Cable vs. community

A bill that’s slated to be introduced during the N.C. General Assembly’s current short session is being touted as a boon to both cable-service providers and their customers. But opponents say the law could undermine funding for local access stations and local government data networks. And with the bill on the fast track, according to Rep. Bruce Goforth, there may not be a lot of time to resolve those concerns.

Supporters of the bill — titled An Act to Promote Consumer Choice in Video Service Providers and to Establish Uniform Taxes for Video Programming Services — say it would lower costs for cable customers. “The proposed changes … [are] really pro-consumer. Competition has proven to improve the quality of service,” said Larry Spooner, area director for external affairs at Bellsouth (which along with Verizon has been a strong proponent of the bill). “We certainly think the consumers will benefit from having an additional land-line-based provider of video services in the state.”

But public statements by both Verizon and AT&T seem to indicate that they have no intention of undercutting current cable rates, according to a letter the city of Raleigh sent to the legislative committee considering the bill.

And a draft version obtained by Xpress reveals that it would establish a statewide cable franchise, replacing the individual franchises granted by local communities across North Carolina. This would eliminate local governments’ ability to leverage those agreements to negotiate additional funding and media services, such as support for public-access channels and local-government networks.

At press time, the bill had just been approved by the Revenue Laws Study Committee and was said to be on its way to the Finance Committee. Goforth said he hadn’t seen the bill yet and therefore couldn’t comment on it.

A taxing situation

“Over the past several years, the technology used to provide [communication services] has converged so that the line between the services is no longer separate and distinct,” the draft legislation states.

For example, cable companies now offer Internet access and have begun to offer telephone service using VoIP (or “voice over Internet protocol”). Meanwhile, phone companies are eager to offer TV service over their land lines.

The bill also emphasizes that it “will establish a method of taxation that applies equally to the same service, regardless of who provides it.” But the draft bill doesn’t explain why those tax concerns should pertain to locally negotiated agreements, and the wording appears to fundamentally change the way the government treats payments from service providers — with potentially significant repercussions for state residents.

In the past, cable-service providers have paid local communities franchise fees in exchange for the privilege of using public rights of way. In the bill, however, the payments these providers would now make to the state are called “sales taxes.” The bill also fails to explain why telephone companies couldn’t simply work out their own franchise deals with local communities to offer cable service, except to say that this new system would be “easy to administer … [would not] impede competition … [would provide] equal taxation of the same service … [and] equal compensation to cities for the use of their public [rights of way].”

Curbing local funding

Supporters of the bill maintain that local communities won’t lose out, because they’ll receive a proportional share of the sales tax, based on their previous revenues from cable-service providers, including both franchise fees and subscriber charges.

But the bill places limits on the additional funding and services that local communities have been able to negotiate with cable-service providers for such operations as public-, education- and government-access channels (collectively known as PEG) and local-government data networks (I-NETs). Proponents of such services often emphasize the value of the training in digital media that these operations provide communities.

For example, the bill would give each local government $16,000 per channel for up to three PEG channels, for a maximum payout of $48,000. (Communities with larger populations might qualify for more channels but no additional funding.) But both Asheville and Buncombe County are getting much more than that under their current cable-franchise agreements. Both local governments received $340,000 start-up grants plus annual funding allotments for their PEG channels (roughly $48,000 for Asheville and $80,000 for Buncombe County).

And while proponents of the bill say it will benefit communities that now get nothing, at least one local media expert disagrees. “Sixteen thousand dollars is a meaningless sum, because it barely covers the purchase of a single camera,” notes Wally Bowen, executive director of the nonprofit Mountain Area Information Network in Asheville. “You just can’t launch a public-access or education-access or government-access operation with a single camera,” says Bowen, who was active in the push to obtain more support for such services during the last round of city and county franchise negotiations.

The bill also mandates free basic-cable service to public buildings within 125 feet of the provider’s cable system, but that’s a benefit already provided under local franchise agreements. Meanwhile, the draft legislation makes no allowance for I-NETs that would connect public entities to one another. In 2002, for example, Buncombe County negotiated with Charter for a 10 megabit Internet link for the county schools valued at $1.1 million over the 12-year franchise term.

“There is no provision in the bill as it stands to protect existing I-NET benefits or to allow communities in the future to negotiate for these benefits,” notes Bowen. “In just one fell swoop, [the bill] cuts out the local government’s authority over public rights of way and … [their] ability to negotiate for these benefits.”

Meanwhile, a letter opposing the legislation, signed by both the mayor and city manager of Raleigh, states: “Two major telephone companies also recently announced that they will not compete with lower rates. At a conference held on April 27, 2006, in Vienna, Va., Verizon announced that they will price their service ‘competitively, but not at a discount.’ … AT&T agreed that lower customer rates would not apply, stating that ‘our business plan is not built around price cuts’ and calling their IPTV ‘a high-end service.’”

Bowen says he’s also worried about how reduced funding for PEG and I-NET operations will affect the state’s fledgling digital-media economy, especially in smaller cities and rural communities.

“What’s so critical about this is that PEG channels and I-NET … and [their funding] are all integral parts of boosting and building our digital-media economy,” he points out. “And here the Legislature is about to cut the legs out from under that. They just haven’t connected the dots.”

For a closer look at the draft of the bill, visit www.ncleg.net/committeeinfo/revenuelaws /meetingdocument_/may22006_/handouts_/default.htm. For additional information, visit www.urtv.org.

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