State Wide TV Franchising Not Living Up To Lobbyists' Promises

from the lobbyists-inaccurate? dept

Thu, Aug 27th 2009 7:13pm — Mike Masnick

I'll be the first to admit that I actually agreed with the stance of telcos a few years back that local "franchising" rules were a problem. If you don't know, for a long time, if you wanted to offer cable-based television in a market, you had to get a "franchise" agreement from a local (town/city/region) authority. For many years, this meant a single cable company offering service with absolutely no competition. When the telcos came along with plans to offer television over fiber or DSL lines, they realized (accurately) that having to get approval in every tiny region would be cost prohibitive. This was all absolutely true, and it was also true that it was silly and unproductive for telcos to have to get so many different approvals and abide by so many different rules just to finally give the cable companies some serious competition in markets.

The telcos were successful in making their case, but, of course, these things never happen without a catch. Various states wiped out local franchises, and put in state-wide franchises... but, in doing so, the telcos were often able to dictate the terms of the state-wide franchise rights, making them quite friendly to the telcos, but not so friendly to others or to actual consumers. Apparently, states are now realizing that the promises given to them by telco lobbyists haven't been shown to be true. The insistence that statewide franchising would lead to lower prices for TV service, for example, hasn't been validated at all.

I recently got to hear first hand how the statewide franchise law in California is leading to serious problems for some really amazing local municipal and school networks, which will now get shut down, since the statewide law doesn't require it, as the local franchise rule did. I'm not convinced that the answer is to return to local franchising, which still seems like a process that is too convoluted for innovation. Perhaps the real answer is that none of this will matter eventually, once television all runs through your browser, anyway...

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Filed Under: franchising, lobbying, telcos, video

26 Comments

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Anonymous Coward, 27 Aug 2009 @ 7:31pm

The real answer is to take away the monopolies and allow anyone to compete. Our cable lines already take up a lot of bandwidth, tons and tons of bandwidth just to have all these channels flow through it. You are not watching 100 channels all at once yet all these channels occupy your bandwidth all at once, bandwidth that could be used more like the Internet where a television can request the station you want and the network will simply transmit only solicited information. This would make possible an infinite amount of channels being that only the channels you watch are occupying your bandwidth at any given time. It's also more efficient because now you don't have to spend needless resources broadcasting irrelevant information to people who aren't watching it, you only broadcast to each what s/he is watching. This also allows for far higher quality video and audio. Then anyone over the Internet should be allowed to create their own channel that I can program in my television the URL to and watch and they should be able to create and offer it for free (other than of course what they normally pay for cable and television). but the fact is that we simply do not have enough competition in this nation to allow for such a thing to be affordable to consumers because in order to add value to consumers we must monopolize it as much as possible and exploit every penny from consumers that we possibly can.
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Anonymous Coward, 27 Aug 2009 @ 7:43pm

local franchising was a buggy whip system, the results of the new system are any better. Maybe sometimes buggy whips aren't so bad.
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..., 27 Aug 2009 @ 8:13pm

Re:
What ?
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RM, 27 Aug 2009 @ 8:35pm

First poster: Look up SDV - Switched Digital Video.

Also, they are not "our cable lines". CATV infrastructure belongs to the cable companies. It was bought and paid for by private money. They do not have a true monopoly, but more of a natural monopoly based on the upfront cost and negligible returns gained by overbuilding cable plant.

This is why you rarely see cable companies competing head to head, except in a few select areas that are new builds. Local franchise agreements would appear to have extended these natural monopolies, however that really isn't true. There simply wasn't a desire to compete head to head between cable companies because it just does not make financial sense.

At any rate, the real issue with the state-wide franchise is giving too much power to telcos as well as losing some long held local benefits as mentioned in the articles, like free cable to the classroom as well as community (public) access tv. These all go away due to the state-wide franchise rules.
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Anonymous Coward, 27 Aug 2009 @ 10:14pm

Re:
"They do not have a true monopoly, but more of a natural monopoly based on the upfront cost and negligible returns gained by overbuilding cable plant."

First of all, even if it is their infrastructure, they have no right to prevent competitors from building new infrastructure.

