Tangled up in cable

The 2006 lame-duck session in Lansing followed an election season in which candidates had collected an unprecedented amount of campaign cash from Comcast, the dominant cable provider in southeast Michigan. AT&T, ready to compete against Comcast and other cable companies with its new U-verse system, was also throwing its political weight around Michigan.

Though competitors, they shared a mutual interest in getting a crucial piece of legislation signed into law. Together, the two pumped hundreds of thousands of dollars into campaign war chests and lobbying efforts.

It was money well spent.

Instead of having to negotiate with communities throughout the state for the right to provide service in towns large and small — the way things had been handled since the dawn of the cable age — the two corporate behemoths succeeded in helping dramatically change how the game is played. With passage of Public Act 480 that December, and Gov. Jennifer Granholm's signature days later, the companies would no longer have to hammer out agreements with every city where services were provided. Instead, a sort of master agreement forged in Lansing and administered by the state would provide the regulatory framework and operating standards.

Opponents of the legislation, led by the local governments that have always negotiated cable contracts for their residents, warned at the time that the measure would strip local franchising agencies of their authority and ultimately hurt communities.

Their warnings went unheeded.

As local contracts are expiring after their usual 10- or 15-year periods, the statewide agreement is replacing them. Unlike the local contracts, the new contracts are not subject to the Freedom of Information Act, so consumers can't know their terms. The new agreements, municipalities say, also prevent them from helping residents with consumer concerns like rates, installation and quality issues because the local governments no longer have the power to impose fines or other penalties for violations of consumer contracts.

Supporters of the legislation promised it would lower rates, increase competition and improve services for Michigan's cable and video service subscribers.

Now, two years later, those benefits have not been fully realized and the law is being challenged by local communities.

"Is it better for the community? We haven't seen any evidence of that," says Celeste McDermott, director of the Detroit Cable Commission.

A report released this year by the Michigan Public Service Commission found signs that competition is growing but said, "there is not yet an overwhelming amount of video service competition occurring throughout Michigan." Rate information is not available, says commission spokeswoman Judy Palnau, because the providers consider it a trade secret and refuse to release it. The commission also reports an increasing number of complaints in the second year of the law's existence, with billing and rates the most frequent gripes. In 2007, there were 615 complaints from cable and video services customers. In 2008, there were 1,030.

The new law, in fact, has caused lengthy and expensive legal disputes between Comcast and Michigan municipalities, and some of its provisions, local officials say, threaten the existence or at least relevance of local public, educational and government access (PEG) channels.

Four municipalities have sued Comcast over how it wants to assign and administer PEG channels, claiming a violation of federal law. In January 2008, U.S. District Judge Victoria Roberts temporarily prevented Comcast from making changes it says are permissible under the new law; she has asked the Federal Communications Commission to review some of the issues. It's a dispute that's being watched nationally, as it could affect thousands of PEG channels and cable franchise agreements. Attorneys from Comcast did not respond to requests for interviews, and company spokespeople would not address the lawsuit during an interview last week.

Judge the effect of the Michigan law on your own cable or video provider services, if you're among the roughly 2.3 million households that subscribe to video or cable:

Have your rates decreased?

Are there more choices for services in your city or township that offer real options for price, selection and service?

If you've had a complaint, did you get better assistance from the state agency in Lansing that now handles them than you did when you could go to your local cable franchising agency?

Jeffrey Hunt, chairman of the Detroit Cable Commission, says those questions get a resounding "no" in response across Michigan. Like many local officials, he describes the 2007 law as worsening services, stripping local governments of most of their authority to oversee cable services for their residents and moving that responsibility to a remote state agency — the Michigan Public Service Commission — that isn't equipped, funded or staffed to handle the work.

"All this is doing is feeding into frustration," Hunt says.

Clearly the law has created new problems. But what, if anything, might be done is an unanswered question so far this term with the new Legislature.

"The broadcasters have a very heavy lobby," says Rep. Vicky Barnett (D-Farmington Hills). A former mayor, Barnett has introduced some reforms and has been successful in the last few months with a measure that clarifies attorneys' fees in disputes involving cable and video services.

But she wants to do more.

"If I could do certain things to protect consumers, I would, but I'm one of 110 votes in the house," she says. "If I had my druthers, I'd repeal the 2006 Act." She doesn't see much support for that, though there have been a few efforts at amending it. During the 2007-2008 legislative session, at least seven bills aimed at refining the law. They sought to clarify PEG fees the providers pay, create a dispute resolution process and ensure the quality of PEG broadcasts.

Those proposals went nowhere.

A few Michigan legislators, including Barnett, have introduced bills this session that are aimed at "fixing" parts of the 2007 law, including PEG payments. The Legislature did clarify the dispute resolution process between the Michigan Public Service Commission and video service providers. But the law's effectiveness, especially as it relates to its early promises, has not been fully assessed.

Meanwhile, local municipalities are left taking on the cable and video services industry after being stripped of most of their authority by the state law. They're lobbying legislatures, fighting in court, complaining to the Michigan Public Service Commission and hoping the Federal Communications Commission sees things their way. The communities' displacement in cable and video services policy is a dramatic departure from history.

History channels

As in other metro Detroit communities, cable television came to Dearborn in the early 1980s. But only after the city issued a contract proposal Mayor Jack O'Reilly says no one should have bid on.

