Local Governments Should Monitor Evolving Cable Franchising Landscape, NATOA Says
Local governments need to continue closely following changes to the cable franchising model that are likely to accelerate with continued growth in over-the-top services, NATOA President Tony Perez said Monday during a webinar. Recent OTT developments like the HBO Go service and Dish Network’s Sling TV service (see 1502090025">1502090025) show that long-forestalled changes to the cable franchising model are beginning to take hold, and that “the pace of change is likely to accelerate over the next couple of months,” said Perez, director of Seattle’s Office of Cable Communications. A 2014 Seattle survey indicated cable subscribership in the city had dropped 13 percent in the preceding four years, with the rise in OTT options being seen as a primary factor, he said.
Sign up for a free preview to unlock the rest of this article
Timely, relevant coverage of court proceedings and agency rulings involving tariffs, classification, valuation, origin and antidumping and countervailing duties. Each day, Trade Law Daily subscribers receive a daily headline email, in-depth PDF edition and access to all relevant documents via our trade law source document library and website.
Continued changes in the traditional cable franchise model are likely to have significant effects on local governments’ ability to depend on cable franchise fees as a source of revenue, Perez said. Increases in cable franchise fees have slowed dramatically in recent years, with a decrease in such fees appearing increasingly likely to begin next year, he said. Local governments will need to monitor changes and alert local officials, Perez said.
Local governments “need to be flexible” about how to handle changes to traditional cable franchising given the current lack of consensus about which model will ultimately survive, said Rick Ellrod, director-Communications Policy and Regulation Division for Fairfax County, Virginia. “We can’t assume that we’ll always have cable franchise fees to fall back on, we can’t assume that the traditional PEG [public, educational and government access] model will stay the same.” An increase in OTT service offerings is most likely to affect franchise fees and other revenue-based benefits for local governments like PEG grants when such benefits are a function of gross cable revenue, Ellrod said.
Changes in the cable model could affect PEG channels, as they aren’t explicitly mandated to be carried on OTT services, Ellrod said. Many PEG channels stream online, as with Fairfax County’s PEG channel, Ellrod said. “That puts PEG in less of a disadvantaged position than we might think,” he said. “But that’s something we will have to look closely at to see how that does affect us.” If bundled packages survive with the acceleration into OTT, local governments may need to push for PEG channels to be included in OTT service offerings, Ellrod said. Local governments also will need to figure out how to handle customer service issues for OTT providers since they don’t have the same direct relationship with the OTTs as they do with cable companies, he said.
Several items in the FCC multichannel video programming distributor NPRM also need continued scrutiny from local governments, said Spiegel McDiarmid lawyer Tim Lay. The NPRM excludes stand-alone OTT programming provided by a cable operator from its definition of a cable service, which may result in a “siphoning off” of revenue from cable franchise fees, as well as “frustrate” any effort to require OTT services to include PEG channels in their service offerings, Lay said. The NPRM seeks comment on whether OTT programming from a provider should be treated differently within the operator’s footprint or when OTT programming is bundled with cable programming, he said. The cable industry is likely to argue against treating OTT as a cable service because it would be “unfair,” but that overlooks the fact that cable companies generate revenue from others’ OTT services via broadband revenue, Lay said.