407 West State Street, Trenton, NJ 08618  (609)695-3481
 NJLM logo 

William G. Dressel Jr, Executive Director - Michael J. Darcey, CAE, Asst Executive Director
NJLM - Changing Technology Alters Cable Franchise Landscape

Changing Technology Alters
the Cable Franchise Landscape


Albert "Al" LiCata
League Telecommunications Committee Chair
Deputy Mayor, Bernards Township

The 1996 Federal Telecommunications Act brought needed laws addressing, among

woman with cable box
Though the shift is invisible to our citizens, changing technology and state legislation are radically changing the way municipalities negotiate cable franchises.

other things, competition.  Some eight years later the consumer stands ready to fully realize the next generation of technology and the way in which it will be delivered.

Earlier this year Verizon announced they would be entering the video market and would be seeking a statewide franchise agreement, instead of negotiating 566 municipal contracts separately.  The League immediately got involved to first understand what was actually being proposed and to later become a positive voice for our membership.

On a municipal level, we have all dealt with the lengthy and sometimes expensive franchising process, often with the lone cable provider to our respective communities.  We've experienced reductions in the basic service price, which specifies the amount of franchise revenues to be received locally.  Also, towns have been affected by a steady loss of franchise fees as satellite providers, untouched by franchising, capture a larger market share.  The League has provided a cable advisory service to help towns understand the franchising process.  In addition, the League offers technical advice and maintains a cable resource center at www.njslom.com.

League Takes Action For several years the League's Telecommunication Committee has been proactive in this area.  Through dedicated work over many years, a Telecommunication Tax Fairness Proposal has been drafted and supported by the League's general membership.  The proposal calls for the broad based telecomm franchise tax to be applied to various technologies so that parity between the once distinctly different entities, cable & telecomm, could be treated in a like manner.


On a municipal level, we have all dealt with the lengthy and sometimes expensive franchising process, often with the lone cable provider to our respective communities.



Mike Darcy, League assistant executive director, and myself, met with State Treasurer John McCormick and his staff on several occasions in January of 2005.  Our goal was to sharing information and our proposals in an attempt to bring needed parity, while protecting vital revenue streams to municipalities.  However, the state expressed no interest due to what they perceived to be the legislative complexities of the issue.

Which brings us to the Verizon proposal.  On March 9, 2005, Mike Darcy and I met with the Cable Association to discuss their thoughts and concerns based on the rumors of Verizon's plan for a statewide franchise agreement.  They supplied information for our review.  It was at this time we agreed to keep municipalities informed as this was shaping up to be a topic of major consideration.

Following this meeting, we reached out to officials at Verizon.  A League Executive Task Force, which included League President Peter Cantu,  Executive Director Bill Dressel, Mike Darcy, League Telecomm special counsel John Belardo, of DiFrancesco, Bateman, Yospin, Kunzman and Al LiCata, League Telecomm Chair, had productive conversations with the Verizon team, led by CEO Dennis Bone.  We took our time to understand Verizon's proposal, while weighing our concerns over "home rule."

Developing a List of Concerns With lines of communication open to various parties, on April 4, 2005 the League's complete Telecommunications Committee came together to review the statewide franchise plan and develop a basic list of issues that needed to be addressed.  Our list closely mirrored what is most commonly found in existing cable contracts.

The list of issues included and is not limited too;

1)  The Franchise Period.  Under a statewide format, a short term first contract is highly recommended to give meaningful review of this new type of franchising.

2)  Extension of Service.  No redlining.  What is a reasonable build out schedule for Verizon?

3)  Franchise Fees.  New Jersey has long suffered under an unreasonably low franchise fees structure for years.  We need to better assess the value of public right of ways.

4)  Account for the Effect of Competition.  Competition is believed to drive down or cap, by dollars per subscriber, pricing for service.  This could reduce gross revenue which would result in less franchise fees.  Not taking into account any change in franchise percentage to address gross or basic service plans.

5)  PEG Access.  Public Educational and Governmental needs to be continued with any possible statewide contract.

6)  Wiring of Municipal Buildings.  Emergency, Public Safety, Educational buildings all need to be wired at no additional cost to the community.

7)  Dedicated Dark Fiber.  Would a statewide contract give municipalities dark fiber to connect all municipal buildings to one network?  How about school buildings?

8)  Senior PAAD.  Eligible seniors should be addressed as in cable contracts.

9)  Public Access Stations.  Cable Companies have supplied equipment, facilities for stations and so on.  How will this be continued should a statewide contract be considered?  Would CATV providers cease support if a statewide contract should come about?

