The recently announced merger between America On-line (AOL) and Time Warner should put to rest any speculation as to whether the Internet is nothing more than a passing fad. It's becoming big business -- and becoming more controlled by mega-corporations. AOL is the world's largest internet service provider, with a market value of $164 billion, and Time Warner is the world's largest media and entertainment conglomerate, valued at $97 billion. At the press conference on January 10, 2000, new AOL Time Warner Chief Executive Officer Gerald M. Levin noted that 20 million homes are passed by Time Warner digital cable -- the second largest number in the country after AT&T Cable Services. The result of this merger and others, such as that between cable giant TCI and telecommunications behemoth AT&T, is that cable television networks are being upgraded to deliver a full range digital services such as becoming the major way people connect to Internet; offering high-definition, interactive, and other forms of digital TV; providing more opportunities to package advertising and home shopping; and much more. So it's more than just cable television service. In spite of this escalating empire-building and globalization, citizens still have a say in how media conglomerates serve their local communities. The valuable cable "rights-of-way" needed by such mega-corporations as AOL Time Warner and AT&T - TCI are primarily controlled by local governments. So encouraging your community to create the best possible cable television franchise agreement is one of the few ways that can help guarantee yourself, your family, your school district, your place of worship, your business, and the rest of your community the most benefit from digital age. You can actually secure a wide range of educational, civic and e-commerce services -- but only if right deal is made. To help get you started, here's brief guide to what your community can request -- and get -- from your local cable television franchise agreement. The Role of Local and State Governments The land and poles that cable television operators need to string their cables are owned by the public and primarily managed by local governments. Therefore, communication companies must develop cable television franchise agreements with a city cable commission, city council, town council, or a board of supervisors for access to these valuable public "rights-of-way." These regulatory entities are called "local franchising authorities" (LFAs) and must be officially recognized by the FCC. The LFA represents one or several cities, towns, and counties. The franchise agreements are negotiated by local government staff members or locally-appointed commissions and approved by local elected officials. Often the negotiations include public hearings. Therefore, local citizens and organizations can exert a great deal of influence in these negotiations. About 30 state legislatures and regulatory agencies also regulate some aspects of cable television. Some states, such as Massachusetts, regulate cable television through a state commission or advisory board. Public utility commissions serve that regulatory function in the states of Alaska, Connecticut, Delaware, Nevada, New Jersey, Rhode Island, and Vermont. In Hawaii, regulation of cable television is the responsibility of the Department of Regulatory Agencies. By federal law, local and/or state authorities may select a cable franchisee and regulate in any areas that is not preempted by the FCC. Typically, LFAs have adopted laws and/or regulations in areas such as subscriber service requirements; public access requirements; franchise renewal standards; subscriber rates for basic cable service (but not channels sold on a per-channel or per-program basis), installation fees, equipment and customer service; public, educational, and governmental (PEG) access channels, connections, services, facilities, and equipment; where the local franchising authority has chosen to regulate; bills and billing practices; extension of cable service to individual homes and businesses; repairs; improper wiring; theft of service; and false or misleading advertising concerning the cable system's capabilities. New Public Interest Opportunities with Mergers and Transfers In the past, cable franchises covered fifteen to twenty year periods. So communities that were unaware of the true value of their public rights-of-way or were simply "sold out" by their elected officials had no immediate recourse for a bad deal. However, the Telecommunications Act of 1996 has opened up the market for buying, selling, and trading cable television companies and service areas. Since most all franchise agreements include a provision for the communities to review the franchise agreement during a proposed change of ownership, many local franchising authorities are finding they can negotiate better deals with the new owners. Many communities have already taken advantage of the recent spate of mergers and transfers to renegotiate better cable television franchise conditions for their local citizens, especially in the "digital age." The five areas within local control are: (1) franchise and other fees; (2) technical requirements, (3) community infrastructure, (4) Community programming, and (5) regulatory authority. Franchise and Other Fees Federal law allows the local community to request up to 5% of the cable operator's gross annual cable television and internet revenues as a franchise fee. A franchising authority may use these funds for any purpose and a cable operator must list any applicable franchise fee as a separate item on the subscriber's bill. The community may also request up to 3% of annual revenues for capital, which includes video equipment, cable modems, and system technical components. All of the franchise agreement examined (and listed below) require the full 5% of the cable operator's gross revenues as payment for the use of public rights-of-way. Some additional notations or requirements include:
