News » The REAL Facts: Why the Governor must veto Cable Bill HR 2812

Cable legislation, HR 2812, passed by the Arizona Legislature on March 1, 2006 is a bill containing terrible ambiguity and which will harm many if not all cities and towns in Arizona. This bill is not a consumer friendly bill nor does it provide rate relief. Additional fatal flaws and unintended consequences of this bill could allow Qwest and electric and gas utilities to take advantage of this bill to reduce their franchise payments throughout Arizona as well.

Access Tucson received a copy of a letter from Anne Doris of Cox Communications to the Tucson City Council taking issue with points Access Tucson Executive Director, Sam Behrend raised to them about the cable legislation. Once again Cox is playing very loose with the facts of this matter and distorting what SB1421 says and means. Behrend’s responses to Ms. Doris’ points are listed below (inset and initialed SB) It seems obvious that the legislation appears to have several significant adverse consequences to the public, educators and consumers, including raising rates to some of the most vulnerable consumers in the City and state. Cox seems to admit that much of Behrend’s assessment is technically correct, but assures that the consequences are unintended. This legislation is so poorly worded that it is not likely to protect the public in ways that Cox assures is intended. Cox has said that it believes that the problems can be solved through individual negotiations.

However, since the bill really discourages effective local negotiations (by allowing for offsets against license fees when the parties agree to solutions for local problems), we think that Cox’ approach is inadequate. Setting aside other concerns Access Tucson may have, this bill should certainly not be signed by Governor Napolitano when it is so poorly worded that local negotiations must be relied upon to fix obvious problems.

The only remaining hope to stop this terrible legislation is with the Governor. Please contact Governor Napolitano and urge her to VETO HB 2812. She must hear from you before Monday!

Contact the Governor’s Office in Tucson at (520) 628-6580 or by email at jlesher@az.gov and make sure she understands how you value the PEG channels and why you believe that the state should not interfere with the rights of the City of Tucson to negotiate the best possible cable television license renewal possible.

Please do what you can today!

Contact:
Jan Lesher
Director, Southern Arizona Office
Governor Janet Napolitano
(520) 628-6580
or by email at jlesher@az.gov

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February 24, 2006From: Anne Doris

Dear Mr. Mayor and Council:

I have recently become aware that you have been furnished with some incorrect information regarding the cable customer tax relief legislation HB 2812 and SB 1421. These bills reduce taxes to our customers and enable cable operators to compete fairly in a highly competitive market. Under the bills, the Cities will continue to maintain all regulatory control and management over Cox’s use of the Rights of Way (ROW). Most importantly, Cox and the City of Tucson have begun discussions on a new cable license, which we hope will be completed before the legislation takes effect.

A letter sent to you by Mr. Sam Behrens is of great concern to me. Since the letter is a source of misinformation concerning the pending legislation, I thought it appropriate to share with you the reality of the two bills.

1. Mr. Behrens states: “there is no way to actually program the PEG channels, since the connections from PEG locations to the headend would be in-kind”

In fact, the legislation provides that in addition to the channel capacity to be provided at no cost to the City by the cable operator (up to 4 free channels); the cable operator must cover “any capital cost and charges for or in support of its use”. In other words, the cable operator enables everything necessary for the City to insert programming on each channel and the programming of the channel remains under the domain of the city, just as it is today.

Contrary to my claim that the bill does not cover connections to PEG centers Cox says the legislation provides that in addition to the channel capacity to be provided at no cost to the City by the cable operator (up to 4 free channels); the cable operator must cover “any capital cost and charges for or in support of its use”.

That is not what the legislation says. It says that any support that an operator gives “for and in support of the channels” is not counted against the license fee, but there IS NO PROVISION ALLOWING CITIES TO REQUIRE the connections. There is a broad prohibition against in-kind (and I am not sure that even the “for and in support” language covers the connections, as the federal law’s comparable language covers facilities and equipment, in addition to cash support). If Cox is serious, the bill should be amended to ensure that nothing in the Act prevents a locality from requiring an operator to provide facilities and equipment that can be required under federal law. (SB)

There are no additional charges to the City.

