OF PETER CANTU
MAYOR OF PLAINSBORO AND NEW JERSEY LEAGUE OF MUNICIPALITIES
IMMEDIATE PAST PRESIDENT
The Assembly Telecommunications and Utilities Committee
10:00 A.M., Thursday May 11, 2006
Committee Room 9, First Floor, State House Annex, Trenton,
Authorizing a System-Wide Franchise for
Certain Providers of Cable Television Service
For more than
a year, the League has been meeting and working with the
Cable Telecommunications Association, Verizon, and municipal
officials to explore the implications of a system-wide franchise
such as the one embodied in the bill before us.
All sides agree
that New Jersey should benefit from more competition in
the area of cable television. In the past, the League has
vigorously supported legislation which would help bring
about cable competition or at least foster more productive
cable franchise negotiations.
Although on the
face of it, systemwide franchising seems to reduce home
rule by reducing the individual municipality's administration
during franchising, on balance the League finds important
local benefits unique to New Jersey, which must be taken
The League believes this type of franchise will create competition
to the ultimate benefit of the consumer, and it may benefit
municipalities by enumerating specific franchise commitments
which would otherwise be subject to negotiation.
is the creation, now, of a competitive cable TV environment.
The benefits of creating wireline competition today include
lower rates (FCC report released February 4, 2005 Docket
No. 92-266) and incentive to respond to consumer demands
regarding programming and service. These are perennial cable
issues that we are all familiar with.
could benefit through statutory commitments the bill includes
in the systemwide franchise such as Public, Educational,
Government (PEG) access stations, access equipment and assistance,
and cable service for municipal buildings. These, and other,
basic commitments are enforceable by the BPU. In addition,
this bill establishes a municipal franchise fee which, at
three and a half percent (3.5%) of gross revenue, is closer
to the national benchmark. However, it is still well below
the Federal ceiling of 5%. The League appreciates the increase
in both the base on which the fee is determined (all cable
revenue), and the percentage of the fee. These changes would
help municipalities control property taxes at a time when
budgets are under significant pressure.
THE BILL IS
NOT WITHOUT ITS FLAWS
There are sections
of this bill which need further review and development.
Existing Franchise Agreements
In new section
19, incumbent cable operators are given the option of converting
to the systemwide franchise without the consent of the municipality
or BPU. Existing local franchise agreements can include
installments of equipment, assistance, funding and other
benefits which would be lost if operators convert to systemwide
franchises. To avoid unnecessary disruptions, municipalities
must be given the option of retaining existing franchise
agreements until those agreements expire.
Fee Rate Should be Based on Competition
The League can
agree to the provision imposing the 3 ½ percent franchise
fee on incumbent CATV providers only where there is a competitive
cable television market. However, we would like to see the
bill use the Federal threshold for determining a competitive
The current bill
states that the 3 ½% franchise fee only applies to
the systemwide franchisee, until they certify that they
are capable of serving 55% or more of the municipality.
Over that threshold, the 3 ½% franchise fee applies
to both the incumbent cable company and the systemwide franchisee.
We think the 55% threshold is too high and would like to
use the Federal competition threshold - one subscriber.
In other words, as soon as the systemwide franchisee starts
to provide service, both they and the incumbent cable company
have the same franchise fee.
In order to assure
the benefits of systemwide franchises are achieved, we will
need to assess the real effects on consumers. After 36 months,
the BPU will conduct a study and document the effects. We
will carefully review that study to assure consumer benefits
are being maximized.
The League is
anxious to continue working on the important issue of developing
competition in video franchises. Local officials understand
that changing technology requires changing statutes and
regulations to manage the demands it places on our municipalities
and maximize its benefits to our residents.