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Trouble on the horizon

The battle over PEG access and franchise fees

By Jim Mount

Fort Wayne Reader

2013-03-15

Somewhere amongst the various fees and charges on your cable bill you’ll find a relatively small line item — about $5 — that, in the grand scheme of things, probably gets overlooked.

But in Indiana, that relatively small item has legislators, cable operators, and those concerned about public media engaged in a pitched battle over access and stewardship of the public right of way.

That small fee is called a franchise fee, and it’s a monthly charge that amounts to about 5% of a cable provider’s gross revenue. In our part of the state, the City of Fort Wayne collects that money for use in the board of public works and for PEG (Public, Educational and Governmental Access) channels.

In the last few years, the issue of franchise fees has become a sticky one. Some consumer advocates complain of it as a special tax passed on to cable subscribers, and feel the fees are a barrier to entry in a local broadcast market.

And some legislators agree. Recently, HB 1432 — sponsored by Representative Jack Lutz, District 35 — would have eliminated all municipalities from collecting franchise fees by June 30, 2015. The bill failed to come out of committee, but it will be studied by the House Regulatory Flexibility Committee this summer, and could easily be resurrected in the next legislative session in January of 2014.

The reason the bill stalled was in part due to the efforts of Erik Mollberg, Assistant Manager of Access Fort Wayne and the Chair of the Indiana Chapter of the Alliance for Community Media. The IACT (Indiana Association of Cities and Towns) also lobbied very heavy against the bill. “I wish I could honestly give you a reason this is happening,” says Mollberg. “I can only speculate that this legislation is coming from heavy lobbying from Comcast Cable and AT&T. Fiscally, this makes no impact on their budget. The estimate statewide is that $21 million is being paid to cities and municipalities from these fees. Compare that to the fact that both Comcast and Frontier made $54 million in Fort Wayne alone.”

He also points out that the cable operator doesn’t even pay those fees — it’s part of your bill.

Franchise fees, Mollberg explains, are collected because a cable operator is using the public “right of ways” that belong to the citizens. The city manages those right of ways as trustees for the citizens. According to FCC law, franchise fees are fair compensation for using the public right of ways.

“In the case of Fort Wayne or Bloomington, they collect a full 5%,” Mollberg says. “That’s what they’re allowed.” In Fort Wayne, the City splits the franchise fee revenue 60/40. 60% of the collected fee goes into public works. The remaining 40% is divided up, with a portion going to IPFW to pay for their educational access channel, a portion going to Fort Wayne Community Schools to pay for their educational access channel, and a portion to the ACPL’s public access operation.

But those who favor doing away with the franchise fee describe it as an unfair tax on the consumer. Since carriers provide broadband internet services, they question whether it's fair to put a “tax” on these services, as it is seen by some.

Mollberg obviously disagrees. To Mollberg, it isn't about taxes; it's all about access. “The effect of losing the franchise fees would be more than devastating to Access Fort Wayne,” he says. “While we receive in-kind support from the ACPL (local government funded), all other operating expenses, such as salaries, equipment repairs and some capital monies for replacement equipment, would disappear.”

Mollberg explains that the ACPL might support one staff person, perhaps a part-time person, but the lion’s share of the programming would have to be produced off site, away from the Access studios. Mollberg envisions a broad-ripple effect that would devastate not only Fort Wayne Access but a great deal of local programming. “This would also dramatically affect the operations of the two educational channels at IPFW and Fort Wayne Community Schools as well, not just Access Fort Wayne.”

Local public access programming is also a way to have transparency in local government. The most frequently watched programs on any of the access channels are city council and other governmental meetings. “Generally speaking, most people are not going to go down and attend a city council meeting unless it is something that immediately impacts their lives,” Mollberg says. “But they do like to watch what’s going on and what local government is talking about.” He adds that many people watch the meetings on the video on demand service.

“On the public access side, it’s a way for the community to be able to talk with each other,” Mollberg continues. “We have a program, for example, that’s all in Burmese. We have a program in Spanish. Public access is a way for those communities to communicate that aren’t available anywhere else.”

People may not be aware of the tenuous status of the local public access channels, but the battle over the franchise fees has been going on for a few years now. It began in 2006 when the statewide Video Franchising Bill — HEA 1279 — passed in the General Assembly. “That was the bill that took away the right of cities and municipalities to locally negotiate a cable franchise agreement,” Mollberg explains. “It was only a few years later that bills were being introduced to then eliminate the right of cities to collect fees for cable companies usage of the public right of ways.”

“And you know that if these fees were to go away there would be no reduction on your cable bill,” Mollberg adds. “Oddly enough, the state tax on cable services is twice as high as the local franchise fee and there is NO discussion in the State Capitol about eliminating those charges.”

Mollberg ultimately doesn’t know where this big push to eliminate franchise fees came from, but he offers some candid reasons of what he feels are the real motivating factors behind the drive to eliminate the fees. “It's the channels they want. The bandwidth we occupy is a valuable commodity to them. We are non-commercial channels (PEG) and we collect no monies off these channels. If they had the extra channels, they could sell those to other content providers and collect more money.”

While HB 1432 is stalled for now, future legislative efforts loom on the horizon and Mollberg says the battle is far from over. “We do anticipate another bill to be forthcoming in the next legislative session, which will begin in January of 2014. However, this current bill could be re-introduced as an amendment to another bill which will run until the end of April.”

Mollberg isn’t alone. Among Mollberg’s supporters is Bill Brown, a representative on Allen County council, President of the Downtown Improvement District, and a member of the ACPL’s Board of Trustees. Brown understands why the cable operators would want to get rid of the franchise fee, but ultimately he believes it should stay in place. “I think public access has really served the community well over the years,” he says. “It’s a valuable resource, and it does give a voice to the people.”

Mollberg believes the local community and government supports his efforts and see the value of public access television. “Certainly the City of Fort Wayne and other non-profits we work with are concerned and communicating with state officials,” he says. “I think on the state level they are just not as aware of us or the potential we have of also providing them with the conduit to communicate. ”

“In the case of franchise fees, it would be wrong for the state to devalue these public lands that belong to the local community,” Mollberg says. “Furthermore, to reduce the franchise fees is an affront to the local residents of that community, by telling them that their public land has no value, much less to the local municipalities who are the trustees for the local citizens to make sure they are getting fair compensation from that which belongs to all of them.”

Meanwhile, Mollberg and other local PEG channels and representatives will be keeping a watchful eye on the happenings in Indianapolis. “This type of bill has come up at least two other times in the past three years,” he says. “It will come up again.”