The Comcast franchise talks in Philly, explained - Technical.ly Philly

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Apr. 27, 2015 1:47 pm

The Comcast franchise talks in Philly, explained

There's a lot to digest, so we broke it down. Here's what the Comcast franchise negotiations mean for the future of Philadelphia and why you should care.

Inside the Comcast Center.

(Photo by Flickr user Nico, used under a Creative Commons license)

Full disclosure: Comcast was the title sponsor of Philly Tech Week 2015.

The City of Philadelphia is in the midst of negotiating its 15-year cable franchise agreement with Comcast. If the words “cable franchise agreement” make your eyes glaze over, fight it. It’s a big deal.

The quick and dirty is that cable TV providers in Philly get a 15-year contract to sell their services to Philadelphians. Every 15 years, the city gets to re-negotiate that contract with the cable provider. The city has power in this deal because Comcast uses city-owned property, like the space under city streets, to deliver those services. This kind of thing happens all over the country. Comcast has more than 6,400 franchise agreements across the U.S.

A lot has changed since the city last negotiated with Comcast, so this is an opportunity for the city to ask one of its biggest corporate citizens for things it thinks Comcast should provide in exchange for the privilege of serving the city. Mayor Michael Nutter has said he will “negotiate hard.”

It’s also a rare opportunity for citizens to make their voices heard on the issue. Local Philly tech leaders like Alex Hillman are encouraging the tech scene to get involved.

At a recent event, Hillman said it’s a question of: “Where do we want Philadelphia to be in 15 years? And what can we do now to get there?”

The first two public meetings about the negotiations, are being held tomorrow, April 28. The city will collect public comments at these meetings and use them during their negotiations with Comcast. See the whole list of public hearings here.

The negotiation process is just beginning and there’s a lot to digest about the topic. We talked to City of Philadelphia Deputy Chief Innovation Officer Steve Robertson to get a better understanding of the issue. Find our explainer below.

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When did this whole process start?

In 1984, when the federal government passed a law that gave local municipalities power to award cable franchises. That was in part because cable operators had to use public “rights-of-way,” like the spaces under city streets, to lay their cable. Philadelphia split the city up into four franchise areas and awarded one each to four cable companies:

  • Area I (Center City and South Philly): Greater Philadelphia Cablevision
  • Area II (West Philadelphia, part of Northwest Philadelphia): Wade Communications (which later became Urban Cable Works)
  • Area III (Northwest Philadelphia): Rollins Cablevision of Philadelphia (which later became Heritage Cablevision of Philadelphia)
  • Area IV (Northeast): Comcast Cablevision of Philadelphia

Check out maps of each area here, courtesy of the City of Philadelphia.

cable franchise map 1984

In 1984, Comcast won the right to serve Area IV. (Courtesy of city government)

(Being Philadelphia, the cable franchising process was not without plenty of ’80s-era political drama.)

Over the next two decades, Comcast acquired the three other franchises. Today, only two companies have a cable franchise with the city: Comcast and Verizon, who applied and got one in 2009.

How does a cable company go about getting a franchise deal with the city?

It’s not that hard. “It’s tough to deny someone entering the market,” Robertson said. “The city isn’t saying, ‘We want the best and only the best.'” If a company has the financial means to set up and operate a cable system in the city, it will likely get approved, he said.

But there aren’t many.

Right. We’ve been seeing a consolidation of this industry nationally, Robertson said. (Most recently with the failed merger of Comcast and Time Warner Cable.) Aside from Verizon and Comcast, Philly has DISH Network and DirecTV (which will likely merge with AT&T) but they don’t need a franchise because they’re satellite providers and don’t need to dig up the street to lay cable.

Why is the agreement for 15 years?

It was what was common across municipalities at the time, for one. (Some cities, like Nashville, do 10-year agreements. Robertson called that “a more recent phenomenon.”) The timeframe allowed cities to ensure some stability in terms of cable providers, but on the flip side, some were alarmed because of the risks of a longterm contract — the city isn’t often signing 15-year contracts. That’s what’s at stake during these negotiations.

Yeah, so, about that. What did Philly get last time?

The last negotiations were in 1999 and 2000, when Philadelphia negotiated for funds for public access TV (PhillyCAM) and five percent of Comcast’s cable-TV revenues, according to the Media Mobilizing Project. (That’s the most a city can collect on franchise revenues, as per federal law.) Philly collected $17.5 million in fee receipts in FY 2012 from Comcast, the Inquirer reported. The city doesn’t collect franchise fees on internet service revenue.

What is the city going to asking for this time around? 

In short, better customer service and free broadband in underserved neighborhoods. That’s what Mayor Nutter has said publicly, but he also declined to go into detail about the city’s negotiation strategy.