"It was bought and paid for by private money."

Do you have any evidence of this?

The fact is that a lot of the CATv infrastructure was funded by government, often local governments, but still funded by government.

"The existing infrastructure was built with taxpayer money and should be equally accessible to all service providers."

http://www.merit.edu/mail.archives/nanog/2005-11/msg00467.html

"The BVU Board approved $500,000 to bring "on-demand" movies to existing customers obtained by over building existing private-sector infrastructure. By using the power of government and tax dollars, they offered subsidized CATV. "

http://www.sullivan-county.com/id3/bvu_movies.htm
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Anonymous Coward, 27 Aug 2009 @ 10:27pm

Re:
also note that in the case of natural monopolies, they should be regulated. Any monopoly should ideally be economically regulated. However, the government doesn't seem to be a good job at regulating them. So not only did the government fund CatV via government grants, but then they hand over these corporations unregulated monopolies and disallow anyone else to build new infrastructure. It's such a scam.
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Esahc (profile), 27 Aug 2009 @ 10:32pm

Hmmm . . .
I've had way too much to comment on this intelligently so all I have to say is . . . yes.
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Anonymous Coward, 27 Aug 2009 @ 10:35pm

Re:
"There simply wasn't a desire to compete head to head between cable companies because it just does not make financial sense."

You mean the cable companies do not desire anyone to compete against them because they can extract more money from customers if there is no competition so they lobby the government to disallow competition. Of course competition makes no sense if you're the monopolist, but it makes perfect sense to consumers and for improving aggregate output.
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Anonymous Coward, 27 Aug 2009 @ 11:00pm

btw, here is a site that goes in a lot of detail over the telco / cableco issue

http://www.mackinac.org/article.aspx?ID=6750
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Mike Masnick (profile), 27 Aug 2009 @ 11:21pm

Re:
Also, they are not "our cable lines". CATV infrastructure belongs to the cable companies. It was bought and paid for by private money.

Yes... but also with gov't grants rights of way...

They do not have a true monopoly, but more of a natural monopoly based on the upfront cost and negligible returns gained by overbuilding cable plant.

In which case there's a strong argument for requiring competition on the network, rather than between networks.

At any rate, the real issue with the state-wide franchise is giving too much power to telcos as well as losing some long held local benefits as mentioned in the articles, like free cable to the classroom as well as community (public) access tv. These all go away due to the state-wide franchise rules.

Yeah. That part isn't good.
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MichaelTurk, 28 Aug 2009 @ 8:35am

Re: cable and broadband
I'd urge you to read up on a) Switched Digital Video as a commenter mentioned below, b) cable's efforts on IPTV, and c) cable's migration of content to digital delivery.

The industry is currently migrating analog content to the digital tier to address the bandwidth scarcity you mention. By moving to digital delivery, and on demand delivery of channels, we'll free a great deal of bandwidth on our networks.

We'll have to disagree on the user-generated video point, though. I enjoy shows like Burn Notice, Entourage and Californication way too much to give up quality programming in favor of someone's YouTube stream. I enjoy watching user-generated content when it's very well done, but frankly, most of it isn't.
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Michael Turk, 28 Aug 2009 @ 8:42am

Cable funding.
The fact is that a lot of the CATv infrastructure was funded by government, often local governments, but still funded by government.

"The existing infrastructure was built with taxpayer money and should be equally accessible to all service providers."

http://www.merit.edu/mail.archives/nanog/2005-11/msg00467.html

"The BVU Board approved $500,000 to bring "on-demand" movies to existing customers obtained by over building existing private-sector infrastructure. By using the power of government and tax dollars, they offered subsidized CATV. "

http://www.sullivan-county.com/id3/bvu_movies.htm

You've misread both of your links. The first specifically refers to "the current copper plant in the ground in most of the US." That's a reference to phone company plant, which was built with taxpayer subsidies. Cable was built with private investment, not taxpayer money.

The second link to BVU is a muni-overbuild project. That's not a cable provider but is actually a municipal government that has overbuilt in their area to compete with the private sector (cable) option. The money they spent was in competition with cable, not on cable.
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Anonymous Coward, 28 Aug 2009 @ 8:57am

Re: Cable funding.
Much of CatV was publicly funded through govt grants as well.

