Calculating cable dollars

Time is on Asheville City Council’s side.

Since taking office in December, Council members have spent several meetings, work sessions and a long public hearing trying to absorb all the details of a proposed cable-franchise contract with InterMedia.

On Feb. 24, frustrated and tired, they listened to three hours of public comment. They accepted stacks of written comments and were slapped with a lawsuit by the Asheville Citizen-Times.

In the third hour, Council member Chuck Cloninger remarked, “I’d hate to see us make a decision at 11 [p.m.].” He recommended that Council discuss the franchise package again during its March 3 work session.

Trying to sound cheerful, Mayor Leni Sitnick mentioned, “I know that I have to address a [Kiwanis] breakfast in eight-and-a-half hours.”

An exhausted O.T. Tomes added, “I don’t even hold church this late.”

So all agreed to Cloninger’s suggestion.

At stake is the city’s outdated 1967 cable-franchise agreement, due to expire in 2002. With a newer one, the city could: collect more in franchise fees from InterMedia (and any future cable companies operating in the city); gain up to three more public-access channels; require tougher customer-service standards; and acquire an institutional communications network for city facilities.

City staff have also recommended that the city adopt its own cable ordinance, which would define how future franchise fees are calculated, require cable companies to offer service to all city residents (including those who have been annexed), and establish penalties for cable companies that violate the regulations. The 1967 agreement did not address these issues.

Also on the table is a proposed franchise-fee settlement of nearly $400,000, which would come partly from a cash offer and partly from increased future revenues. That’s about how much then-franchise-holder TCI underpaid the city between 1992 and 1995, before InterMedia bought out the contract, according to the city’s consultants.

By delaying action on these issues, Council may be able to renegotiate them. Or, the city may reject the proposal and force InterMedia into a more formal negotiation process next year, Mayor Sitnick noted.

It’s our money

A long line of city residents urged Council to delay making a decision — and to get tougher on InterMedia.

Asheville resident Bill Wall told Council that he was just starting to understand the franchise-fee question.

Cable companies pay franchise fees to municipalities to compensate them for running lines through public rights-of-way. As Wall sees it, city residents and cable subscribers are the ones who really pay that fee: Cable companies simply pass it to them as a “local usage fee” on their bills. “Let the citizens know it’s their money,” he urged Council.

Wall added that he also now understands the years-long dispute the city has had over which revenues the fee is based on. Under the vague definitions in the city’s existing franchise agreement, cable companies have insisted that “gross revenues” include only basic- and expanded-tier monthly service charges — not revenues from premium or pay-per-view channels, advertising or home-shopping programs.

Wall said he called the Federal Communications Commission and asked what “gross revenues” means.

“They said, ‘Obviously, it means everything,‘” Wall reported.

Citizens for Media Literacy Director Wally Bowen suggested, “Give InterMedia 30 days to come back with a franchise-fee settlement, or [take them] to court.” Although InterMedia just took over the Asheville franchise in 1996, it inherited TCI’s debts: Bowen estimated that current and past cable companies may have underpaid franchise fees in Asheville by approximately $1 million over the past 10 years.

InterMedia General Manager Joe Haight responded, “There are not any delinquent [franchise] fees. … The city had the right, at any time, to take us to court. They chose not to do it.”

InterMedia has offered to pay $150,000 in the first two years of the proposed franchise agreement, and city staff estimate that the redefined gross-revenues clause should net the city about $240,000 more in fees over the next four years than InterMedia would have paid under the 1967 agreement.

Council members appeared just as concerned as residents about the fee dispute.

“Can we figure out how much [money] we’re really owed?” Sitnick asked city staff, noting that previous Councils had been trying to get that answer for years. She added that cable-franchise holders were never charged any penalties or late fees — and that the city didn’t get to use the money when it was due. Then InterMedia bought out TCI’s interest and “gets left holding the bag,” Sitnick remarked. “Where’s the justice?”

No one had an easy answer. Meldrum’s only response was that the 1967 agreement established no fines and no penalties.

Tomes wondered whether the city would be having this dispute if it had adopted a cable ordinance before InterMedia took over the franchise from TCI.

Probably not, Meldrum responded.

TCI Media Services representative Steve Curtis added that Council should bear in mind the thousands of dollars the city is losing each month by delaying action on the proposed franchise agreement, which includes a more inclusive definition of gross revenues. Urging Council to act, he said, “Think about what the city could do with that revenue.”

Make the records public

The franchise numbers are important to someone else, too: Asheville Citizen-Times Executive Editor George Benge handed Council members copies of a lawsuit he said was filed on Feb. 24. The lawsuit demands that the city disclose cable companies’ revenues in Asheville during the past 31 years.

