How To Get The Most Out Of Your Cable Franchising Process
By CLIFFORD E. SINGER
Urbana City Council
Many urban areas will see their present cable TV
franchise expire in the next few years. Let's examine the
results of cable refranchising in a medium-sized municipality, and see how your community can do as well or
better.
There are three critical questions to ask when approaching refranchising. Is your system competitive? Is
it obsolete? What do you hope to accomplish? To indicate you are taking the system seriously, your city can
apply to regulate the basic tier, which must include
airwave and public channels. Since only a few systems
are even partly competitive, let's assume yours is found
to be uncompetitive.
If your system has less than 50 channels or less than
one fiberoptic line per 500 potential subscribers, it is
obsolete. To maximize profits by expanding services
and escaping present rate regulation limits, an obsolete
franchise needs a complete upgrade. All trunks and
weathered cable on your rights of way may need to be
replaced within a few years. If so, your municipality
can have a unique opportunity to meet your community's particular balance of needs.
Your community may want better public service
television, easier parental control of children's viewing,
and/or a better integrated information transfer system.
Which of five routes you choose to meet these needs
will depend in part on this balance:
(1) Announce intent to refranchise; negotiate over
start time and duration.
(2) Define community needs; seek a franchisee
that meets them.
(3) Roll over your franchise short term; negotiate
timing of "must carry" video with your telephone company.
(4) Contract construction of a fiberoptic backbone; lease it to all right-of-way users.
(5) Contract for a municipally supervised system; privatize it later as needed.
Urbana's experience is an example of the best you
are likely to do if you consider only the first approach.
Urbana approved a fifteen-year refranchise after a
year's delay for negotiations. It obtained use of up to
nine public service channels without restriction on program content, and a 2% public service support fee in
addition to a 5% general franchise fee. A simple market
analysis indicated that roughly 80% of these combined
fees would come from the franchisee's total profits
(which a consultant and generic FCC studies indicate
are well in excess of 25%). However, the city did not
obtain a system which would require active parental
unblocking of excessively violent or otherwise inappropriate viewing for children. The city also obtained
only a few fixed location public service feed locations,
vague guarantees on cooperative use of public service
channels, and no prohibitions against public service
channel relocation.
A better cable system might automatically lock programming which didn't meet national standards for
viewing by children. If subscribers had to take active
measures to unblock it, then the system would likely
protect a large number of children whose overstressed
parents take a passive approach to the average of 25
hours per week children spend in front of the "tube." A
better cable system would leave the proportion of gross
receipts spent on public service up to the electorate. It
would leave use of public service bandwidth unfettered. This would allow municipalities to foster economic development by offering fiberoptic/cable use at
cost for information transfer, rather than at monopoly
prices. A better cable system would require provision
for video origination anywhere within the system
within about five years. It would also protect public
service channel locations and guarantee compatibility
of publicly and privately provided programming on
public service channels.
For a city willing to go as far as contracting for
construction of a municipally supervised cable system,
all these things are possible. Whether your community
wants to go this far depends on its goals and the economics of its market. You may be able to meet comprehensive goals, and save your residents money at the
March 1995 / Illinois Municipal Review / Page 9
same time, it you take an aggressive approach in a
market where your franchise is exporting a large monopoly profit margin. If your goals are less comprehensive or your system already has some competition, you
may want to cooperate closely with your more highly
regulated telephone company, and/or consider municipally contracted construction only of a fiber-optic
backbone.
Whatever your city's choice, there are six steps
which are essential for success:
1. Don't rule out any of the above options until your
municipality has a signed and enforceable
agreement.
2. Contact alternative contractors for all options at
least a year before your franchise expires, if at all
possible. If you don't have time left for this, you
can still roll over your present franchise to give
alternative contractors enough time to prepare a
complete proposal. Take public input, set goals,
and define procedures before entering into exclusive discussion with an alternate contractor.
3. Obtain a solid legislative majority commitment
to using any of the above options needed to meet
your goals. If you can't do this, your goals are too
extensive and need to be revised. This majority
will need to weather a publicity campaign from a
strong vested interest, legal action at least against
all but the municipally supervised sustem, and
any intervening elections.
4. Don't bluff. A monolithic corporate system may
be able to project a stronger position than its
market economics will support, but an open governmental process is unlikely to succeed at this.
Have the economics of your market analyzed.
This will help you choose the best option and
understand your present franchisee's economic
interests. You can save time and money by paying for private or academic services only for well
defined technical tasks like market or legal research, not to tell you what your policy should be.
5. Cooperate with nearby municipalities and the
many others in your state and hundreds across
the country also facing franchise expiration. Use
formal agreements, municipal leagues, and/or
informal contacts. This can be essential if you
Page 10 / Illinois Municipal Review / March 1995
eventually reject the option of a municipally supervised system. Alternative contractors engaged on an exclusive basis may provide extensive legal research in their proposals, and they
can be expected to vigorously defend their legal
right to participate in your market once you conclude an agreement with them. Unless you offer
them very lucrative terms, however, they may
have limited enthusiasm for sharing court costs
before you have helped clear the way for their
entry. Joint municipal negotiations and sharing
legal costs can be helpful, but your municipality
must be prepared to proceed on its own whenever joint interests diverge.
6. Obtain majority support for a specific plan and
binding commitment for funding, equipping,
and managing public service cablecasting before
signing any final agreement. Pay careful attention to the fine print in a final agreement, to make
sure it is consistent with your goals and this plan.
Following these six steps, your community should
be able to avoid the continuing storm of protest that has
followed decisions requiring expensive converter boxes under cable franchises approved in some communities, and instead get the best out of your cable
system.
'•Urbana's Future," (20 Jan., 1992) 168 pp.
SPFA Requests Historic
Steel Tank Nominations
The Steel Plate Fabricators Association (SPFA) is
seeking nominations for the oldest steel water tanks in
America and each state.
SPFA, a North American trade group representing
manufacturers of steel water tanks and other fabricated
metal products, will award plaques and certificates to:
• Century Club qualifiers — tanks that have been in
continuous service for at least 100 years.
• The tank in each state that has the longest record
of continuous service.
To qualify for an award, tank owners or operators
merely need to notify SPFA in writing of their historic
tank, and to send along proof of first use (e.g., board of
directors minutes, engineering drawings, newspaper
clippings, etc.). During 1994, SPFA recognized 13 tanks
as Century Club members.
Entries can be submitted to SPFA at 3158 Des
Plaines Ave., Des Plaines, IL 60018. The nomination
deadline is August 1.
Clifford E. Singer is a member of the Urbana City Council and a
professor of nuclear engineering at the University of Illinois. Partial
lists of equipment contractors and cable franchisees active in the
Midwest are available at cost of reproduction and mailing.
March 1995 / Illinois Municipal Review / Page 11
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