Technical Requirements Bandwidth: The "bandwidth" or "through-put capacity" determines the amount of information or channels that a cable can carry. "Downstream" capacity determines the amount of information that can be carried into the subscribers' homes and businesses. "Upstream" capacity determines the amount of information that can be carried from the home or business to the system - an important consideration for internet users. Some of the better franchise deals are:
Nodes: Signal quality is greatly affected by the number of subscribers assigned to each "node" or connection. The fewer the number of subscribers using the same node, the better quality their cable television signals. A good franchise requires as few homes per node as possible, depending on the residential density. For example:
Network Rebuild: Optic fiber is far better at carrying digital signals than the traditional coaxial cable. A good franchise will require at least a hybrid fiber/coaxial (HFC) network and the replacement of as much of the coaxial cable as possible. The number of times a signal is boosted ot amplified also determines the quality of the signal -- so the fewer "active" components, the better the service. Some of the better franchise deals are:
Community Infrastructure Since cable television operators use valuable public rights-of-way, most communities require the companies to construct an "institutional network" (I-net) as part of the cable system. Such a network connects libraries, schools, and government offices in order to provide video, local access network (LAN), and internet services. The requirements can specify bandwidth, the number of optic fiber "strands" dedicated for the institutional use, or general performance criteria. Franchise agreements can also list the number and location of the I-net sites, provide equipment and maintenance of the I-net, and provide funds to operate the system. (Note that the grants are usually used to pay the cable operator for the construction and maintenance of the I-net.) Here are some examples of some of the better franchise deals:
Community programming Communities may require cable operators to set aside channels for public, educational, or governmental ("PEG") use. These channels may be operated by the cable company, local government, or a third party. PEG channels are not mandated by federal law. If the franchise authority does require PEG channels, specific requirements should be determined in the franchise agreement, such as the support for services, facilities, or equipment for the use of PEG channels and the circumstances under which a cable operator may use unused channels. Some of the better franchise deals include:
Digital Bandwidth Reservation More frequently, municipalities are requesting access to the infrastrature in terms of digital bandwidth rather than analog "channels." For example:
Regulatory Authority Communities have the authority to require standards or enforce standards developed by the FCC in the areas of basic cable television rates, signal quality, customer service, open access for internet service providers, equity in treatment of both residential and business subscribers. Some of the better franchise deals include:
Cable Operator Clout Over Local Elected Officials Obviously, cable operators want to pay as little as possible for the use of the public rights-of-way and charge as a high a rate as possible. When dealing with local elected officials and government staff members, large communications corporations have learned that it's "cheaper to play the political game than upgrade the system," in the words of one legal consultant. Long-time cable operator Time Warner has successfully used this approach - and cable new-comer AT&T is becoming "much smarter in community relations and working with elected officials." Since the passage of the Telecommunications Act of 1996, cable television service has gone from local owners to mega-communications corporations such as AT&T and cable operators are "swapping" service areas to consolidate franchise areas. This has resulted in the communications giants accumulating more clout over local elected officials - who are becoming more concerned about what these media giants will say about them on their cable programs and other media outlets. A good indication of whether local elected officials and government agencies have succumbed to this media clout is how well they have negotiated the cost of the use of the public rights-of-way.
Sample Cable Television Franchises
Additional Resources Center for Media Education J.D Power and Associates
Federal Communications Commission
Report researched and prepared by B.R. Forbes, Access Enterprises. Special thanks to Nicholas Miller of Miller & Van Eaton and to Libby Beaty of the National Association of Telecommunications Officers and Advisors (NATOA). |