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Taming Cable PDF Print E-mail
News/Features - Feature Stories
Tuesday, 30 July 2002 18:00
The current franchise agreement between the City of Davenport and the city’s provider of cable-television services was drafted in 1974. Nixon resigned that year. Pong was a state-of-the-art video game. Of course, nobody had even heard then of terms such as fiber optics, digital cable, or the Internet, or had any conception of how they would impact the way people watch television or communicate in the 1990s and beyond. Nor were those words on the tips of people’s tongues when that agreement was revised and extended in 1986.

“No one could envision what the technology was going to be 15 years out,” said Karl Rhomberg, who was on the city council during the franchise-agreement revisions of 1986 and is now executive director of Cable Access Television, Incorporated (CABI).

But 15 years is nothing. Davenport’s cable-television franchise agreement is pushing 30 years old. To say it’s outdated is an understatement.

Now the city’s embarking on creating a new franchise agreement with Mediacom, and it will be asked to address a wide variety of interests: those of the cable company, those of the public, and those of local government. Any agreement will also need to be flexible enough to ensure that it’s not rendered obsolete when the next technological revolution comes along.

The current agreement was set to expire in March 2002, but it was extended through August to allow for more time. The negotiation process was well under way in February when, during a public meeting, several city-council members expressed an interest in a municipally owned and run cable system. The city and Mediacom, the current franchise holder, haven’t held any discussions since May. “The city just expressed that it wanted to set its own priorities,” said Jon Koebrick, Mediacom’s director of governmental relations.

With the most recent extension set to expire at the end of August, the issue is about to emerge once again. Next week, the city council will likely extend the current franchise agreement through February 2003. It will also request that Mediacom respond to a number of issues related to its compliance with the current franchise agreement, particularly with respect to public access and reports to the city. According to city attorney John Martin, the issue of public access involves “the ability of the public to effectively use the cable system.”

Once the questions of compliance are answered, the city will actively undertake the process of renewing its franchise agreement with Mediacom. That might be done before the current agreement expires in February, or the pact might be extended – yet again.

A franchise agreement determines many things, but the city can’t set or regulate cable rates or programming. What’s at stake might be farther from the hearts of most citizens, but it’s far from irrelevant. The terms of the franchise agreement will determine whether the term “public access” has any real meaning in Davenport, and it will also dictate the quality of the high-tech infrastructure that connects local governments, schools, and the citizenry.

The issue is also highly complicated, involving hamstringing federal regulations and legal rulings, as well as ever-changing technology.

Web of Regulation

A franchise agreement is the instrument through which a municipal government awards a cable company the nonexclusive right to use public right-of-ways for infrastructure that carries television programming and other data. In return for that right, the cable company collects for the city a “franchise fee” of not more than 5 percent of its gross cable-service revenues and provides other equipment and services. (Davenport receives a 5-percent franchise fee worth approximately $800,000 a year.)

A city can award a single cable franchise, or it can have franchise agreements with multiple providers. Typically, though, cable companies operate as monopolies. That’s because the cost of building a cable network is prohibitive, and without a monopoly, there’s no guarantee that a competitor would be able to generate enough market share to recoup the costs of infrastructure.

Of course, the combination of the regulatory environment and no competition has put customers at the mercy of their cable companies. Until recently – when the cost of small satellite dishes and their programming packages became competitive with cable – consumers have had no alternative to the local cable company, its rate structure, and its service record.

What cities can and can’t ask for is dictated by the Federal Communications Commission (FCC) and federal law, in particular the 1996 Telecommunications Act. For example, some city-council members in Davenport have inquired whether “gross revenues” include Internet service provided by Mediacom. Historically, the answer was yes; Mediacom had charged its Internet customers the 5-percent franchise fee, which is then passed onto the city.

But on March 14, the FCC adopted a rule that said gross revenues of cable services do not include access to the Internet through cable modems. As a result, Mediacom stopped collecting that fee from its Internet subscribers, and the city has lost a chunk of its franchise fee. (Neither Mediacom nor Martin could say how much money, because the change is so recent.)

