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Note: This report riddled with inaccuracies and misleading conclusions is from one of our favorite astroturf think tanks. Heartland provides the industries that fund their 'research' with persuasive reports for misleading legislators.
from: Heartland Institute

Opponents Slow Video Franchise Reforms
Written By: Diane Katz
Published In: Info Tech & Telecom News
Publication Date: October 1, 2007
Publisher: The Heartland Institute

Alarmed by the prospect of cable franchise reform, opponents are twisting facts and employing false claims that locally produced news, programming, and community information broadcast on public, educational, and governmental (PEG) channels will disappear under new franchise rules.

Video franchise reform has stalled in Wisconsin, where a reform bill was approved by a wide margin in the Wisconsin State Assembly on May 9 but has yet to reach the Senate floor. The bill would allow video service providers to obtain a statewide franchise rather than having to negotiate with hundreds of municipalities.

Special interests, particularly municipal governments that have come to rely on revenues from franchise fees, are lobbying hard in Wisconsin and elsewhere to preserve the status quo, even though consumers would benefit greatly from video service competition.

Value of Competition

The benefits of a streamlined process are clear. Easing market entry promotes competition, which in turn spurs investment, controls prices, and improves service quality. The need for competition is plain: Since 1999, cable rates have increased 236 percent in Green Bay, 76 percent in Kenosha, 62 percent in Milwaukee, and 61 percent in Madison.

Elsewhere throughout the Great Lakes region, telecommunications firms are investing hundreds of millions of dollars to upgrade broadband networks. The investment boom is a direct result of franchise reforms that promote competition in cable TV services.

The pending legislation in Wisconsin would prohibit municipalities from forcing video service providers to subsidize the production of local programs--the costs of which ultimately are paid by cable subscribers. The subsidies would not end abruptly but would be phased out over several years.

Video operators would continue to pay franchise fees of up to 5 percent of gross revenues to each municipality and provide channel capacity for PEG programming.

Subsidies Obsolete

PEG subsidies were established when few if any alternatives for local programming were available. That's no longer the case.

In the 1970s, when PEG became a standard feature of municipal franchising, video production systems could cost $100,000 or more. Today a high-definition portable camcorder can be had for less than $3,500, and standard digital camcorders, which produce high-quality conventional video, cost much less.

Video can be uploaded and viewed at no cost on tens of thousands of Web sites and on an increasing number of distribution alternatives such as iPods and cell phones.

Little Local Programming

PEG advocates say the subsidies are needed to give local citizens access to the airwaves, but many of the programs aired on PEG channels do not originate locally--when programs air at all.

For example, Stevens Point Community Access TV, like many others, simply posts a bulletin board for several hours each day. Wausau Public Access Cable airs several hours of church services daily. Meanwhile, the Alliance for Community Media, a PEG advocacy group, reports River Falls Community Communications and New London Cable 6 each produce only 10 hours of local original programming each year.

Subsidies for some of the local access programs that do air --such as the Scientology Program on WPAC Channel 10, "Unarius" ("the physics of reincarnation") on Chippewa Valley Community Television, and "Past Life Therapy" on Madison's WYOU Channel 4--are tough to justify.

Big Budgets, Few Viewers

That may help explain why the PEG audience is so small. A 2005 survey by the Madison City Channel found 82 percent of respondents obtained information about local government from sources other than PEG channels, such as newspapers, radio, and the Internet. Moreover, more than 47 percent of viewers earned annual household incomes exceeding $70,000.

The notion that public access groups are starving artists is likewise largely a fiction. The annual budget for Madison City Channel exceeds $529,000, for Western Reserve Cable 9 it's $400,000, and Milwaukee City Channel spends more than $385,000 a year.

If local programming is truly valued by the public, municipal officials can give the PEGs some of the considerable revenue generated by franchise fees. PEG advocates could also go directly to voters and ask for additional tax revenue.

It's long past time for the PEG hold-up--literal and figurative--to end, and for lawmakers to put consumers' interests first, through franchise reform.

Diane Katz (dkatz@mackinac.org) is director of science, environment, and technology policy with the Mackinac Center for Public Policy.