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from: Spinal Column

AT&T entrance into local market prompts utility box concerns

June 06, 2007 - Recent enactment of a new state law pertaining to cable television franchising is the catalyst for AT&T approaching several local communities for permission to begin providing Internet protocol (IP) television, Internet and phone service in the lakes area. Officials in some communities — while not trying to stifle competition for Comcast — have concerns with the new law, which some have argued will curb funding through set fees the service providers pay. Other municipal officials fear utility upgrades by AT&T could have negative aesthetic and public safety effects in their communities, which receive revenues from cable companies in two ways.

Franchise fees are typically a percentage of the cable provider's annual gross receipts in a community and reapportioned back to that community each year. Public, educational and governmental (PEG) programming fees are a set percentage of gross annual receipts in the community which are also paid back to the community to buy equipment and produce public, educational and governmental programming.

The new state law — commonly known as the Metropolitan Extension Telecommunication Rights-of-Way Oversight (METRO) Act — institutes a statewide format for cable service providers to use in negotiating franchise agreements with local governments.

The Michigan Public Service Commission (PSC) is designated as the government entity responsible for providing the uniform franchising form to the parties, though the PSC can't regulate the cable television providers as public utilities.

"The old law was in place for 60 years and I think it was functioning effectively," said attorney Jon Kreucher, who is representing Waterford Township and advising local officials on cable issues. "Cable has always been a situation and system that needs to respond to local needs and interest, and having a statewide franchising system eliminates some of the possibility of reflecting those local needs and interests."

Under the new law, a local unit of government must allow a video service provider to install, construct, and maintain a communications network within a public right-of-way and allow "open, comparable, non-discriminatory, and competitively neutral access to the public right-of-way." The law also states a local government can't impose any fee or franchise requirement other than those set in the bill's provisions.

According to Joe Steele, spokesman for AT&T, new infrastructure boxes the company is installing to provide television and other services are about 60-inches-tall and 40-inches-wide. One of the boxes can serve anywhere between 30 and 700 homes, contingent upon how far apart the homes are from each other.

"You can only send a signal so far over copper (wires), so there are physical factors there we have to take into account," Steele said. "The upgrade of these boxes ... is to allow for the increased broadband (Internet) speed, as well as delivering the video product."

The upgrades are necessary, he said, so data can be combined with phone lines and sent out to reach homes and businesses, a required step to providing the IP television (technically not cable television, Steele said), which is essentially television services offered through an Internet connection via a digital subscriber line (DSL).

The boxes are similar to a routing device in that they combines both data and video services with the phone lines that go into homes and businesses, according to Steele.

"The function is to make a connection between their fiber-optic network coming into the box," said David Albery, administrator of the Greater West Bloomfield Cable Advisory Board. "The wires going out from the box are the actual copper telephone wires to peoples' homes. The same ones that have been in use for telephone service will now be used for video service. The transformation of a signal that could be digital coming in and going out on that very simple copper line occurs in that box."

The number of new utility boxes necessary in each community depends on the physical layout of the municipality, according to Steele. Sending data over copper wires can only transmit the information a certain distance before the signal naturally degrades.

"We have to be careful about that so our folks receive a consistent, high-quality signal," Steele said, adding that the boxes' distance from one another also depends on the layout of the neighborhood and the community.

Steele said the boxes have to be placed within the public right of way.

A representative from the Michigan Municipal League (MML) said that AT&T is sometimes placing the boxes in rights-of-way that are in residential yards.

Joe Fivas, assistant director of state affairs for the MML, said the utility boxes are "absolutely huge."

"We have some in East Lansing, where I live, and they are huge," he said. "They are putting them right in front of homes."

"They have the right to install them because they have the right to use the public rights-of-way," Albery said of AT&T. "On every person's property, there are easements and rights-of-way, and AT&T has a right to use those. If it happens to be in your front yard, that's where it goes."

"We are trying to choose locations that are as conducive to the aesthetics of the neighborhood as we can," Steele said in response to concerns about utility box placement. "We will try to restore the area to a better condition than it was when we are finished, including reseeding and sodding around the area."

Representatives of some lakes area communities have been meeting to consider enacting ordinances similar to one Commerce Township may adopt to address the new AT&T utility boxes.

"When we get our final adoption, I think what we'll do is end up sharing that with others," said Commerce Township Supervisor Tom Zoner.

Some Commerce residents have been opposed to the ordinance, arguing that the provisions would limit cable television competition, but Zoner said he strongly disagrees that the ordinance would do that, and contends that Commerce is only trying to protect public safety and private property.

"We do have an ordinance written that we have shared with others who like that ordinance," Zoner said. "At this point, the township attorney has talked with AT&T's attorney."

Some AT&T television service is currently available in portions of West Bloomfield and Wixom, two of more than 50 communities which have partial access to the company's new product. It's availability was announced Tuesday, May 22.

