The devastating 416 Fire that burned 54,000 acres north of Durango last summer had residents scrambling for updates. They found them on DGOV TV, the community television channel run by Durango city employees.
The channel put regular programming on hold June 1 and aired only emergency information for the rest of the month. And it kept it up through the end of July.
“We were getting comments from people who were continually checking it,” said Victor Locke, who oversees the city’s public-access channel. “And we reach county residents as well because it’s over the air.”
That’s important to residents of Durango and La Plata County. Tuning into cable or over-the-air local channels means watching Albuquerque TV news since the region is in the New Mexico TV market. (In November, the city inked a deal to air Denver’s KUSA 9News so residents have some Colorado news on the public-access channel 10.2.)
But now, DGOV TV, along with nearly every public-access channel in the U.S., could see funding diminish if a rule proposed by the Federal Communications Commission moves forward to reinterpret franchise fees, the money that cable companies pay for permission to install cables in city streets. The money often ends up in the city’s general fund to pay for city services, such as street repair, public safety and city council meeting broadcasts. And it’s causing public-access channels to plot survival strategies.
“Going from having franchise fees to not having them, typically what happens in that case is the public access goes away,” said Amanda Mountain, president of Rocky Mountain PBS, which supports “orphaned” communities, such as Durango, returning to Colorado TV territory. “And eliminating that will leave a huge void where some will feel it more than others, particularly in Durango.”
The U.S. cable industry says franchise fees cost companies $3 billion a year. But what’s worse, they say, is that some communities abuse the relationship and expect cable firms to also provide courtesy accounts, network capacity, channels and other in-kind contributions. The FCC has proposed capping all fees — including in-kind contributions — to 5 percent, which is the current limit for franchise fees. For consumers, that could shave $5 to $6 from a $100 cable TV bill, although no cable company has directly promised savings to customers.
For Durango, those fees in 2017 totaled $187,680, enough to cover one full-time and two part-time city employees, as well as operations and equipment. With limited resources, Locke is creative. Besides airing City Council meetings and local events, he pieced together free programming from sources such as Rocky Mountain PBS, 9News and the German network Deutsche Welle.
“We don’t have to pay for a lot of programming. And if we had to, I don’t think we can continue to carry the programs,” Locke said. “This is an attempt by the industry to rewrite the rules so they don’t have to pay the franchise fees. We have eight buildings in the city that Charter Spectrum has to provide cable service to. Now that would be included (in the 5 percent). This is like changing the rules in midstream. I think that’s really rubbing people the wrong way.”
But Locke acknowledges that cable’s contribution to its budget is already in decline as Charter loses TV subscribers.
“The question is: Is it sustainable to continue offering television service? (DGOV) is an excellent service. It provides transparency and is an immediate outlet for public information that we saw from the 416 fire,” Locke said. “Long story short, operating a TV channel takes funds, so we’re looking into developing an advertising policy to make us more sustainable.”
Fair, unfair or new reality?
There are two types of fees allowed by law.
Franchise fees typically range from 3 to 5 percent of a cable company’s gross TV revenues. And many local governments put this in their general fund. If cable companies raise overall TV prices, these fees could stay the same despite the loss of subscribers.
Fees for public, educational and governmental, or PEG, programming are charged on a per-subscriber basis and can range from 25 cents to $1 per month. Funds can only be used to finance equipment for PEG programming. Not all local governments negotiate a PEG fee, but those who do typically also have a government-access channel. These fees decline when cable loses subscribers.
For years, cable companies have called franchise fees unfair because competitors who don’t need the right-of-way — such as satellite-TV services or online-video services — don’t have to pay cities a dime.
The cable-TV industry hasn’t been shy about petitioning the FCC to drop fees. In 2002, the FCC exempted broadband-internet service from cable-franchise fees.
Ted Hearn, vice president of communications for the American Cable Association, said the current FCC franchise fee proposal is about sticking to the Cable Act of 1984. Local governments are asking for much more than franchise fees, he said, pointing to association comments to the FCC.
“By seeking to have unbounded authority to effectively tax or assess only cable franchisees, (municipal) actions will further distort the market, harming both franchisees and their subscribers,” the association said.
More than 1,800 letters were submitted to the FCC by the December deadline.
But there’s no deadline for the FCC to rule. Critics of the cable industry expect something to happen sooner than later since current FCC leadership could change in the next presidential election, less than two years away.