'Government assistance has played an important role in the CATV industry. In fact, in view of the public interest that information and communications infrastructure should be established, and that regional disparities should be addressed including areas of difficult transmission, the central and local governments have provided various forms of assistance to the CATV industry.

However, as the CATV industry transforms itself towards more expansion and promotion of its regional character, the assistance policy should be changed as well. Subsidies to projects where there is no particular justification should not be continued. Even if there is reasonable grounds for government assistance, such assistance should not be rendered to CATV operators in areas where the nature and scope of such assistance addresses the difficulties which their managers themselves should be responsible for. Such assistance may result in inefficient management and misplaced management strategies.'

http://www.mediacom.keio.ac.jp/publication/pdf2008/sayaka.pdf

CATV has always received government assistance through grants/subsidies.
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Anonymous Coward, 28 Aug 2009 @ 9:04am

Re: Re: Cable funding.
Uhm.. well that article documents it in Japan only. My mistake.
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Anonymous Coward, 28 Aug 2009 @ 9:36am

Re: Re: Re: Cable funding.
Perhaps I'm mistaken and you're right, it was privately funded. I can't really find information on it but I always thought much of it was funded for by local governments. Maybe not.
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Michael Turk, 28 Aug 2009 @ 10:06am

It wasn't...
But thanks for acknowledging the error.
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Pete, 28 Aug 2009 @ 12:15pm

Franchises haven't been exclusive for quite some time
http://www.law.cornell.edu/uscode/uscode47/usc_sec_47_00000541----000-.html U.S. Code TITLE 47 > CHAPTER 5 > SUBCHAPTER V-A > Part III > § 541Prev | Next § 541. General franchise requirements (a) Authority to award franchises; public rights-of-way and easements; equal access to service; time for provision of service; assurances (1) A franchising authority may award, in accordance with the provisions of this subchapter, 1 or more franchises within its jurisdiction; except that a franchising authority may not grant an exclusive franchise and may not unreasonably refuse to award an additional competitive franchise. Any applicant whose application for a second franchise has been denied by a final decision of the franchising authority may appeal such final decision pursuant to the provisions of section 555 of this title for failure to comply with this subsection. http://legal-dictionary.thefreedictionary.com/Cable+franchise When Congress deregulated the cable industry with the 1984 Cable Act, its primary intent was to promote competition. The 1984 act sought to balance the government's dual goals of providing cable access to all areas and deregulating rates. The industry had argued that competitive market forces would produce competition and stabilize rates. However, competition did not occur in the ensuing years, and cable operators continued to enjoy a Monopoly in virtually all service areas. Before 1992, exclusive cable franchises were granted to the bidders who promised the widest access and most balanced programming. The government felt that this was the best way to ensure that cable's new and expensive technology was available to people in poor and rural areas as well as more affluent areas. As a result, bidders who promised more than they delivered were protected from competition. The 1992 Cable Act eliminated many of the barriers to competition that existed before. Most important, it abolished the exclusive franchise agreement, which had been a powerful monopolistic tool.
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Michael Turk, 28 Aug 2009 @ 12:25pm

Exclusivity
It's true that the 1992 Act ended exclusivity. It's also true that cable companies, in the intervening 17 years, negotiated with all the local franchising authorities - "having to get approval in every tiny region."

Not only did it not prove to be "cost prohibitive... silly and unproductive... to have to get so many different approvals and abide by so many different rules", but in fact the cable industry grew and prospered quite nicely.

Further, in many cases those same companies had to do it two or three times as their initial franchises expired and were renewed through further negotiation.

It was never clear to me how it was such an onerous requirement for a company with billions in market cap, yet much smaller companies had no problems navigating the process.
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Pete, 28 Aug 2009 @ 12:43pm

Re: Exclusivity
That was kind of my point.

Articles with info like this:

"For many years, this meant a single cable company offering service with absolutely no competition."

only serve to perpetuate this incorrect view...a view that is at least 15 years out of touch.