A Meeting with VerizonThe League's executive team again met with both Verizon and the Cable Association in early May.  With Verizon we shared our concerns.  They provided us with areas they could address immediately and a developed a new list of concerns they would look into based on our recommendations.  The Cable Association stressed the important difference between a franchise regulated at the state level and the current system cable providers follow.  It was cable's opinion that any change would result in loss of local control, and local options. 


With the rapid development of technology, what once was a clearly defined difference between cable television providers and the telecomm industry has blurred. These two entities have become direct competitors.



Verizon's plan is to allow municipalities an option for competition through the statewide agreement.  They are offering a larger percentage of revenues to municipalities based on the gross price of packages offered to consumers, instead of the small percentage off the basic service plan.  In many cases this could triple franchise fees a town currently gets from such an agreement. The revenue could be used for such things as equipment for the PEG & Access channels or to off set local property taxes.  It offers a consideration to home rule in the sense that more revenues could be realized without the having to negotiate separate municipal contracts. Each municipality could use the new revenues as it chooses.

Mayor’s Summit on Cable As the amount of information increased, so did the level of interest of our membership.  Much had been driven by the respective industries.  The League hosted a Mayors' Summit on June 15, 2005, in Lawerenceville.  Two hundred mayors, various elected officials, guests, industry representatives heard the information from the various sources.  The speakers included  Jeanne Fox, President,  the Board of Public Utilities, John Belardo, League special counsel for Telecomm, Karen Alexander, President of the NJ Cable & Telecommunications Association, League President Peter Cantu, Dennis Bone, CEO Verizon New Jersey , New Jersey State Assemblyman Wilfred Caraballo and Albert LiCata, League Telecommunications Chair.

The program was well received along with the Q & A session.  Assemblyman Caraballo indicated, legislation for a Verizon statewide contract will be introduced later this fall.  Your League will continue to be proactive on this issue.  The League will keep you informed through emails and legislative alerts. We are also hosting another full panel discussion and information session on this topic at the League Convention this November.

The League will continue to keep all lines of communication open as the Verizon proposal is set to be introduced later this fall.  We will remain vigilant and protective over local revenue streams. The task force will work to voice concerns, ask questions and engage your questions.  We accept that technology is rapidly being developed and deployed.  In light of this fact it is all the more important to greet that horizon with our eyes and minds wide open.

 

 

 

Article in October 2005, New Jersey Municipalities


407 West State Street, Trenton, NJ 08618  (609)695-3481
 NJLM logo 

William G. Dressel Jr, Executive Director - Michael J. Darcey, CAE, Asst Executive Director

Changing Technology Alters
the Cable Franchise Landscape


Albert "Al" LiCata
League Telecommunications Committee Chair
Deputy Mayor, Bernards Township

The 1996 Federal Telecommunications Act brought needed laws addressing, among

woman with cable box
Though the shift is invisible to our citizens, changing technology and state legislation are radically changing the way municipalities negotiate cable franchises.

other things, competition.  Some eight years later the consumer stands ready to fully realize the next generation of technology and the way in which it will be delivered.

Earlier this year Verizon announced they would be entering the video market and would be seeking a statewide franchise agreement, instead of negotiating 566 municipal contracts separately.  The League immediately got involved to first understand what was actually being proposed and to later become a positive voice for our membership.

On a municipal level, we have all dealt with the lengthy and sometimes expensive franchising process, often with the lone cable provider to our respective communities.  We've experienced reductions in the basic service price, which specifies the amount of franchise revenues to be received locally.  Also, towns have been affected by a steady loss of franchise fees as satellite providers, untouched by franchising, capture a larger market share.  The League has provided a cable advisory service to help towns understand the franchising process.  In addition, the League offers technical advice and maintains a cable resource center at www.njslom.com.

League Takes Action For several years the League's Telecommunication Committee has been proactive in this area.  Through dedicated work over many years, a Telecommunication Tax Fairness Proposal has been drafted and supported by the League's general membership.  The proposal calls for the broad based telecomm franchise tax to be applied to various technologies so that parity between the once distinctly different entities, cable & telecomm, could be treated in a like manner.


On a municipal level, we have all dealt with the lengthy and sometimes expensive franchising process, often with the lone cable provider to our respective communities.



Mike Darcy, League assistant executive director, and myself, met with State Treasurer John McCormick and his staff on several occasions in January of 2005.  Our goal was to sharing information and our proposals in an attempt to bring needed parity, while protecting vital revenue streams to municipalities.  However, the state expressed no interest due to what they perceived to be the legislative complexities of the issue.

