Cable Fight Heating Up

May 1, 2006
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GRAND RAPIDS — The Grand Valley Metro Council and the Grand Rapids City Commission are on the same channel, as both groups ratified separate resolutions that oppose yanking municipalities out of the cable television regulating business.

The loss of local regulatory authority, which is being threatened at the federal and state levels, could result in cities and townships across the state losing up to $100 million annually in cable franchise fees. The city alone stands to lose up to $1.4 million in revenue each year if local governments are taken out of the cable picture.

“We want competition more than AT&T and Verizon do,” said Michael DeVries, Grand Rapids Township supervisor, who added that cable fees are the third largest revenue source for many local governments.

“At this point in time, we have no choice but to oppose it,” he added.

The city resolution reaffirmed the current franchising scenario, which has resulted in funding for public cable channels and access to these resources for low-income residents through the Community Media Center.

“If we lost local control, we would be at the whim of corporate decisions,” said James White, 3rd Ward commissioner.

State House Bill 5895 and state Senate Bill 1157 would require new cable providers to negotiate directly with the state, instead of with government officials in areas they want to serve. In both bills, the state would collect the cable franchising fee and then disperse it to local governments.

But members of the Metro Council and the city commission are a bit skeptical that the state Legislature would actually follow through on a new revenue-sharing promise.

“We already know how good the state is with revenue sharing. We have no trust or faith (in the state Legislature),” said Kentwood Mayor Richard Root.

Four West Michigan lawmakers, all Republicans, have signed on to the bills as sponsors. State Sen. Wayne Kuipers, who represents Ottawa County and Grandville in Kent County, is the primary sponsor of the bill in the senior chamber. State Reps. Fulton Sheen of Allegan County and Dave Hildenbrand of Kent County are secondary sponsors of the House bill that was introduced by Jacob Hoogendyk of Kalamazoo.

AT&T Inc. and Verizon Communications Inc., two telecom companies that want to get into local cable operations, are pushing for the legislation. The firms said their entry into the marketplace would mean more choices and lower prices for consumers, who would find cable bundled with Internet access and telephone service.

AT&T representatives met with the council’s executive committee recently and said they weren’t interested in eliminating the fees, but want to streamline the process by negotiating only with the state. They also said consumers would benefit from more competition.

But after that meeting, GVMC Executive Director Don Stypula said committee members were “skeptical of AT&T’s position” and recommended that the board oppose the state bills.

While franchise fees may be the biggest anxiety that local municipalities have about the legislation, it isn’t their only one. They’re also worried about losing control to rights-of-way in their communities, and apprehensive that the telecoms won’t offer service to everyone within a community.

“The concern is they will pick and choose, address by address, and there will be other areas they will pass,” said Stypula.

In December, the Metro Council released a legal analysis of the House bill, prepared by attorneys at Varnum, Riddering, Schmidt and Howlett. Stypula said the report indicated the bill, which has been copied in the Senate, would be “remarkably harmful to municipal interests in cable franchising.”

In addition to the Metro Council, the Michigan Municipal League and the Michigan Cable Telecommunications Association oppose the legislation.

MML, which represents cities and villages in the state, doesn’t like the bill for the same reasons the council and the city have rejected it.

The MCTA, which includes current cable providers that are locked into lengthy franchise agreements, doesn’t like it because they are worried the telecoms will “cherry pick” their best customers.

“They want to have a leg up on the incumbent cable providers,” said Stypula of the telecom firms.

As of last week, both bills were in the Committee on Technology and Energy.

The bill in the U.S. House, meanwhile, cleared the Telecommunications and the Internet Subcommittee before the spring break. Michigan Republican Fred Upton, who chairs that panel, said the legislation would increase competition, lower prices and raise the quality of telecom services through a nationwide approval process. AT&T and Verizon also support the federal bill.

The bill would amend the 1996 Telecommunications Act. Backers of that bill, which shrunk the regulatory control of local governments to the bottom rung of cable channels, said that act would bring more options and lower cable charges to consumers.

But the act is being revamped partly because lawmakers said consumers’ monthly cable bills have gone up too much — by 86 percent since 1996, when the Telecommunications Act became law.

If Congress approves the legislation, the state bills would become moot, as a federal law usually trumps a state one.

City Cable Administrator Jon Koeze told commissioners that the city’s current agreement with Comcast Cable Communications Inc. would continue through the year 2016, even if a new law was approved before then. But Koeze said it likely wouldn’t be renewed after that year, if a new law was in place, and it could be contested legally if the federal or state bills are passed before it expires.

Koeze said AT&T representatives have been willing to discuss most aspects of the state bills, except for the cherry picking issue, also known as redlining. The city’s longtime cable administrator told commissioners that the state bills allow new providers to market their services selectively. He qualified that market as customers who could afford to pay $165 a month for cable and other services.

“They don’t want to offer service to everyone,” said Koeze.

Koeze added that the city would lose at least 30 percent, or $420,000, of its yearly $1.4 million cable franchise revenue if the state bills become law.

“Instead of stealing directly from us like they do with revenue sharing, they’re going to use someone else to do that,” said Rick Tormala, Grand Rapids 2nd Ward city commissioner, of state lawmakers.

Comcast and Charter Communications Inc. are currently the state’s two largest cable providers.

Stypula said telecom executives have privately met with a few public officials recently and were able to convince some that a new law would be a good deal for their communities. But he urged his members, who represent 32 municipalities, not to switch channels and to reject the current bills.

“We need to get into this issue with a position of strength and unity, and our strength is our unity,” said Stypula. “I think we can work something out, but we have to stay together.” 

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