In preparation for the negotiations, the city commissioned a report on Comcast’s service in Philadelphia. The 571-page report, which you can read here, found that more than a quarter of Comcast subscribers are unhappy with their service. A whopping 99 percent of the people who left additional comments — more than 1,700 people — wrote negative ones. The most common complaints were about price, customer service and slow internet speeds. (See pages 64 and 65 of the report.)

The report also recommended that Nutter ask that Comcast develop better pricing packages for cable TV, upgrade public access channels to high definition and make regular inspections and improvements to its infrastructure.

What does Comcast say about all of this?

Comcast has called the report’s findings “inaccurate, overstated [and] misleading.”

“Importantly, the consultant never contacted Comcast to solicit objective, verifiable data, resulting in conclusions that are not based on easily available and decisive data, and that are simply untrue,” Comcast senior vice president LeAnn Talbot wrote in a blog post.

A Comcast director who asked not to be named added, via email:

Nearly one out of four online survey responses were from the same IP address, i.e. the same computer terminal. By the consultant’s admission, individuals could complete the survey several times, and it’s our understanding that some groups with special interests mobilized and promoted survey participation.

Are these demands realistic? Like, is there really a chance that the city will get what it wants?

Robertson says yes. “We’re asking for what we think we can get.” It likely won’t ask for something like free broadband for the whole city because that is not a realistic demand.

On the other hand, the Comcast director who asked not to be named made it clear that there are rules around what the city can ask for during the negotiations. (The subtext of that comment: there’s a lot of misinformation about what the city can and can’t ask for.)

“This cable television franchise renewal pertains solely to the delivery of our cable television service in Philadelphia. It does not apply to Internet access, telecom policy, or other unrelated issues,” the director wrote in an email, adding: “Franchise agreements are strictly regulated by federal law, and franchising authorities are limited in what they can request of a cable television provider under this process.”

One thing that the city can’t ask for, the director said, is better prices. It can, however, ask for better customer service, the director said.

In seven years, will Philly negotiate differently with Verizon?

No, it won’t, and that’s another reason this negotiation is important. Under a policy called “competitive equity,” Robertson said that Verizon will have to fulfill the same demands.

What happens if Comcast says no to the city’s demands?

The city could deny Comcast’s franchise renewal. Comcast could then fight it, and it would go to an administrative hearing, where a hearing examiner would judge the merits of the city’s denial. This has rarely ever been done, Robertson said.

When’s this going to be over?

The franchise agreements expire in late summer and early fall, and Robertson said the city hopes to finish negotiations before that.

So, if I have some feelings about this, what should I do? Will it make a difference?

Robertson encouraged Philadelphians to: Go to the public meetings. Submit feedback on the city’s site.

Indy Hall is organizing a group to go the public forum tomorrow evening in South Philly. The Media Mobilizing Project is also running a campaign around the issue.

If the public’s voice will make a difference in the negotiations remains to be seen, but public opinion has appeared to have made a difference in several major Comcast issues, like net neutrality (the FCC got four million public comments) and the Comcast-Time Warner Cable merger (one former Comcast exec said that it was frustrated customers who killed the merger).

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VIEW COMMENTS
  • Dear Philly,

    In 1995, Comcast and the rest of the cable companies cut a deal with the FCC called ‘the social contract’; It was to wire the schools with high-speed internet– with some of it ‘free and the wiring ‘at cost’ and upgrade the networks. In exchange, the company was able to raise rates up to $5.00 a month. Problem is, the contract expired in 2001 and we can find no evidence that the schools were wired or that prices declined after the contract expired — or that there has been any audit or investigation of Comcast in PA.

    “Comcast will provide a free service connection to each public and private school located within 200 feet of Comcast’s activated cable
    plant. Comcast will provide a service connection at cost to public and private schools beyond 200 feet of its activated cable plant. Comcast
    will also provide a free modem and free modem service to all such schools within a year after Comcast makes personal computer-based
    Internet access service via cable commercially available to residential customers. Free cable service, including basic and enhanced basic service, and service offered on migrated and new product tiers, will be provided to all connected public and private schools… Additional
    internal wiring to serve additional outlets in any school will be provided at cost. Such wiring will be provided at no charge if Comcast
    is able to coordinate installation with other comparable electrical wiring installation being done in new or rehabilitated schools.”

    And in fact, Time Warner (and Comcast) showed profit margins of 97% on their high-speed internet service — We believe this is caused by the majority of expenses being dumped into the cable side of the equation– thus, the extra $5.00 a month still be paid just added to the bottom line profits of the internet service.

    We examined Time Warner, who signed the same contract
    http://www.huffingtonpost.com/bruce-kushnick/investigate-time-warner_b_6142934.html

    And if you want the full story of what happened in PA see: The Book of Broken Promises. http://newnetworks.com/bookbrokenpromises/

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