a fair and equitable franchise agreement.

So what did Time Warner do to get themselves into this pickle?

It’s not necessarily what they did as much as it is what they didn’t do.

First, the County has no record of Time Warner ever delivering the necessary letter to invoke the formal process required by federal law 47 U.S.C. § 546(a). It would seem from correspondence that the County bent over backward to get Time Warner to bargain in good faith, issuing extensions, even providing Time Warner with a model plan for an I-Net. But Time Warner ignored the assessment done by Mecklenburg for future cable related needs and then placed unreasonable demands on the County concerning their uses of rights of way and the ability of the county to promote competition. Perhaps what really tweaked the County was an apparent attitude that Time Warner understood the needs of the community better than it did, even though the county had extensively studied the needs of the community.

Throw into the mix the lousy provisions for PEG, a suggestion that the County pay for interconnectivity, lack of facilities upgrades, the deletion of provisions for communicating with citizens who are deaf, blind or non-English speakers and Time Warner’s attempt to prevent the County from using its Emergency Alert System and you’ve got one heck of a case for denial.

Which brings the final point, if municipalities do not conduct thorough needs assessments they cannot adequately claim grounds for denial. It’s quite possible that Mecklenburg has a slam dunk since they did their homework correctly and have shown extraordinary due diligence.

In this season of cheer Time Warner needs to stop acting like the Grinch and meet the very reasonable demands of Mecklenburg.

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Wednesday, December 22, 2004

And so it will begin…

In January, a new Congress will be seated and a sitting president inaugurated for a second term. January may also mark the last time people who are interested in communications and media will be able to make any kind of solid predictions for the future. The birth of 2005 heralds the necessary re-write of the Telecommunications Act.

Much attention will be on Congress and Washington, D.C., but even more attention will need to be paid to states and local government. Intelligent industry lobbyists and strategic thinkers understand that the federal system is cumbersome and runs about as fast as molasses in January. The telecom industry is not monolithic by any means, and their own in-fighting is good news for regulators, but they at least understand one valuable concept, if you want rapid change…take it to the statehouse.

This is a common and smart tactic for any advocacy. State by state reform has been used in issues such as gun control, abortion, the environment and gay marriage with tremendous success for the “reformers.” And while it might seem that proposing a sweeping change at the federal level may be easier because you only have one legislature to deal with as opposed to fifty, it is exactly the opposite. After all, who is actually watching the statehouse?

A recent example is legislation that was slipped by the citizens of Pennsylvania. Verizon was able to successfully get legislation passed that prevented Pennsylvanian municipalities from building their own WiFi networks. An exception was carved out for Philadelphia (after much objection by Philly activists) but what about Pittsburgh, or Reading or Allentown? Ohio will be facing the same kind of challenge in the coming year when the industry works to pass legislation that will prevent municipalities from building all sorts of municipally run telecom infrastructure. Who knows what other state measures are lurking in 2005? As I always say “A bad idea has a way of taking on a life of its own.”

Replication is the key. It’s not necessary to individually write separate pieces of legislation for each and every state, just take one piece, do some “Find and Replace” and voila!
For that reason, regulators and public interest advocates need to be aware of legislation being introduced in every statehouse. If it passes in Ohio you can bet it will be introduced in Washington and Wisconsin. Additionally, many states don’t have rules regarding germaneness of legislation to the bill proposed, so you will see bits and pieces thrown into legislation that has nothing whatsoever to do with “telecom.” Dig deep into budget bills, that’s always a favorite way to get something passed with ease and stealth.

So while the national news will be focusing on the macro, it will be important for the public to be educated about the micro. Otherwise by the time the Telecommunications Act really does get re-written it may not really matter that much because so much of the public interest will have been stripped out at the state level.

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Tuesday, December 21, 2004

Communications Blog to Start Today!

Welcome to Riedel Communications "Blog." I've created this so there can be an exchange of ideas regarding cable franchise renewal and how communities can get the best franchise agreement possible. Coming soon will be items of interest, commentary and a chance for you to comment on the issues of renewal. Bunnie Riedel

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