Comcast is still negotiating local franchises in my neck of the woods, and Verzion was downstate as well. It's only AT&T that seems to be inept in the "local franchise" approach.
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Clueby4, 28 Aug 2009 @ 8:16pm

Get your lines off my lawn!
“they are not ‘our cable lines’", is at best debatable, and more likely delusional.

What with tax breaks, incentives, and the ultra-corrupt Universal Service Fund, broadband stimulus scam, and the Telcomm Act funding scam.

Right-of-Way is not in the least compensated for, that's what the worthless franchise agreements arewere supposed to insure and all the really provide is theater for clueless. Hence that paltry, give the little crotchfruit some intrawebs, oh my how generous.

For a start, calculate how much the property tax on the land they use would cost, before even factoring in the cost of leasing the land. That amount would be huge, hence why the current effectively non-existent compensation is ridiculous and malacious.

Simple solution, go back to the 90's telecomm rule that the lobbyist got lifted. You can use right of way however you have to lease access at wholesale to competitors, add to that a requirement to use the portion of the insane profits towards infrastructure maintenance, expansion, and upgrades. And as far as rural, schools, and whatever other happy shiny idea they can get there funding from the frelling USF, which took in 7.1 BILLION dollars in 2008. Oh and just to keep them on their toes toss a few 90's style AOL injunctions around.
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Anonymous Coward, 28 Aug 2009 @ 8:18pm

Re: Re: Exclusivity
""For many years, this meant a single cable company offering service with absolutely no competition."

only serve to perpetuate this incorrect view...a view that is at least 15 years out of touch.""

Well, in my neck of the woods it's still true. In fact at one time, years ago, there used to be competition and cable was like $30 a month. Then one day Time Warner started taking it all over and prices skyrocketed ever since. There is no competition on cable where I live and many areas around here also have no competition just as well.
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Anonymous Coward, 28 Aug 2009 @ 8:18pm

Re: Re: Re: Exclusivity
(well, no competition on cable. There is satellite).
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Anonymous Coward, 28 Aug 2009 @ 8:24pm

Re: Re: cable and broadband
"We'll have to disagree on the user-generated video point, though. I enjoy shows like Burn Notice, Entourage and Californication way too much to give up quality programming in favor of someone's YouTube stream."

No one is stopping them from creating those shows. If they want to create those shows and if you want to fund them by watching them that's fine. But that's not to say they should restrict anyone's ability to create their own show. Unless you are worried that if everyone starts making their own show people will stop watching your show and hence will stop funding it. In other words you want to force people who want to watch content to fund/subsidize content you want to watch by taking away their ability to create and watch whatever content they want if it competes with the content you want. NO, society has no obligation to fund the content you want by giving it a monopoly, the content you want should have to compete with anyone else's content weather you like it or not. You are free to fund the content you want and to pay what you want for it and if it's too expensive to produce because the rest of the population doesn't want to subsidize you by giving your content a monopoly then tough. Besides, most content now a days is nothing but commercials and all these really really cheap to produce reality shows to begin with.
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Anonymous Coward, 28 Aug 2009 @ 8:32pm

Re: Re: Re: cable and broadband
If some random person wants to create content and offer it for free (of course s/he should pay for her Internet connection) she should be able to and if I want to watch it without paying anything extra (than what I pay for cable/Internet) then I should be able to. And the government should offer no one any monopoly on the infrastructure so that both me and anyone can have the means to offer and watch content at a cheap monthly rate (instead of the completely overpriced cable prices that we are stuck with today). If you want to watch the content that you want to watch you are free too and the telcos or whoever are also free to offer it and charge what they want and you are free to pay or not to. However, what you have no right to do is to take away my ability to watch content produced by any other random person just because you want to encourage me to fund the content you want.
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Anonymous Coward, 29 Aug 2009 @ 7:53am

Re: Re: Exclusivity
""For many years, this meant a single cable company offering service with absolutely no competition."

only serve to perpetuate this incorrect view...a view that is at least 15 years out of touch."

I'll believe you over Mike when Time Warner isn't the only cable service provider in my area.
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Justin Davis, 31 Aug 2009 @ 9:32am

I like your thoughts. Can you send me a link to your other posts?

Justin Davis
Internet Filter
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