Dr. Connie Book, associate professor in the School of Communications, testified in Raleigh before the House Finance Committee on June 1 that local cable television franchising serves the public interest better than proposed state legislation.
The telephone industry is lobbying the State of North Carolina, other states and the federal government to end the local cable television franchising process. Proposed legislation to create a standardized franchise process is now in North Carolina’s House and Senate, and action is expected within weeks.
Dr. Book testified that the proposed legislation would benefit wealthier neighborhoods at the expense of municipal and public school infrastructures – thus, the public interest.
Dr. Book – author of the book “Digital Television: DTV and the Consumer” – is frequently asked by cities, the cable industry and the Federal Communications Commission to make comment and presentations on the status of local cable franchising, and she has served as a data-collection consultant for municipalities across the country. At Elon, she teaches the Broadcasting in the Public Interest course.
Cable franchises in North Carolina today are local contracts, negotiated by elected city officials with cable providers for limited terms, typically 10 years. While only one cable company operates in most communities, nothing legally prevents another provider from establishing service. Dr. Book said potential providers have chosen not to compete because profit margins are seen as too low.
Dr. Book said the local cable franchise process has consumer protections that the proposed state legislation does not. For example, local agreements require the cable company to make its services available to all neighborhoods, not just the wealthy ones where they can pull a larger profit per household. She said telephone companies want to enter cable television markets in select, wealthy neighborhoods where they can quickly earn cash on competitive services, and the North Carolina legislation would allow them to do so.
More significantly, she said, when a telephone company establishes cable service in any one neighborhood, the existing cable provider can convert its franchise from a local to a state franchise within 30 days – in effect, abandoning local cable franchise provisions tailored to individual communities and negotiated with hundreds of voices at the table, and ending all public service requirements established in those agreements.
“Let’s imagine we are the City of Greensboro. We negotiated with the cable company a franchise agreement that provides for an Institutional Network. That network runs our street lights, our water monitoring system, e-mail, internet in our public schools, some telephone service, and is maintained and operated by the cable provider,” Dr. Book said.
“BellSouth rolls out service and the cable company – within 30 days, according to the new Senate version of this bill – converts to the state franchise. Immediately, the Institutional Network is no longer required. The cable company lowers its bill to compete with BellSouth, which sets up shop for $3 a month less than the cable company because its overhead is lower. Remember, BellSouth didn’t have to build out its system. Sounds good, right? $3 less a month. $36 a year. Competition is working,” she said, with irony.
“So the cable company, now earning less per household, sits down and reviews the bottom line. That Institutional Network it once provided the City as part of the local franchise agreement becomes, by necessity, a billable item. The cable company puts a value on it, a dollar figure. Communities that lease that network service from the cable company or telephone company of similar size to Greensboro typically pay more than $2 million annually. The City has to have this service, and that money comes out of the general fund generated by local tax dollars.
“This is just one city, one example. That white elephant will be repeated in every market where so-called competition exists. That new tax burden will be on every person, not just cable subscribers, with cable competition only benefiting the select, wealthy pockets of neighborhoods where the telephone company has decided the profit margin is right.”
The state and federal government’s interest in changing the franchise process, Dr. Book said, is related to who gets the 5 percent franchise fee that is collected because the wires that deliver cable service travel across publicly owned property – the public right-of-way. Currently, that 5 percent goes into a general fund to be used at the discretion of the cities for public services.
“This bill will end a process that is working, for one that won’t work,” Dr. Book testified. “In the end, the State will have been seduced by a promise of competition and increased telecom taxes that won’t pan out.”