“There’s no guarantee they’ll come up with something tomorrow or six months or a year from now, but we do know the clock is ticking,” said Mike Wassenaar, president of the Alliance for Community Media. “What we’ve seen is (the FCC) has changed its priorities depending on who’s in office. That’s why we’re seeing them go after net neutrality. And that’s why they just lost a case with rural (low-income) broadband for tribal lands.”
However, a greater fear is the loss of local control when cities negotiate their next cable franchise, said Alan DeLollis, president of the Colorado Communications and Utility Alliance, which represents about 60 local governments.
“What we’re talking about is the ability the FCC is giving cable companies to set their own value on a channel, for instance,” DeLollis said. “And for the cable company to say ‘I’m going to set a fair-market value and deduct that from your franchise fees’ without letting the city have any feedback, that’s huge right there.”
Wassenaar, whose organization represents 400 public-access channels in 42 states, isn’t sure how many public and government channels exist, but he estimates that there are 3,000. He is, however, sure of one thing.
“All of them rely on those fees. It’s at least a majority of their funding,” he said. “I think that’s one of the reasons why the FCC’s proposal could be catastrophic for local media across the country. It would force the local organization to get rent or keep the channel, but not both. This is a way to force local communities to drop channels and to reduce media diversity, plain and simple.”
Comcast and Charter officials referred comments to the national cable organization NCTA, also known as The Internet & Television Association, which in turn pointed to an earlier online statement:
“Congress set limits on the amount of compensation that cable operators can be charged for this access, to be sure that cable operators will continue to invest in their networks and offer new products and services. Unfortunately, … some local franchises are also abusing the local and state franchising process by demanding that cable operators obtain extra authorizations or licenses and pay extra fees when they offer broadband and other services over the cable network, even though the operators have previously already paid them a fee for their network to be in the rights-of-way.”
Blame the cord cutters
Subscribers have been ditching cable TV for years, or at least downgrading TV plans and paying just for internet and then tacking on a streaming-video service such as Hulu or Sling TV. That, in turn, has cut into the amount of money local governments collect from the local cable provider.
No one seems to keep track of the financial impact on local governments, many of which put those franchise fees into their general fund to pay for street repair, police services and other city needs.
The cable industry says the figure is $3 billion a year, but a historical number wasn’t available, said an NCTA spokeswoman. According to past NCTA reports, the organization reported the cost was $3.5 billion in 2016, with in-kind donations at $1 billion. That’s up from $2.4 billion in 2014 and in-kind donations of $1 billion. NCTA said franchise fees in 2008 cost the industry $3 billion, while it valued in-kind contributions to local and national nonprofits that year at $2 billion.
One explanation why the fee hasn’t dwindled too much is that cable companies continue to raise prices, said DeLollis, with the Colorado Communications and Utility Alliance.
“Comcast, at least as an entity, has been doing well enough with its formulas in bundling and raising prices that franchise fees as a gross number for the city’s general funds (have) been fairly steady,” DeLollis said.
And that’s despite Comcast shedding 370,000 video subscribers nationwide last year and losing 151,000 subscribers the year before that, he added.
“As subscribers drop, those PEG dollars fall, and that’s an impact for sure in our revenue and for any of our communities,” he said.
In Denver, which lost its public-access channel in December after it didn’t renew its contract with long-time operator Denver Open Media, the city’s cable fees bucked the trend and saw fees increase between 2012 to 2017. That could be due to population growth or higher prices.
But another reason was newcomer CenturyLink, which began offering Prism TV service in the city in 2015. Last year, however, CenturyLink began winding down its TV service, and the city received nearly $1.2 million less in 2018.
“This revenue goes into the city’s general fund and is used to support basic city services, vital operations, and strategic priorities,” said Jenny Schiavone, a Denver city spokeswoman. “We oppose the proposed FCC ruling, because it would result in a decline in franchise revenues, and have filed an official comment in response to the Commission’s position.”
Denver is working on relaunching its public-media channel, and continues to broadcast government meetings online and on Comcast channel 8.
Longmont, which built its own gigabit-internet service, collected $751,697 in franchise fees in 2017. Of that, 75 percent goes into the general fund and 25 percent goes to the Cable Trust, which finances the government channel. The payment was $141,000 less than the prior year, a 16 percent drop.
“That’s a police officer right there,” said Assistant City Manager Sandra Seader. “(The FCC proposal) puts municipalities in the very rare position of figuring out where to make up the difference. What are we going to fund: police or public-communication services?”