The courts also have their say. Some municipalities – most notably Portland, Oregon – have added “open access” provisions to their franchise agreements. In essence, “open access” would force the local cable provider to open its infrastructure network to competitors. This is seen as a way to encourage competition, because rivals wouldn’t have to pony up the initial infrastructure costs.

But open access has been struck down by the courts, and it will take action from the FCC or Congress to allow it. In other words, competition in cable television is likely to remain a rare occurrence.

Of course, cable is no longer just about television. Mediacom also provides high-speed Internet access, and it might one day also provide telephone service through the network that now brings 30,000 Davenport households their television programming.

Public Access

The issue of public access has several components. One will be the number of channels allocated for public, government, and school-district use, and that will be decided during franchise-agreement negotiations.

The other issue involves giving the public the means to access the airwaves, and provisions for this are a part of the current franchise agreement. First, Section 19 of the agreement dictates that the cable company will “provide cablecasting originated by it … . Grantee shall use its best efforts to present programming which deals with the needs and interests of the City and its citizens. Grantee shall maintain the necessary studio facilities and equipment to produce and transmit such programming.” In addition, the franchise agreement says that citizens are entitled to use Mediacom’s production facilities – at a “reasonable fee” (which is not defined) – to create programming for the public-access channel. Advocates of public access argue the franchise agreement should be specific about what constitutes a “reasonable fee,” or state that there should be no fee.

Rhomberg and CATI have been at the forefront of a movement asking Mediacom to comply with its current franchise agreement. “These people have made an agreement with the city,” Rhomberg said.

Yet Rhomberg freely admits that Mediacom is ill-equipped to live up to the requirements of the current agreement. “It’s not their line of work to do public production.” And that’s where CATI comes in. The not-for-profit company would like to become “the citizens’ production house,” paid by Mediacom to fulfill both the public-programming and public-access components of the franchise agreement. CATI would provide local programming that it produces itself – and Rhomberg is chock full of ideas – and would also provide the equipment and facilities for public-access programs produced by citizens.

Already, groups have approached CATI about doing programs, but that’s premature, Rhomberg said. “We’d love to do a production about you,” he said, but “that’s Mediacom’s responsibility.”

Certainly, Rhomberg is operating out of some self-interest. CATI was formed in 1974, but it’s been dormant for a long time. A contract with Mediacom would provide some long-term funding for the organization.

But Rhomberg argues – rightly – that cable television is uniquely positioned. “The one thing cable’s got that nobody else [including satellite providers] has [is] local programming,” he said.

“The Davenport story isn’t being told to the people of Davenport,” he added. “We want to provide the medium to the people.”

And that wouldn’t require a radical re-tooling of a franchise agreement. “A lot of what we want is already there now,” he said.

The key will be enforcing current provisions and ensuring that similar measures are included in a new agreement. And adding operational money to the equation. Many franchise agreements include an annual contribution from both the cable company and the city’s franchise fee to public access.

The Davenport Situation

This public-access component is one of the things in the city council will be asking Mediacom about at its meeting next week.

The cable company will have until September 6 to provide responses to the city’s concerns. Koebrick said he hadn’t seen the requests and couldn’t respond to them. But when asked whether Mediacom was in compliance with its franchise-agreement terms, he said, “We believe so, generally, yes.”

Mediacom’s response to the city will likely set the tenor for the negotiations to follow, and give some sense of what to expect from both the city and the cable company over the coming months. “We’ll provide whatever the franchise requires,” Koebrick said.

Yet Mediacom claims it’s incumbent on the city to request the information. “We’re confident the city has not asked for any reports prior to this time,” Koebrick said. “We don’t provide reports that have not been requested.” (The language of the franchise agreement, however, pretty clearly states that Mediacom is periodically required to give certain information: “Grantee shall make an annual presentation to the City Council regarding the activities of the Grantee,” for example. That hasn’t been happening.)

There seems to be a level of mutual distrust between the city and Mediacom. Because of customer complaints and rates that seem to have no ceiling, the city is exploring the idea of a municipally run cable system to compete with Mediacom.

City-council members will be invited to visit Muscatine’s city-run system sometime in August, Martin said. And the city has a small contract – no more than $2,500 at this point – with Patrick Callahan to consult on the cable-television issue. According to documents Callahan presented to the city, the consultant reviews city documents, evaluates the cable company’s system and performance, and works with the city to develop goals and strategies for the franchise-renewal process.

