Gerard Scimeca – Chairman, CASE
February 1, 2019
There’s a scene in the movie Vacation where America’s favorite goofy dad, Chevy Chase’s Clark Griswold, wrecks his car and asks the mechanic the price of putting his vehicle back together. The unfortunate response to his honest inquiry: “How much you got?”
Americans know a shakedown when they see one, and in the movies it can provide great suspense or comedy. But we don’t expect to see these hard-fisted tactics employed by state and local politicians against private companies attempting to serve the general public. This, however, is now the unfortunate circumstance as cable and broadband companies are being forced by local governments to pay over the top fees and provide costly “in kind” benefits for “franchise” rights to serve local communities around the country. It’s a shakedown, it’s wrong, and it is consumers who will ultimately pay the price.
Years ago in 1992, the federal Cable Act set a legally binding fee capped at 5% of gross cable service revenue to be paid to local governments for the use of “rights-of-way” property – telephone poles, sewer ducts, and other access to city land. Called a “franchise fee,” this agreement ensures that municipalities are compensated for the use of their facilities and helped streamline and simplify the complex issues involved in deploying cable television infrastructure.
In more recent years, that wise policy bloomed beyond anyone’s expectation when cable providers found ways, at basically no additional cost to local governments, to piggyback broadband service on that infrastructure, bringing untold benefits to American residents and ushering in the internet miracle.
But now, with dollar signs in their eyes, state and local politicians are finding ways to blow through the cap that limits fees to 5% of cable television revenues, in violation of the law. Cities are demanding, for example, 7% fees on broadband revenue, or requiring “registration fees,” or coercing cable providers into giving them “courtesy” services, meaning free cable or broadband in municipal buildings, sporting arenas, airports, and wherever else they think to demand a free ride. Just some of the outrageous demands made by local governments can be found here.
Aside from being afoul of the law, these local demands could cost service providers tens of millions of additional dollars, which will either mean fewer services or higher bills for their customers. It will also choke off investment in building out and improving networks, making our technology companies less competitive just when Americans are counting on new tech the most. It’s essentially an illegal, hidden local tax, that municipalities are forcing cable companies to collect on their behalf and for their unique benefit.
Thankfully, people are wising up, and this includes the FCC which oversees cable regulations and enforcement. It is conducting a vital proceeding right now to reaffirm the structure and fairness of the Cable Act fee system and to protect consumers from the threat of skyrocketing bills.
These outrageous local shakedowns have to stop and the law must be clarified and affirmed. A line must be drawn in the sand against this backend corruption of the law, both to protect crucial investments cable companies are making into the technology of tomorrow, and protect honest consumers from rate hikes and reduced service.