Which brings us to the Verizon proposal.  On March 9, 2005, Mike Darcy and I met with the Cable Association to discuss their thoughts and concerns based on the rumors of Verizon's plan for a statewide franchise agreement.  They supplied information for our review.  It was at this time we agreed to keep municipalities informed as this was shaping up to be a topic of major consideration.

Following this meeting, we reached out to officials at Verizon.  A League Executive Task Force, which included League President Peter Cantu,  Executive Director Bill Dressel, Mike Darcy, League Telecomm special counsel John Belardo, of DiFrancesco, Bateman, Yospin, Kunzman and Al LiCata, League Telecomm Chair, had productive conversations with the Verizon team, led by CEO Dennis Bone.  We took our time to understand Verizon's proposal, while weighing our concerns over "home rule."

Developing a List of Concerns With lines of communication open to various parties, on April 4, 2005 the League's complete Telecommunications Committee came together to review the statewide franchise plan and develop a basic list of issues that needed to be addressed.  Our list closely mirrored what is most commonly found in existing cable contracts.

The list of issues included and is not limited too;

1)  The Franchise Period.  Under a statewide format, a short term first contract is highly recommended to give meaningful review of this new type of franchising.

2)  Extension of Service.  No redlining.  What is a reasonable build out schedule for Verizon?

3)  Franchise Fees.  New Jersey has long suffered under an unreasonably low franchise fees structure for years.  We need to better assess the value of public right of ways.

4)  Account for the Effect of Competition.  Competition is believed to drive down or cap, by dollars per subscriber, pricing for service.  This could reduce gross revenue which would result in less franchise fees.  Not taking into account any change in franchise percentage to address gross or basic service plans.

5)  PEG Access.  Public Educational and Governmental needs to be continued with any possible statewide contract.

6)  Wiring of Municipal Buildings.  Emergency, Public Safety, Educational buildings all need to be wired at no additional cost to the community.

7)  Dedicated Dark Fiber.  Would a statewide contract give municipalities dark fiber to connect all municipal buildings to one network?  How about school buildings?

8)  Senior PAAD.  Eligible seniors should be addressed as in cable contracts.

9)  Public Access Stations.  Cable Companies have supplied equipment, facilities for stations and so on.  How will this be continued should a statewide contract be considered?  Would CATV providers cease support if a statewide contract should come about?

A Meeting with VerizonThe League's executive team again met with both Verizon and the Cable Association in early May.  With Verizon we shared our concerns.  They provided us with areas they could address immediately and a developed a new list of concerns they would look into based on our recommendations.  The Cable Association stressed the important difference between a franchise regulated at the state level and the current system cable providers follow.  It was cable's opinion that any change would result in loss of local control, and local options. 


With the rapid development of technology, what once was a clearly defined difference between cable television providers and the telecomm industry has blurred. These two entities have become direct competitors.



Verizon's plan is to allow municipalities an option for competition through the statewide agreement.  They are offering a larger percentage of revenues to municipalities based on the gross price of packages offered to consumers, instead of the small percentage off the basic service plan.  In many cases this could triple franchise fees a town currently gets from such an agreement. The revenue could be used for such things as equipment for the PEG & Access channels or to off set local property taxes.  It offers a consideration to home rule in the sense that more revenues could be realized without the having to negotiate separate municipal contracts. Each municipality could use the new revenues as it chooses.

Mayor’s Summit on Cable As the amount of information increased, so did the level of interest of our membership.  Much had been driven by the respective industries.  The League hosted a Mayors' Summit on June 15, 2005, in Lawerenceville.  Two hundred mayors, various elected officials, guests, industry representatives heard the information from the various sources.  The speakers included  Jeanne Fox, President,  the Board of Public Utilities, John Belardo, League special counsel for Telecomm, Karen Alexander, President of the NJ Cable & Telecommunications Association, League President Peter Cantu, Dennis Bone, CEO Verizon New Jersey , New Jersey State Assemblyman Wilfred Caraballo and Albert LiCata, League Telecommunications Chair.

The program was well received along with the Q & A session.  Assemblyman Caraballo indicated, legislation for a Verizon statewide contract will be introduced later this fall.  Your League will continue to be proactive on this issue.  The League will keep you informed through emails and legislative alerts. We are also hosting another full panel discussion and information session on this topic at the League Convention this November.

The League will continue to keep all lines of communication open as the Verizon proposal is set to be introduced later this fall.  We will remain vigilant and protective over local revenue streams. The task force will work to voice concerns, ask questions and engage your questions.  We accept that technology is rapidly being developed and deployed.  In light of this fact it is all the more important to greet that horizon with our eyes and minds wide open.

 

 

 

Article in October 2005, New Jersey Municipalities