2. Mr. Behrens states: “the two digital channels are only available for Governmental programming.”

In fact, the two free channels provided by the cable operator on the digital tier would also be determined by the City. They could be used for secure training channels for the police or fire department or for other government programming such as the federal government’s Pentagon Channel.

It is our expectation that the needs of the education community will be dealt separately outside the license agreement.

Cox is saying that the fact that the educational channels will be dealt with separately outside the license agreements means that limiting digital channels to G usage is unimportant.

AGAIN, not true. If there is an enforceable agreement OUTSIDE the license agreement for channel capacity, the fair market value of the channels comes out of the license fee. Of course, Arizona and Tucson could rely on Cox to meet educational needs, out of charity - but can Cox point to any community in Arizona where Cox is providing facilities, equipment and support for an E-channel beyond what is provided in the license? And if Cox plans to meet the needs outside the license, why is it harmful to meet the needs inside the license? (SB)

3. Mr. Behrens asserts: “one of the Governmental channels could be CSPAN.”

In fact, since the City would have the discretion to decide what was to be put on the digital channel, it is difficult to imagine that the City would choose to duplicate carriage of CSPAN - a service that Cox already carries under a separate contractual obligation.

Cox claims that the local govt has the discretion to decide whether one of the G channels is CSPAN. In fact, that is not what the legislation says. It actually removes local control over one G channel and gives it to fed programming, and DOES NOT SAY that carriage is at the discretion of the City. If one wanted to make the point clear, the legislation would state: “a locality may, at its discretion, dedicate one channel to carriage of state and federal government programming.” As for the company’s claim that it has a contract to carry CSPAN: in fact, cable companies have dropped CSPAN I or II in the past, or refused to carry them. The contract is not permanent. (SB)

4. Mr. Behrens states: “because we have only G channels on digital, and P&E have to be accommodated on basic, City Council meetings will have to be moved to the digital service tier, unless of course, either E or P are bounced altogether. That will cost the poorest subscribers approximately $15 extra per month, minimum (cost of tier plus a box).”

In fact, the legislation does NOT require cable customers to subscribe to digital service to get the government access channel. The bill allows the City to continue to have two government, education or public access channels in the basic tier. The City’s government access channel would only be moved to the digital tier if the City chose to move it there.

You may be aware that we are only a few years away from all channels being delivered in a digital format. In fact, the Federal Government has set aside 1.5 billion dollars in the digital transition bill to provide cable boxes to those who can least afford them. In the interim, these are the types of issues that will be resolved through a license renewal process.

The current bills would not take effect until July of 2007 which is sufficient time to allow both parties the flexibility to negotiate license provisions. This allows the unique local needs to be addressed, while still honoring the intent of the legislation to reduce the tax burdens on cable customers.

To address #4, 5 and 6: Cox claims that the fact that the G channels are on digital is insignificant, because (a) some day all channels will be digital; (b) there will be subsidies for transition to digital; and (c) the G channel could always be on basic. (SB)

(a) first, the bill does not say all channels will be on basic. It limits the number of channels on basic to 2. Any way you slice it, in order to get 2 additional channels, the poorest subscribers will pay more, whether all channels are digital or not. That is because the G channels will not be on the basic service tier. If Cox wants to protect consumers, the bill should say what your license says - namely, unless a G requests that a channel be scrambled, all channels will be available to each subscriber, at no additional charge.

(b) second, digital transition has not occurred, and the bill isn’t tied to passage of a digital transition bill, or based on any commitment that Cox will provide the digital channels at no charge once transition has occurred. In fact, the subsidies provided for in the bill (a) basically give 2 $40 vouchers to allow households to buy boxes that will allow them to receive digital BROADCAST signals. The bill does not cut digital cable rates, or rates for cable boxes; and (b) digital transition does not occur until February, 2009, which means there will be 2 years unaccounted for. If the AZ legislation is meant to parallel the changeover to digital, it got the dates wrong. The time should run until February 2009, unless the date for digital transition is extended.

