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Michael Miller

Viewpoint

By Michael Miller
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Cable Show, Part I

Numerous contracts between television networks and cable companies are expiring over the course of the next year, so expect more public disagreements and blackouts like the ones that thousands of readers briefly experienced last week.

Churning market forces are pulling and pushing at each other as the telecommunications industry, now almost a universal presence in the lives of Long Islanders, goes around and around and eventually stops at a place nobody knows for sure. Huge and powerful distribution companies are desperate to prevent huge and powerful program providers from elbowing them aside with online television and movies. The cable distributors, alleged by some consumer advocates to be working in collusion, are signing exclusive agreements with some program providers which may eventually force consumers to continue their cable subscriptions to watch online (“Television Everywhere”). Satellite and telephone companies have their own issues. The alliances change rapidly issue to issue, week to week.

And into this minefield steps the Village of East Cupcake, trying to navigate these rapids when national governments and multinational conglomerates can not. To assist them, New York State publishes a pamphlet.

At any given moment, a half dozen Nassau County municipalities are negotiating a cable television franchise agreement. This ancient local franchise system was meant to reign in what economists used to call a “natural monopoly” (the idea that only one company would want to even try building an infrastructure). New technology makes delivering video to your home a potential high competition field, but for decades the local franchise system has unintentionally helped keep out competitors.

Each company provides its own boilerplate wording for these cable franchise agreements and about 99 percent of the wording is the same from one municipality to another. Some municipalities get concessions involving the number of drop-off points to pay bills. Many specify grants and other considerations regarding “PEGS” (public access, education and government stations). Don’t get me started on that. Just don’t. I just don’t think you can reasonably expect East Cupcake officials to really innovate or put what little hammer they can to the army of lawyers across the table who do nothing all year-long except figure out how to word these agreements.

One other thing sometimes differs in these contracts: the amount of the cable franchise fee. The federal government allows local governments to charge cable companies up to 5 percent per video subscriber for the use of public rights-of-way in order to deliver service (for example, all those poles). Depending on the wording of the franchise agreement in your municipality, you may pay a little more than 5 percent because “non-subscriber revenues” such as certain advertising revenues can be factored in. Across the country, local governments are taking in well over $3 billion in these fees (the state and the county also get cuts of a quarter of a percent). The fees are passed directly along to consumers. Many municipalities have been charging only 3 percent, but are now raising new and renewed franchise fees to the maximum. This is in effect a tax, and one which is structured in a way that may decrease desire to write tougher agreements. It’s just one example of the very close, very quiet relationship between public officials and our friends at the cable companies.

A study by Common Cause found that New York State’s three dominant cable providers and their joint political action committee spent $24.3 million on persuading and influencing public officials (lobbying) between January 2005 and July 2008. In 2009 and 2010 alone, one company has made $421,000 in campaign contributions and that doesn’t include significant political investments made by the joint PAC or contributions in the six figures made by individual corporate officers. A competitor gave $284,000 over the same 14 months. Both political parties do well. State, county, town and some village politicians do well.

Many local governments are proud and pleased to accept sponsorship of pet projects by these companies. I’ve been told of two situations where a company paid its franchise fees early to help with temporary budget problems. None of these things are illegal, but it is certainly harder to say no to a friend, or to call them out publicly.

Michael Miller is a freelance writer, designer and strategic consultant who has worked in state and local government. Email: millercolumn@optimum.net