But is a municipally financed, built, and run system feasible? Callahan reports that 10 Iowa communities have built their own systems, but they’re all much smaller than Davenport; Muscatine, with a population of less than 23,000, is the largest.

And it’s not like a municipal system would just take over Mediacom’s infrastructure and operations. Mediacom has no intention of ceding this market to the city, and the city can’t legally withhold a franchise agreement. “The city does not have the option of not granting us a franchise because it intends to get into the business,” Koebrick said.

In other words, although the city might be able to offer cable (and perhaps Internet) service at a lower price than Mediacom, it will have to take customers away from the company. And the city’s track record with things that don’t normally fall under the purview of municipal government – CitiBus, the RiverCenter/Adler Theatre, and John O’Donnell Stadium – doesn’t inspire confidence.

Yet the threat of a municipal cable utility could provide leverage to get concessions from Mediacom. If the company views the possibility of municipal competition as real, it might be willing to give up a little more.

Mediacom’s interest in a new franchise agreement is simple. A long-term agreement allows the company to secure financing for future system enhancements that it expects will keep it competitive with other entertainment or service providers, whether they’re small-dish satellite services or the phone company. Koebrick said Mediacom considers franchise agreements lasting 15 years as reasonable.

“We want to get this done as soon as possible,” Koebrick said. “We would hope to have this done by the end of the year.”

What Could Be

The city will be making a lot of requests of Mediacom, particularly to connect government, schools, and citizens to each other. The issue here isn’t really money, because the cost of whatever facilities, equipment, and infrastructure Mediacom provides will largely be passed on to consumers, Koebrick said.

Yet Mediacom might balk at some provisions. Mediacom will incorporate many of these franchise costs into its rates, which means that the more Davenport asks for (and gets), the more the average cable customer pays. Mediacom can cast itself as the good guy – looking out for citizens’ pocketbooks – by objecting to some demands from the city. “We try to keep down pressure on those rates,” Koebrick said.

And that’s where the city will need to do a good job educating the public about the benefits of the franchise-agreement provisions.

The city also needs to ensure that it looks at the franchise agreements of progressive communities of all sizes across the country to see what innovative things they’ve been able to get from cable companies.

The city of Tallahassee, Florida, incorporated these goals into its cable-franchise-renewal process, among others:

• Ensuring that students, low-income people, and the elderly have access to high-speed Internet access at home, school, or community centers.

• Encouraging the cable system to make its system compatible with those of neighboring communities.

• Encouraging reasonably priced high-speed Internet access for small businesses.

• Encouraging the cable company to offer à la carte service, allowing people to purchase their cable packages channel-by-channel. (One consistent gripe about most cable companies is the way they package channels together and only offer them in groups.)

• Creating an institutional network for distance learning.

• And conducting regular, independent customer surveys.

The local situation is also unique, and Davenport might also ask Mediacom to address challenges specific to this area, such as the ability and resources to broadcast more city and county meetings from all across the Quad Cities area, including Illinois.

Obviously, federal law and the courts restrict what cities can require. But creative thinking can go a long way, so long as the cable company is willing to negotiate in good faith.

Of course, disinterest from cable companies has prompted many cities to build their own information networks. And in some cases, rather than build an entire cable system, a city can bear some of the infrastructure costs in partnership with the cable company. (LaGrange, Georgia, built a broadband network and leased it back to the cable company to ensure that its connectivity goals were reached.)

The key, Rhomberg said, is to approach the renewal process methodically, and not run through it. “Typically, it’s a 24-month process,” he said.

“We’re not intending to rush this through,” Martin promised.

Yet some of these issues don’t appear to be on the minds of the city leaders. When asked the city’s goals for its franchise agreement, Martin listed three: improving public access, expanding the “interactive loop” among city facilities, and improving the emergency-alert system.

“There are lots of things we’d like to have, of course,” Martin added, noting of Mediacom: “Some things they’re open to, some of them they’re less willing.”

The key is to force the issue with Mediacom, so that Davenport and its citizens get the most for their money.
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