(c) There are 2 channels on basic for all of P, E and G. Any way you count it, under the bill, one of those has to disappear. If it is P or E, it is dropped from the system entirely (since there is no digital P or E). If it is G, it at least could be on the digital tier, but then subs would pay more. So, the choice presented by Cox is quite direct: “subs must pay more or lose one important source of community information.” Again, if all channels are available to all subs, regardless of the tier subscribed to, the problem begins to go away. But a bigger problem: why is it a problem if there are just 4 channels that can be allocated as the local govt sees fit between P, E & G?

(d) the claim that all public buildings will get free basic, ignores the fact that (a) the bill does not ALLOW all PEG channels to be carried on basic, so public buildings will have to pay extra to get all PEG; and (b) schools are not included. Answer: free basic + PEG ought to be required, and free PEG should be at every school, at a minimum.

(e) Cox is claiming that there is a 3-year phase in of license fees, and that it will not itemize taxes, as I say could happen. Note that Cox does not say I read the bill incorrectly - it just says they should be trusted. Cox goes on to suggest that the intent of the legislation is to make sure customers are not paying a “fee on top of the fee.” Of course, this micharacterizes what is happening, but if that was Cox’ intent, it is easy to achieve that narrow end: “gross revenues do not include amounts collected by operators as a license fee pursuant to 47 USC Section 542(b) and itemized in accordance with 47 USC Section 542(c)(1), or sales or similar taxes imposed upon the subscriber where the acts as a collection agent for the government.” This or similar language has been included in licenses over the years.

(f) Cox claims the legislation lowers bills. That is just wrong. Overall, operators DO NOT charge more in communities with INETs and PEG, and 5% license fees than in other areas. They charge what the market will bear, period. What the community assessments do is ensure money stays in the community rather than running out of state. There is no reason to suppose Cox’ rates will drop anywhere over the long term. When license fees were dropped on cable modem service, there was a drop in cable bills when the line item was removed, but there has not been a long-term reduction in cable modem rates.

(g) finally, Cox at several points says that all issues can be resolved through negotiation. If that is the case, then the legislation is unnecessary. (SB)

5. Mr. Behrens states: “the same result will follow for the schools and public buildings, which only get basic service, and therefore will have no clear access to E or G programming without inordinate expense”

The decision about what (P, E or G) access channels are located in the basic tier is up to the City. The bill allows up to two free analog channels to be provided by the cable operator. Additionally, the bill allows cities to have free basic cable service to city buildings, enabling the city to view these and all other basic service channels at no cost.

6. Mr. Behrens states: “Gross revenues actually could drop much more dramatically than Cities may anticipate, since any taxes or fees imposed by any level of government can be deducted from the gross revenues calculation, at least as long as it is itemized.”

In fact, the current proposed legislation contains a 3-year phase-in clause that minimizes the financial impact on any municipality in the State of Arizona. In our competitive business it would be unwise for us to add itemized taxes and fees to our customer’s bills for any reason. This section of the legislation is intended to make sure our customers are not paying a fee on top of the fee and thus being doubly taxed.

This takes me back to the intent of the legislation. By reducing customer’s tax burden; cable TV can increase its subscriber base which ultimately will increase city revenues. Even cable customers within the City of Tucson boundaries pay significantly different fees, based on whether they receive cable service from Cox or Comcast.

Let me also take this opportunity to reiterate, that it has never been our intent to eliminate access locally. Cox’s goal is to effectively use today’s technology. The current Tucson license was written over twenty five years ago and never contemplated the technologies that exist today. The effective use of our digital bandwidth can provide customers with entertainment and communication options that suit their needs.

I look forward to continuing our discussion on how to effectively use technology to meet the Cities needs.
Best regards,

Anne Doris

Vice President and System Manager, Southern Arizona