Frequently
Asked Questions
Frequently
Asked Questions
Q. What is a cable
franchise?
A.The franchise agreement is a non-exclusive contract between the
municipality and the cable provider that establishes the rules by which the
cable company can operate within the municipality and use its rights-of-way.
Q. What is a franchise
fee and why is it on my bill?
A. A franchise fee is a charge collected by your cable provider on
behalf of the municipality. The Federal Government allows local governments to
charge up to 5% per cable subscriber in the form of a franchise fee. Local
governments are able to collect this fee because cable television providers
utilize public rights- of-way to deliver their services.
Q.
Can my municipality control cable rates?
A. Municipalities do not have authority to regulate basic tier cable
rates. Although the Federal Communications Commission currently permits some
local governments to regulate and approve pricing for cable services, this
practice is limited to communities with only one provider or which limit the
number of providers allowed to serve a geographical area this is subject to
specific and limited situations. The
municipalities in the CACC do not have the ability to control cable rates for
any level of service.
Q. Where
is the competition?
A. Municipalities do not grant exclusive cable franchises and are open
for other companies to compete head to head with Adelphia. In fact some portions
of State College Borough and
Despite efforts, there has been very little interest in the cable industry in
competing for customers on the same street. Most companies choose to avoid
serving customers on the same street. The cable industry appears to be more
focused on purchasing other cable providers, merging or preventing unsolicited
buyouts of their companies than expanding into new territories.
The industry term for cable companies building on the same street and competing
for existing customers is called competitive overbuilding.
Attracting companies for competitive overbuilding is a big challenge. A few
facts to consider:
As an example, consider a new subdivision with 100 homes. When the original
cable provider comes in and begins to offer service, they will most likely
attract 60 to 80 of the homes as customers. It will take that company approx. 10
years to recoup the cost associated with the expansion and then begin to turn a
profit over the initial costs of running service to the subdivision. Recent
industry estimates indicate that the cost to lay one-mile of fiberoptic line is
approximately $40,000.
When the second company comes into the same neighborhood they will pick up
approx. 35 to 40 percent of the first companies customers. The rate of return on
their initial investment will easily approach 20 years to reach a profit over
initial expenses.
Q. What is the difference
between the informal and formal processes used to negotiate a new franchise
agreement?
A. Informal process: The
member municipalities of CACC and the cable provider may, at any time, agree on
a renewal franchise through informal negotiations.
Formal process: If the member municipalities of CACC are unable to agree on renewal terms through negotiation, the formal renewal process may be invoked. This process has a number of required actions.
The member municipalities of CACC are currently working in the formal process.
Q.
Why can't I pick the specific stations I want to purchase?
A. Because
the federal law allows the cable company to select the programming services it
offers. Municipalities cannot dictate to the cable provider which channels
it must offer or in what packages they must be delivered.