Cable companies aren’t completely suffering. They’re focused on selling internet to cord cutters, and that has improved overall revenues. Comcast, for example, brought in $94.5 billion in revenues last year, an 11.1 percent growth even as its video revenues declined 1.8 percent.
Charter, likewise, posted $43.6 billion in revenues last year, up 4.9 percent. But even though it ended the year with 296,000 fewer video customers, its video revenues grew, thanks in part to “annual rate adjustments,” according to the company’s 2018 annual-earnings release.
When John Masters joined Grassroots TV in 2001, he saw the decline in franchise fees coming and began searching for new revenue sources for the Aspen channel that launched in 1972.
“Grassroots didn’t get any franchise fees directly until sometime in the 1980s,” Masters said. “I’ve spoken to folks who were here in the ’70s and asked, ‘What were you guys thinking? What was the financial plan?’ They were a bunch of hippies. They didn’t know.”
Franchise fees never amounted to enough to keep the station running. So Masters sought out underwriters and started charging fees to anyone who wanted use studio equipment. It also charges Aspen, Snowmass and Pitkin County to cover City Council and commissioner meetings.
“And it turned out to be our primary revenue stream over time. We were eventually able to build the professionalism of the station by charging,” Masters said. “I kind of pitched that to the community television community at conferences, and it was not well received because the idea was that this should be free and completely accessible to everyone. But that just doesn’t work, at least not in our market. In a big market like Chicago, maybe.”
Grassroots no longer receives franchise fees directly from the city of Aspen. Rather, it, like other local nonprofits, applies for civic grants that are funded through Aspen’s general fund. It receives about $90,000 a year, which makes up about a quarter of its budget. Last year, the city gave it an extra $15,000 to help create a high-definition channel. And Grassroots continues to put shows online and explore new ways, including podcasts, to get in front of viewers. Last month, it added Roku and Apple TV channels.
“We don’t know how many people are watching or how often,” Masters said. “But now we can tell online. We had 125,000 views in the last year, and that was before we started pushing online.”
The right of survival
In Pueblo, the only way to watch local high school football games is either in person or on cable-access Channel 19.
“We’re not part of the Nielsens (ratings), but I can tell you every bar in town has it on (for the games),” said Scott Richards, who handles public-access programming as part of his job at Pueblo Community College. “We estimate that there’s 10,000 (watching) in town.”
The station has some sponsors to help pay for event broadcasts, and there’s in-kind support from the school and students. The city provides the funds from PEG fees, which were recently used to upgrade a server so City Council meetings and other programs could be broadcast online and on Facebook Live for people who either can’t make it to the meeting or don’t have cable.
If any funding evaporates, “it would kill us, that’s for sure,” Richards said. “Our community could not absorb our operational costs plus the equipment costs. They’ve been very generous.”
The Alliance for Community Media offers tips and tools to help public-access channels figure out a more sustainable business model. Besides adding in-house recording services, many are investing in cable alternatives to help their programs reach a new audience. Online is the obvious move, but there’s also mobile content and even radio.
Other ideas are coming from the community. Sean Maday, a resident of Superior, started listening to his town meetings when municipal broadband was under consideration. But he didn’t have time for hours-long meetings online. So the software engineer developed a tool to transcribe recorded meetings and pull out key words, such as Comcast, so that a citizen could search for the topic of interest without listening to the whole meeting. His pet project, EngagedCitizens.us, is still in development, but it’s open-source code because he hopes to share it with other interested municipalities.
“I can’t see myself dedicating too much time to watching a public-access channel or a four-hour board meeting,” Maday said. “But can we use technology to make the contents more palatable so if I do have 10 minutes, I can find the piece where the conversation is occurring and dial it down to those 10 minutes.”
At Telluride TV, executive director Peter Kenworthy began looking beyond cable-franchise fees after funding for channel changed to a community grant, rather than a set amount from the city. It’s considering a partnership with another media company so Telluride TV’s local programs could get more “screens” and be aired on monitors as people wait in line at gondola stations.
“We’d provide community content between the ads. It’s another platform for advertising, and we’d get to produce content for advertisers,” Kenworthy said. “It’s another way for us to diversify our audience.”
While he’s hoping cable-franchise fees that help a channel such as his don’t diminish anytime soon, he feels it’s inevitable — be it with the FCC rule or cord cutters.
“I think all channels are having to reinvent themselves just like we are and having to exploit every kind of revenue source they can,” he said.
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