National video franchises are wrongheaded

Submitted by acohill on Wed, 07/06/2005 - 10:51

Marsha Blackburn (R-Tenn) is talking about proposing a House bill that would allow for national video franchises. This is partly in response to the somewhat justified whining by the telcos that it is too much trouble for them to go to every town in America and ask permission to deliver TV programming over phone lines.

There are so many dumbheaded things here that it is hard to know where to start.

First of all, the telcos are trying to rewrite the rules in their favor after their main competitors, the cable companies, have already invested a lot of time and money in negotiating local franchises. So the cable companies might reasonably ask why the phone companies get to skip the hard part.

Communities will be furious because national franchises will likely cut them out of the sometimes lucrative franchise fee income. Most local franchise fees don't make sense because they are not tied to the cost of right of way management, the way they should be. Instead, it's an easy way to force a private business to collect taxes from taxpayers.

From another angle, franchise fees don't make much sense because satellite TV providers have avoided them completely, so you have a competitor that has neither local nor national franchise fees. So why create a national franchise fee?

The Federal government will probably love the idea, because by definition, a national franchise will involve a big fee, most of which will stay with the Federal government. The FCC will like it, because it helps justify the FCC, which is really obsolete.

Franchise fees ought to be tied to the cost of providing community property (right of way) to private companies, and nothing more. It should not be tied to the kind of content. Franchise fees should not be managed as a hidden tax initiative--it only creates local disincentives for private companies to offer service. Communities cannot simultaneously complain they don't have enough broadband options then turn around and insist that telecom providers become a local tax collector, which just raises the cost of service.

Communities could get out of the franchise fee business entirely by investing in a community broadband infrastructure and make it available to private companies for a fee based on some sensible metric (like number of customer served, or a small percentage of revenue). This creates a self-funding mechanism to support the broadband infrastructure, and does not inhibit small companies with innovative services from entering the marketplace.

The only winners in the franchise agreement game are lawyers, whose huge fees on both sides simply raise the cost of telecom for everyone, including local government. It's crazy for the Federal government to be trying to make this even more complicated, and in the process usurping more control from local authorities.