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from: Desmoines Register

Cable law faulty, advocates say
Lawsuits targeting franchise fees in jeopardy, they fear

By JASON CLAYWORTH
REGISTER STAFF WRITER

May 3, 2007

Thousands of Iowans could be left without cable service if a bill passed by the Legislature is signed by the governor, cable and city advocates say.

In addition, the law would specifically grant cities the legal right to collect up to 5 percent franchise fees on cable. That jeopardizes lawsuits filed against several Iowa cities seeking millions of dollars in refunds to cable users.

"I think the intent" of the law "was to kill our lawsuits," said Tom Waterman, one of the attorneys who filed the cable lawsuit.

Waterman, of Davenport, predicts another court battle if the legislation is signed by the governor.

"We're hoping he declines to sign the bill," Waterman said.

Senate File 554 would allow companies to apply for statewide franchises to provide video service, rather than negotiate franchise agreements with individual cities as current law requires.

Advocates say it opens up competition and will lead to better service and lower cable bills for Iowans.

But the proposed law approved by the Iowa House and Senate would also allow companies to "cherry pick" the areas they want to serve, said Susan Judkins, a lobbyist for the Iowa League of Cities.

Others agree:

"Some company could pick just the more affluent neighborhoods where they're more likely to sell premium services, and not bother with other parts of town," said Craig Nowack, cable television coordinator for the city of Dubuque.

In addition, the law would specifically allow cities to charge a 5 percent franchise fees on cable bills. It also validates the fees that have already been paid, which would mean cities would not likely have to pay refunds if ongoing litigation brought against the fees is successful.

The franchise fees have long been considered payment to cities for use of road right-of-ways, where cable lines and other equipment are often placed.

But several lawsuits have called into question those fees, challenging them on the grounds that they are an illegal tax. At stake is roughly $50 million, according to estimates from Waterman. Lawsuits involving cable franchise fees are pending in Des Moines, Cedar Rapids, Dubuque, Sioux City, Waterloo, Davenport and Bettendorf.

The cable law would not affect ongoing litigation in Des Moines, where a franchise fee on gas and electricity bills is being challenged.

Gov. Chet Culver was reviewing the cable legislation and had not decided if he would sign the bill, Courtney Maxwell Greene, a Culver aide, said Wednesday.

Iowa House Majority Leader Kevin McCarthy said Wednesday that he anticipates the governor will sign the legislation.

McCarthy, a Democrat from Des Moines, said the real importance of the law is to open up competition.

"Arguing specifics and nuances of policy kind of neglects what is the true argument," McCarthy said.

Reporter Jason Clayworth can be reached at (515) 699-7058 or jclayworth@dmreg.com