Statewide Video Franchising: Bad for Communities

Folks who are mostly interested in broadband are probably unfamiliar with video franchising laws. Many people still apparently believe that cable companies are able to get exclusive franchises from the city (granting them a monopoly on providing cable television). However, that is not true and has not been true for many years.

Most cable companies still have a de facto monopoly because it is extremely difficult to overbuild an existing cable company - the incumbent has most of the advantages and building a citywide network is extremely expensive. This is not a naturally competitive market; it is actually a natural monopoly.

However, most people want a choice in providers (something that goes beyond a single cable company and a satellite option or two depending on whether you rent/own and your geographic location. In talking with many local officials and the National Association of Telecommunications Officers and Advisers (NATOA), it seems that almost every local government wants more competition in its community too.

This is where telephone and cable company lobbyists have stepped in - more successfully at the state level than at the federal level. They have convinced legislators that the barrier to more competition is local authority over the franchise (the rules a company agrees to in return for the right to use the community's Right-of-Way in deploying their network). These rules include red-line prohibition (you cannot refuse to serve poor neighborhoods), an affordable "basic" tier of service, local public access channels, broadband connections at public buildings, etc.

Some states have listened to the lobbyists and enacted statewide franchising - where local communities are stripped of the authority to manage their Right-of-Way and companies can offer video services anywhere in the state by getting a state franchise from the state government. Every year, we gather more data that this practice has hurt communities, raised prices, and barely spurred any competition. Most of the competition it is credited with spurring came from Verizon's FiOS deployments, which would have occurred regardless of state-wide franchise enactment.

This touches directly on broadband because the statewide franchises often give greater power to companies like Verizon to cherry-pick who gets next generation broadband. Wealthier neighborhoods will increasingly get access to faster networks as private companies are allowed to cherry pick. This practice not only leaves poorer parts of town behind, it makes them even harder to serve when those areas cannot be balanced with higher-revenue sections producing sections of town (who already have service).

Recently, this issue resurfaced with new evidence that state-wide franchising was little more than a giveaway to private companies who are increasingly profits at the expense of communities who still have no choice in providers.

Both Phillip Dampier at Stop the Cap and Karl Bode at DSLReports have deeply linked posts on this matter that cover Michigan, Tennessee, and Wisconsin. Stop the Cap also delves into how Comcast spends in millions lobbying - you didn't think we get hit for rate increases every year for nothing, did you?

The Detroit Free Press ran Brian Dickerson's "With Regulation like this, who needs Monopoly?"

Now, three years after AT&T's champions in the Legislature crowed that Comcast's reign as the 800-pound. guerrilla of Michigan cable service was over, Comcast remains the state's dominant provider, maintains a de facto wire-line monopoly in most its franchise areas, charges higher rates for basic cable service, and has far fewer legal obligations to the subscribers and communities it serves.

What most of this comes down to is accountability. Local governments are accountable to the citizens. Companies like Comcast and AT&T are accountable to their shareholders. There is no perfect arrangement, but I would err on the side of a network being accountable to the community.

Photo courtesy of photocamp.