[RP TownTalk] Cable TV Franchise Fees

Sun Jan 27 15:40:29 UTC 2013

Jim -

As you are well aware I sent you multiple lengthy pieces of correspondence
offline in regards to this subject and if my sentiments are to be included
please do so in context (also I represent Ward 1 not 2).  What I actually
stated was below:

"One item you did not attach to this email was a copy of your Comcast bill
that reflects the accuracy of your comments.  No one should be charged fees
other than what is legally provided for.  I was curious myself so I took a
look at my latest bill from Verizon and they are charging exactly 5% based
upon my math.  That is not to say that Comcast's math is as accurate but
without an example it is impossible to speculate.

As I am sure you are aware, from electricity, to phone, to cable bills the
breakdowns are complicated and I would like to at least have a high degree
of confidence that this is an issue that is established by evidence rather
than allegation."

This was written to you over three weeks ago prior to educating myself on
the issue in regards to the existing federal law, existing case law,
application to municipalities, and since having multiple lengthy email
exchanges.  My original comment indicated that you made an allegation but
did not provide any backup evidence of it, not that I agreed that your
allegations were in fact true.  If I knew then what I know now, I would not
have asked for it because Comcast is within their rights to charge fees in
excess of the 5% cap.  

The argument being made, is that cable companies have a hard cap of 5% for
all fees paid - they do not.  You asked the town to look into this which the
town did.  Comcast defended their position which was vetted by the town's
attorney that there are pass-through and/or other fees that they are allowed
to collect under existing federal law.  The information was provided to you
and you aren't satisfied.  I have asked you to provide contrary evidence
that the fees in excess of the 5% cap, that existing case law stipulates is
completely legal, have been overturned.  To date you have not, the argument
you keep puttting forward is that they can only charge 5% - a claim that has
been throughly dismissed by the courts already. 

In reading your post, and reviewing the resolution you are asking Council to
pass, it seems apparent that you continue to disagree with the law of the
land.  The town already has a resolution on the books that defines what
contributes towards the 5%.  I believe the disconnect here is that you do
not believe legally they can exceed that - they can.  There are fees that by
federal case law and rulings CANNOT be included in the 5% cap.  It seems
that you continue to view the franchise fee as a singular component - it is
not.  It is made up of a franchise fee subject to the 5% and additional
charges allowable that are not subject to the 5% (please see the end of the
post for a detailed treatment of this).  

The link you sent in regards to the Comcast settlement was apples and
oranges from this case.  It had to do with whether franchise fees were
applicable from the start of a billing cycle or if the fees only applied to
the pro rata portion of a month in which the consumer was actually receiving
service. I.e. if cable fees are 50/month for a billing cycle 1/1 - 1/31 and
a customer started service on 1/15 should they be charged the full
percentage or a pro rata portion (in this case 50%).  The settlement did not
find this practice illegal nor would it have not ever been adjudicated had
Comcast included this in its communication to subscribers, an oversight that
according to the articlehas since been ameliorated.  The settlement in the
case was for $50k to a charity of choice for the appelant; legal fees were
also covered for $462k - i.e. the actual Comcast plantiffs received $0, but
yes this did result in attorneys being paid.  Keep in mind as well, this is
a settlement, not a finding of fact; it is entirely likely that Comcast
could have prevailed on the merits of the case but the cost-benefit
stipulated it was cheaper to settle - unfortunately the achilles heal of our
legal system.

I have pled with you numerous times in our offline correspondences to read,
in detail, the information you yourself provided me in the White Paper
primer on franchise fees.  It discusses at length how and why cable
companies can charge fees in excess of the 5% cap.  I was even more
interested, so I pulled the actual case filings and and read the actual
decisions but what you provided in the primer is a fair treatment.  

If anything, I thank you, since I now know in detail about franchise fee
law, case law etc.  I will provide to the public what I provided to you in
an email that discusses in detail why the 5% discussion is more nuanced than
you are presenting:

Jim

Please re-read what I wrote.  I agreed with you on the Gross
Revenue/Franchise Agreement point.  Comcast can only charge the 5% franchise
fee for charges listed in the definition of Gross Revenue.  I completely
agree with this.  

The discussion of Gross Revenue ONLY applies to the 5% cap.  By definition
and backed up by case law, they are well within their rights and authority
to charge fees that are NOT, nor can be, included in the definition of Gross
Revenues - i.e. PEG Capital Costs and other incidental charges.  These, as a
matter of law, are NOT to be included with Gross Revenue, but in ADDITION to
Gross Revenue.

Federal law as defined through the Pasadena Order and the 2003 Declaratory
Letter allows for a cable operator to charge 5% of Gross Revenue AND PEG
Capital Costs AND Other Incidental Charges.  

Comcast has not done itself any favors by only including a single line item.
You are interpreting this line as Gross Revenue - it is not.  The charge you
see listed as a Franchise Fee can include:

(1)Franchise fee capped at 5% of Gross Revenue  

(2) PEG Capital Costs

(3) Other Incidental Costs

i.e. (1) + (2) + (3) = what you are seeing listed out as a Franchise Fee

If (2) or (3) are > 0 then by definition you will be charged greater than 5%
since we know (1) is a constant 5%.  In this case Comcast has already stated
that they have additional fees.  Those fees by definition are NOT to be
included in the definition of Gross Revenue and NOT subject to a 5% cap.
The franchise agreement per Resolution 99-R-1 with Comcast nee Jones
Communication specifically required them to incur capital costs and
specifically requires them to incur ongoing capital costs etc.  

JWE

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