In all three local communities which have approved franchise agreements — West Bloomfield, Wixom, and Orchard Lake — the proposed agreements came to them without specific franchise and PEG fee figures included in the document.

MML's Fivas said it's a point of contention among the communities, AT&T, and the PSC whether the fees should be filled in when the proposed agreement is submitted to a community's governing body for approval.

Steele said the communities are the ones who bear the responsibility of filling in the respective amounts for franchise and PEG fees paid by AT&T.

Judy Palnau, spokeswoman for the PSC, said that having the communities fill in the blanks for franchise and PEG fees is the way the process has always been done.

"The PSC has had to remind people because apparently there is some confusion," Palnau said. "They had to remind both the providers and franchising entities that it is the responsibility of the franchising entity to fill in those two lines on the form."

Catherine Mullhaupt, member information liaison for the Michigan Townships Association (MTA), said the association doesn't have a system in place to track communities which have received blank fields for franchise and PEG fees.

Jerome Espy, vice president of Comcast Michigan Communications, said the company provides services to 1.3 million Michigan residents, but the company doesn't break down the number of customers in individual communities for competitive reasons.

Comcast is currently the cable provider in lakes area communities which are represented by the Western Oakland County Cable Communications Authority (WOCCCA) — Wixom, Walled Lake, Wolverine Lake, Commerce, Milford village and township, White Lake, and Highland — the Greater West Bloomfield Cable Advisory Board, representing West Bloomfield and Orchard Lake, and the Waterford Cable Advisory Board.

Steele — like Espy — said that for competitive reasons, the AT&T isn't "getting into specifics as far as which communities we may have applied to (for franchise agreements)" in order to provide cable television service, or when service will available in a community. However, he was able to say that there are 56 communities included as part of AT&T's "initial launch."

According to Janet Christian, cable coordinator for Waterford Township, there are 19,646 Comcast cable subscribers in the community.

There are 35,396 total Comcast subscribers in WOCCCA communities: 9,355 in Commerce; 4,933 in Highland Township; 2,227 in Milford Township; 2,122 in Milford Village; 2,688 in Walled Lake; 7,927 in White Lake Township; 2,424 in Wixom; and 791 in the village of Wolverine Lake, according to statistics for the 4th quarter of 2006 which were provided to the Spinal Column Newsweekly by a source outside of Comcast.

Comcast serves another 60,000 customers combined in West Bloomfield, Orchard Lake, Sylvan Lake, Keego Harbor, Southfield, Lathrup Village, and Oak Park, according to company promotional materials.

The following is breakdown of lakes area communities and how they are addressing AT&T's actual or expected entry into the local cable television market.

COMMERCE

While legal counsel for both Commerce Township and AT&T had been in negotiations over the proposed ordinance regulating new AT&T utility boxes, Zoner said he hasn't heard about the status of those negotiations.

"They were supposed to work together," he said, adding that "AT&T has been quick to beat up on Commerce Township but slow to negotiate a contract for us."

In addition, though the community and AT&T have been in discussions about the ordinance, the company hasn't approached Commerce with a proposed franchise agreement for consideration.

The ordinance was discussed at the Feb. 13 township Board of Trustees meeting. Board members couldn't reach a consensus to either table or introduce the draft ordinance.

The ordinance amendments include provisions that utilities can't be located within 10 feet of an existing or proposed sanitary sewer or water main; that if the utility is located in the right-of-way, any proposed above ground structures be placed at existing property lines that are perpendicular to the road right-of-way; and that no above-ground structure shall exceed 3 feet in height, or 5 feet in length and width.

"Our ordinance says you can't have anything bigger than 36 inches in front of your house — shrubs, fences, or anything else — and the reason for that is the safety factor so people can back out of their driveways without running into a utility box," Zoner said. "That was our major concern: safety, health and welfare, not competition."

AT&T's Steele said the ordinance would prevent the company from upgrading its current utilities to provide better services to the community, including new television and broadband Internet access service.

According to Zoner, AT&T could place the "refrigerator box" above the ground in the same location as water and sewer lines, which could present problems.

"What happens if my water line breaks? What do I do if everybody (receives) AT&T high-speed (Internet service)? You lose that service."

WEST BLOOMFIELD

An AT&T franchise agreement approved by the West Bloomfield Township Board of Trustees will provided the community with 5 percent annual franchise fees and 2.82 percent annual in PEG fees. However, according to Township Supervisor David Flaisher, the community has been asked by the company for an explanation on the PEG fee figure.

"They aren't saying they won't pay it, but they want to know where we came up with it," Flaisher said. "But they filled it in, they signed it. So as far as we're concerned, that's what it is."

Flaisher said the additional 0.82 percent in PEG funding — Comcast, the community's current provider, pays 2 percent annually — is based on the fact that Comcast paid the township $900,000 up front, over and above the franchise fee, when reaching the last agreement.

