March 6, 2006

Local government strongly endorses promoting competition for all consumers and treating like services alike. Our nation’s cities and counties welcome video competition in their communities. Nationalizing franchising, however, would limit the benefits of head-to-head video competition to a chosen few, and would undermine the ability of local governments to protect their residents and manage their rightsofway.

Before Congress acts, it should consider:

• Franchises do not just provide permission to offer video services; they are the core tool local government uses to manage streets and sidewalks, provide for public safety and homeland security, enhance competition, provide locallyoriginated programming, and collect compensation for private use of public land. Eliminating franchises will deprive local government of the power to perform these basic functions.

• Competition is for everyone. Current national policy implemented through franchises encourages competition throughout the country, not just in urban or suburban areas and not just for the wealthy. The local franchising process resulted in broadband service being available to 91 percent of all homes served by cable in less than 10 years.

• Congress should not try to oversee management of local streets and sidewalks from Washington; national franchising would abrogate a basic tenet of federalism by granting companies access to locally owned property.

• Local government does not stand in the way of new video service offerings. Telephone companies have insisted on preferential treatment in most markets. Potential video competitors require relatively few franchises to implement their announced business plans (for SBC 1,500-2000 franchises, for Verizon 100-200 franchises).

• States where statewide or simplified franchising is currently in place do not see greater or faster video competition deployment.

Video Choice Act – S. 1349 (Smith/Rockefeller) and H.R. 3146 (Blackburn/Wynn)

• Without a franchise agreement, the only effective mechanisms that local governments have to manage their rightsofway, ensure competition for everyone, and collect franchise fees are eliminated.

• The bills take away local government ability under current law to obtain support for public, educational and governmental (PEG) channels and to obtain institutional networks (“INets”) for local government needs such as fire, police, and other governmental communications.

• While the bills ostensibly prohibit economic redlining, the provision is riddled with loopholes.

• The bill would immediately abrogate all existing local franchise agreements. The new provisions would be applicable to all video service providers, both existing cable companies and new entrants.

• Although the bill retains the current five percent gross revenue cap on franchise fees, it limits the revenues from these fees in two ways: 1) by limiting these fees to the cost of managing the rights-of-way; and 2) providing four-and-a-half pages of exceptions to what can be included in the gross revenue, gutting existing levels of franchise fees received by local governments.

• The bill prohibits municipalities from charging fees for issuing construction permits needed to install or upgrade facilities.

• Under the bill, video providers would be required to offer only four public educational and governmental (PEG) channels, far below what many communities use today. The bill also eliminates support for PEG channels and INets on which local governments currently rely.

• The municipal broadband provisions would impose additional layers of useless bureaucracy and procedure on local government and hamper broadband deployment. Existing municipal deployments would be frozen.

• All local cable franchising, including the five percent franchise fee and public educational and governmental (PEG) channels and INets, would end on the earlier of the expiration of the cable operator’s current franchise or four years.

• Local governments are prohibited from charging any rights-of-way fees in excess of the actual direct costs incurred by the local government in managing communications service providers’ use of the rights-of-way.

For more information on The United States Conference of Mayors campaign to protect local government teleco-cable communications franchise oversight, contact Assistant Executive Director Ron Thaniel at 202-861-6711 or rthaniel@usmayors.org.