Benge and his staff have repeatedly requested these documents, which show exactly which revenues the past franchise fees have been based on. Each time, the city’s legal office has responded that those fees are considered a tax under state law, and the revenues are “income” that can’t be made public.

“We didn’t want to go into litigation,” said Benge, insisting that there is “no animosity” involved. He repeated his argument that the revenue information is crucial to public dialogue on the proposed franchise. He asked Council to delay any franchise decision until the courts render a decision on the newspaper’s lawsuit.

Council members made no reply.

But Sitnick had seemed to be searching for the same information earlier in the meeting, when she asked staff to figure out how much the city was owed in franchise fees. Looking at figures from the audit by consultant Rice, Williams — $396,250 underpaid between 1992 and 1995, at 6 percent of gross revenues — Sitnick tried to calculate what 10 years’ worth of fees would be.

She didn’t quite finish her estimate, but she directed staff to do so before the March 4 work session.

Based on the above audit figures, gross cable revenues through those years totaled about $2.2 million per year, using the broader definition of gross revenues. But InterMedia and previous companies have argued that, under federal law, only 5 percent of revenues are due to the city — and that those revenues include only basic- and expanded-basic charges. By that reckoning, cable revenues came to just $1.19 million per year between 1992 and 1995.

Sitnick didn’t do the math, but she reflected, “It seems like we’re on the short end of all these sticks.”

More money for access

(Or: Who needs it?)

Funding for public-access channels has been a key issue throughout the recent cable-franchise debate. But an InterMedia survey — and a few speakers during Council’s Feb. 24 hearing –raised a different viewpoint.

Said Asheville resident Charlie Patton, “We’ve got all the public access we need.” He reminded Council that the costs of providing three more public-access channels “would be passed on to subscribers.”

To help purchase public-access equipment, InterMedia has proposed setting aside $200,000 in the first two years of the proposed franchise, as well as additional funding in later years of the 17-year agreement. Most of that expense would be passed on as a small charge on subscribers’ monthly bills.

Apparently satisfied with that, Patton urged Council to approve the franchise.

Another Asheville resident, Mary Ellen Brown, begged to differ. She said that public access is “doomed to fail” unless more funding is created. Brown, who worked on public-access issues in other towns before moving to Asheville, pointed out that the expense doesn’t have to be passed on to subscribers.

Bowen agreed that the funding proposal is “grossly inadequate.” Black Mountain officials talked their cable provider into creating a public-access channel a few years ago, but with no funding. “It was a hollow victory,” Bowen reported.

He told Council members that the city has the volunteers, the experts and the interest to create a successful public-access channel. Bowen argued that it is crucial to have a cable channel dedicated to “local content” in an age when “our children know more about Michael Jordan and Cindy Crawford than they do about local people and local affairs.”

Bowen suggested that Council could create a public-access trust fund, using InterMedia’s franchise-fee settlement.

Also urging better funding, Scott Barber declared that public-access channels — and the funding to support them — are all about democracy. “Access to community channels shouldn’t be dependent on wealth or access to money,” he said. Barber runs a local video-production service.

He gave Council a twist on a 1996 InterMedia survey, which indicated that more than 70 percent of the nearly 400 respondents thought the current single public-access channel was sufficient for Asheville. Those people indicated that they weren’t interested in paying for more.

“That means three in 10 subscribers are interested,” said Barber. “That’s over 6,000 people. I’m encouraged by that.”

Let’s talk

Tomes’ eyes may have drooped a few times during the long meeting, but he was paying attention.

After hearing InterMedia representatives appear to back down from a promise to provide Internet modems to all city schools, he remarked, “The longer I listen, the more disenchanted I become.”

Part of his frustration reflected his constituents’ calls and letters complaining about ever-rising cable fees.

But part also seemed to come from a general mistrust of cable companies, Asheville businessman Mark Rosenstein observed. “[Instead] of mistrust and defensive postures … let’s talk about what’s possible,” he suggested.

A member of a new Public Access Coalition, Rosenstein urged Council to be in no hurry to sign a franchise. He claimed that a task force made up of residents, cable representatives, city staff and others could find solutions.

Council member Barbara Field asked him why his group didn’t take up the fight when Buncombe County renegotiated its cable franchise last year.

Conceding that that was a missed opportunity, Rosenstein countered, “Where was the leadership of Council two years ago when this issue [of renegotiation] came up?”

Sitnick responded by asking the media — the Citizen-Times in particular — where they were when county commissioners held public hearings on a new cable franchise.

In other words, how come Council gets to be the lucky one to be sued?

That’s just the kind of frustration Rosenstein was talking about. “Let’s have a public dialogue,” he said. “These discussions should have started two years ago. [Now] the leadership has to come from y’all.”