Free Cable for Firehouses Put at Risk by FCC Vote

(Bloomberg) -- Cable systems around the U.S. provide towns and cities with public-access channels showing school board and city council meetings, as well as networks like one that keeps New York City’s firefighters connected to the internet.

The services are provided for free, but that may be about to change. The Federal Communications Commission on Thursday decided that cable providers such as Comcast Corp. and Charter Communications Inc. should assign a value to the channels and data networks, and then reduce fees owed to localities by that amount.

The proposal from FCC Chairman Ajit Pai, who leads a Republican majority, succeeded on a 3-2 vote with both agency Democrats dissenting. Pai said cutting fees would leave more money for cable companies to invest in new services. “We will reduce costs for consumers and expedite the deployment of next-generation services,” Pai said.

Mayors anticipate a squeeze to their budgets and expressed alarm at a change to arrangements negotiated in many cases long ago. “Local governments around the country would be forced to make difficult decisions,” cities including Atlanta, Boston, Dallas and Rye, New York said in a filing at the FCC.

The decision “risks grave harms” to communities, said Commissioner Geoffrey Starks, a Democrat.

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Thursday’s vote is another example of the FCC under Pai trimming local efforts to regulate phone and cable companies. Last year the agency limited localities’ power over cell tower sites, citing the need to spur growth of fast communications networks -- a priority backed by President Donald Trump.

At issue are in-kind services that towns, counties and cities receive in addition to fees, which are capped at 5% of revenue. Examples of the services include discounts for seniors, channels for community use, and information networks that link government buildings.

The FCC decided to classify in-kind offerings as fees, subject to the 5% limit.

Cable providers back the move. The FCC’s anticipated action will “help rein in abusive practices and overreaching” by localities, NCTA – The Internet & Television Association, a trade group with members including Comcast and Charter, said in a filing. It cited what it called abuses that included a requirement in Minnesota to deliver cable service to municipal liquor stores and golf courses, maintaining fiber connections with local colleges in a Maryland county, and demands to extend service with 550 miles of new lines in Vermont.

Cable operator Altice USA in a filing said because it needs permits to lay lines, it’s difficult to resist requests from municipalities. “The result is that the company is confronted with demands for payments or grant concessions above the cap” and “consumers bear the added cost,” Altice said.

$3B in Fees

The cable industry pays about $3 billion annually in fees, the NCTA trade group said in a filing. The industry’s revenue was about $132 billion in 2018, according to statistics compiled by Bloomberg Intelligence.

Cities feel burned. Existing law lets cities impose both fees and obligations, and the FCC is muddling the two, the cities including Atlanta and Boston said in their filing. The U.S. Conference of Mayors on July 1 passed a resolution saying the FCC’s proposals “undermine local authority, turn public property over to private interests and remove longstanding community benefits.”

The cities offered Dallas as an example, saying values placed by cable providers on community channels could be high enough to slash about $10 million from annual fees of around $12 million -- or even eliminate fees entirely.

New York City will absorb “adverse and significant impact” from the change, Michael Pastor, general counsel for the city’s Department of Information Technology & Telecommunications, told the FCC in a July 25 filing. He didn’t provide an estimate of the potential cost to the city.

As an example, the city’s information network feeds cable TV and internet service into every fire house in all five boroughs, and also carries public-safety messages, Pastor wrote.

‘Very Concerning’

There are no alternatives aside from building a parallel network that would take years “and cost a massive amount,” Pastor wrote. “The stark reality is that the cities will be forced to pay extortionate fees” because the alternative would be to disrupt municipal services, Pastor wrote.

Democratic members of Congress had asked the FCC not to move forward.

The change is “very concerning,” Senators Kirsten Gillibrand and Chuck Schumer, both Democrats, said in a July 25 letter to Pai.

Local governments use 70 community channels across New York to show government proceedings and high school events, and the FCC rule “would undermine their ability to provide critical services to their communities by putting funding for these services at risk,” Gillibrand and Schumer said.

Fifteen U.S. senators, including 14 Democrats and independent Bernie Sanders of Vermont, in a July 29 letter to Pai said the change puts localities in a no-win situation, needing to choose between requiring support for the community channels, or free cable service to schools and libraries.

--With assistance from Henry Goldman and Geetha Ranganathan.

To contact the reporter on this story: Todd Shields in Washington at tshields3@bloomberg.net

To contact the editors responsible for this story: Jon Morgan at jmorgan97@bloomberg.net, Elizabeth Wasserman

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