Champaign-Urbana, Illinois

When an astroturf or telecommunications company tells consumers that laws to permit statewide franchising for cable or telephone company video services are “consumer-friendly,” here is a real world example demonstrating how wrong they are.

After a year of informal negotiations with Comcast, Champaign city officials Tuesday voted unanimously to reject the company’s franchise renewal application.

Council members said they won’t accept a bad franchise agreement.

“We have to defend the rights of 75,000 people who live in Champaign and pay phenomenal amounts of cash for cable services,” city councilperson Tom Bruno told The News-Gazette.

At issue:

• City officials want Comcast to maintain a local office in Champaign-Urbana, which company officials have reportedly refused to guarantee;
• Comcast objects to a request from the city to add a fifth Public, Educational, and Government (PEG) access channel unless the city assures Comcast it will have a considerable lineup of “original” programming;
• Comcast wants to change the formula for computing “gross revenue,” on which the city bases its 5 percent franchise fee, substantially reducing the $700,000 annual payment the city usually receives.

Subscribers and city officials want assurances that Comcast will maintain a local presence, and not adopt a regional approach that places many Comcast employees that make decisions affecting the community well outside of the area.  Comcast’s demand that the city heavily program its existing PEG channels before considering adding a fifth channel as part of a ten year franchise agreement was dismissed by Rick Atterbery, a member of Champaign’s negotiating team and the chairman of the CU Joint Cable & Telecommunications Commission.

“They would require more original programming (on PEG channels) than NBC is providing [its affiliates],” Atterbery said.

Tom Bruno

City officials discovered the state of the cable industry’s willingness to compete when it put out a formal request for proposals for any cable company to apply for the city franchise.  Only one provider, the incumbent Comcast, submitted an application.

Other cities have had similar experiences, finding no cable company of size will apply for a franchise to serve a community already wired by someone else.  Instead, cable companies change hands when operators conduct private negotiations to swap territories, as was the case in Memphis, Tennessee when city officials learned Time Warner Cable was leaving and Comcast was taking over, or through mergers and acquisitions, such as in Buffalo, New York where incumbent operator Adelphia’s franchise was taken over by Time Warner Cable.

In the end, Comcast holds all of the cards.  Should Champaign officials be unable to negotiate an agreement with an intransigent Comcast, the cable company can use the telecommunications industry-friendly statewide franchise law it fought heavily against in 2007.  Like in Tennessee and several other states, AT&T (among others) has been spreading campaign contributions around to attempt to pass legislation to adopt a single franchise agreement for entire states, reducing the time and effort AT&T would have otherwise spent making agreements with individual communities.  Comcast, being the incumbent likely to face competition, strongly opposed the bill in an effort to slow down AT&T.

It would be ironic if Comcast had to resort to a statewide franchise to “opt out” of the local franchise negotiations that it fought so hard to force AT&T to comply with.

The News-Gazette confirms that the city really has little to work with:

The city could theoretically require Comcast to remove or abandon its city facilities, but Comcast could fight a council rejection in court or seek a state franchise, making Comcast’s ouster highly unlikely, Atterbery said.

Deb Piscola, Comcast’s director of government affairs, attended the meeting and said she was optimistic a franchise agreement can be hammered out. She said informal negotiations can continue along with the formal process simultaneously.

“Ninety-nine percent of franchise renewals are completed through the informal process,” she said. “I feel very confident we will reach an agreement.”

Piscola also said she believes Comcast will retain a local office, and that the differences over the franchise fee can be worked out.

[Update: 6:39pm ET — Clarified article to recognize this week’s action involved the Champaign city council, not Urbana.  Our reader Bob reminds us that AT&T U-verse has launched in parts of both cities in the past few weeks, should customers want to take their business elsewhere.]