"I think the 0.82 (percent) is to make up for that," Flaisher said, adding that he believes having AT&T in the community to offer service will increase competition and cause both Comcast and AT&T to drive down their prices for consumers.

WHITE LAKE

Township Supervisor Mike Kowall said AT&T officials were expected to meet with him yesterday, Tuesday, June 5.

"Supposedly, they are going to be bringing in a franchise agreement for us to look at and we are going to have (a certain number) of days to act on that," Kowall said, adding that he is concerned about the utility boxes AT&T would need to install.

"Especially if they are going to put them along M-59, they are just big targets for cars and trucks to run into. It could cause a disruption of service, not to mention a safety hazard. I'm going to talk to them and ask them what the chances are of them putting them in vaults under the ground."

WATERFORD

In response to AT&T formally submitting a proposal to Waterford Township on May 7, the Board of Trustees approved two measures to proceed.

During their May 14 meeting, board members approved a recommendation from the township's cable commission to hire attorney Kreucher; and during its Wednesday, May 23 meeting, board members approved a resolution that set franchise and PEG fees at the same rate paid by Comcast.

Kreucher, who drafted the resolution that served as Waterford's response to AT&T, said the Waterford Cable Commission calculated all PEG fees paid to the township through grants in previous years to 2007 equivalents.

After the figures were totaled, they were divided by the 15-year term of Comcast's agreement with the township, and divided by Comcast's revenues generated in Waterford to determine the annual PEG fee figure.

According to Kreucher, the cable commission's calculations determined that Comcast appears to pay the equivalent of 1.96 percent of its annual gross revenues in the township as a PEG fee.

AT&T, like Comcast, would pay a 5 percent annual franchise fee to the township.

"The community is under the obligation to try to charge each of the competitors the same fees," Kreucher said. "The community wants to do that to not create a competitive advantage, placing one over the other."

HIGHLAND

According to Highland Township Supervisor Triscia Pilchowski, AT&T hasn't approached the township about entering into a franchise agreement.

"They haven't shown any interest in our area yet," she said. "I suppose it's because we don't have that dense population they look for."

Pilchowski said Highland has been and will continue to pay close attention to how the issue of utility box placement in Commerce plays out.

"If AT&T came knocking at Highland Township's door, the door would be open for them," she said. "We believe in that competitive spirit and we would love to have that product available for our residents. At the same time, we want to be able to have them here without putting up boxes that are really going to stick out and cause a disruption to the community. If Commerce comes up with a reasonable ordinance, then Highland Township would very likely follow."

MILFORD

AT&T doesn't have any franchise agreements with Milford Township or Milford Village, according to Township Supervisor Don Green, adding that he expects the company to offer service in the community sometime in the future, but not in the next few months.

Green is involved in discussions on utility box issues.

"You can't eliminate them or exclude them so you have to have some rules to go by," he said. "I met with AT&T when it was SBC for quite a long time, trying to get them out here so that we would have competitive services. I got a letter from AT&T stating that we don't have the density in Milford Township to make it profitable enough for them to come out here."

Milford Village Manager Arthur Shufflebarger said he is aware of the utility box issue and he has had a discussion with the community's planning consultant. However, "that's as far as it has gone at this point."

WIXOM

A resolution allowing AT&T to provide video services to Wixom residents was unanimously passed by the Wixom City Council on May 9.

Additionally, AT&T's annual financial support of PEG programming will amount to 1.125 percent of annual gross revenue collected in the city. The franchise fee is set at 5 percent of annual gross revenues in the city.

"The rates are exactly the same (as with Comcast)," said Wixom City Manager Michael Dornan.

According to Dornan, Wixom may follow Commerce's lead on the utility box issue.

"I was talking with Tom Zoner about his ordinance, and if we did something to regulate these things, it would follow what Commerce is doing," he said.

WOLVERINE LAKE

Wolverine Lake has not yet been approached by AT&T with a proposed franchise agreement for video service, according to Administrator Sharon Miller. However, the company has already installed two new utility boxes in the village.

While no specific ordinance is in place to manage the placement of utility boxes, AT&T reportedly adhered to some of the community's aesthetic standards.

"We were able to work with them because they have to get a permit from us. So we could determine where we wanted them," Miller said. "There's one on the corner down by Glengary, and we asked them to place that back a little ways, and it's sort of in the woods. It's not bothering anybody."

ORCHARD LAKE

The Orchard Lake City Council approved a local franchise agreement for video service provided by AT&T during a regular meeting held on Monday, May 21.

The agreement calls for the company to pay the city 5 percent of gross revenue collected from city video customers each year, as well an additional 2.82-percent PEG fee. This is in accordance with the community's agreement with Comcast, according to City Clerk Janet Green.

AT&T has already placed certain infrastructure and equipment within the city limits. There are currently two large, beige wire boxes which hold the necessary phone lines for delivering the AT&T services, according to Albery.

Staff writers Josh Jackett, Jacob Leonhardt and Andrew Sawmiller contributed to this report.