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from: Desmoines Register

Statewide video franchise fee could curb soaring cable costs

By REP. CARMINE BOAL
IOWA HOUSE DISTRICT 70

April 20, 2007

Expected to come before the Iowa House this week is a bill designed to increase cable and video competition in Iowa, encourage improved service, lower rates and provide a greater diversity of products - all benefitting consumers.

Under current Iowa law, a company desiring to provide video (TV) service to an area must obtain franchise agreements on a city-by-city basis. This process is cumbersome and the approval process can take years. The expense and hassle discourages competing video providers from entering a market.

To address these problems, SF 554 would allow a statewide video franchise to be issued by the Iowa Utilities Board and establish a predictable and uniform application process. The bill also would allow current video franchisees to opt out of their agreements with a city and convert their local franchises to state-issued franchises when a new competitor enters the market. This provision allowed Mediacom to remain neutral on the bill when it had previously opposed it.

Extensive subcommittee work has resulted in a compromise amendment to the bill to minimize the League of Cities' opposition to this legislation. One of the primary concerns was whether cities would be permitted to continue to charge a franchise fee to cable video providers. The bill legalizes the video franchise fee, but sets a cap of up to 5 percent that is allowed to be collected on gross revenues. Because each city's determination of "gross revenues" varied, the legislation clearly defines the term.

The cities also negotiated to require new video competitors to pay a support fee for each city's public access channels and networks for police and fire communication. It also requires that if an incumbent provider opts to convert to a state-issued franchise, it must continue to pay for these support fees as well.

Another possible amendment to the bill would create a "video services equalization tax." This tax would require customers who receive their video via satellite or dish to pay the same franchise fee as cable customers (up to 5 percent). Opponents argue that since the satellite user does not use the right-of-way in the ground needed for cable video transmission, they should not pay for its maintenance. If passed, the tax would set an interesting precedent of literally taxing air. For that reason, I do not support this amendment.

If this legislation is passed, Iowa would join 10 other states with similar laws. In states where competing video service has entered the market, cable rates have dropped by as much as 42 percent. In contrast, the average cable rate in Iowa has risen 36 percent since 2002, although the average rate of inflation has only increased by 12 percent.

The time for this legislation is past due and is vital to Iowa's future. This highly technical legislation has involved great compromise, which has met the concerns of most stakeholders. I am hopeful the bill will pass with overwhelming support.