"The [Request for Proposal] asked for more from the cable companies than any franchise had ever asked," he says. Eventually, a proposed provision for 24-hour security monitoring of all the Dearborn schools — part of the community's wish list — was replaced with a $1 million cash payment from the eventual bid winner, a company called TelePrompTer.

Back then, municipalities had such power. Because cable providers needed to dig on public land and otherwise use public right-of-way and infrastructure, local governments could almost dictate what they wanted from the companies as compensation. Satellite, a later technology, is delivered through airwaves and not subject to the same regulations and governmental contracts.

"It was the benefit of the bargain. It was the promise of letting them come in and string all the cable. They're going into our easements. They're using existing poles. They save a fortune on infrastructure," O'Reilly says.

Also part of the bargain was funding for a local production studio and PEG channels. "Their whole reason of why we should let them behave like a utility was that they were going to provide this great access to our citizens," O'Reilly says.

At the time, they had a federal mandate to do so. In 1972, the FCC began requiring cable operators in the 100 largest markets to set aside channels for PEG use with no cost to the local governments or school districts. The goal was to provide outlets for local programming, promote diversity, advance educational television and increase local governments' informational services.

As the cable industry developed in Michigan and elsewhere, providers negotiated with the different municipalities as they added service areas. Cable was regulated nationally through the FCC but administered locally by the "local franchise authorities," often a municipality but sometimes a consortium of several cities or townships.

By 1984, O'Reilly says, the cable providers realized "they've got a hodgepodge of a mess. They're not connected. They're not integrated. They've got these franchises they find onerous even though they entered into them, so they go to Congress for relief."

At the time, O'Reilly was a young attorney working for the House Energy and Commerce Committee and remembers hearing then-Sen. Barry Goldwater (R-Arizona) complain specifically about southeast Michigan during the debates about cable policy.

"He used Dearborn as the illustration of why the cities should not be protected and why these contracts should be overwritten. The irony is that it was freely entered into and it was a bad deal. Dearborn did such a good job of seeing what all the opportunity could be for the community," O'Reilly says. "They should've forced Dearborn to come back and been more realistic. You can't blame Dearborn because Dearborn was doing what was in the best interest of the city."

When Congress passed the Cable Communications Policy Act of 1984, it preserved the municipalities' role in the franchise process and affirmed that the FCC would have jurisdiction over cable services. When Congress revisited the Act in 1992 and adopted the Cable Television Consumer Protection and Competition Act, it clarified the role of local franchising authorities and required cable operators to provide a basic tier of service that included the PEG channels. The Telecommunications Act of 1996 removed any control local franchising authorities had over cable rates, but PEG channels were still a generally protected provision in terms of how they were funded and operated.

Then along came the Michigan Legislature.

Lame duck legislation

In 2006, Battle Creek Republican Mike Nofs had crafted the deregulation bill and introduced it in the Michigan House that September. Just after the November election, the measure got hearing after hearing before overwhelmingly passing both houses in December. It was a 26-12 vote in the Senate and 86-21 in the House.

Only Sen. Ray Basham (D-Taylor) and then-Rep. Andy Meisner (D-Ferndale) spoke against the measure following the Dec. 12, 2006 votes. "Lansing's assault on the ability of local governments to meet their many obligations," Meisner said, "has been ongoing for years."

With Gov. Jennifer Granholm's signature a few weeks later, Michigan deregulated cable and other video services effective in January 2007. That means as the 1,885 existing agreements with the local franchising agencies expire, Comcast can set them aside and instead use one agreement throughout the state. That's happened to 806 of them so far.

It also means AT&T has been able to install its new system, the U-verse, along telephone lines without permission or oversight from local governments to use the right-of-ways that cable had always needed and paid for.

AT& T started shopping its state legislation in 2006, after Congress refused to authorize AT&T's U-verse network at the national level. So the company shopped it state by state. AT&T wanted to avoid the messy patchwork of contracts with local municipalities and their consortiums that have negotiated cable contracts since they started in the 1960s. State laws allowing statewide service agreements weren't quite as good as a national one would have been, but they would allow AT&T to get U-verse off the ground. With Public Act 480, Michigan cleared the way.

"Michigan has gone further than most other states in terms of stripping local franchising authorities of authority," says Jonathan Weinberg, a Wayne State University law professor who specializes in telecommunications.

An AT&T spokesman did not comment to Metro Times for this story.

As AT&T moves into areas Comcast once had exclusively, competition is supposed to result. In some places it has. The Michigan Public Service Commission (MPSC) found at the end of 2006, 285 communities had a single cable or video services provider with 58 having two or three options. Last year, 243 communities had a single option while 101 had more than one.

Meanwhile, Nofs, who is running for an open Michigan Senate seat this year, thinks the industry should be governed by states instead of the traditional federal oversight.

"I think the states should be the one in the driver's seat. I don't like the federal government coming in and telling us what we can and can't do," Nofs says.

He discounts the amount of campaign contributions Comcast made in the run up to the legislative vote as having any influence on what resulted. In the 2003-2004 election cycle, the cable television provider spent just $2,400 from its political action committee (or PAC) in contributions to state level candidates and their PACs. By the end of 2006, Comcast spent nearly $200,000, with most of the contributions coming between when Nofs introduced his bill in September and the November election. The spending increase was the largest based on percentage increase of the top 150 Michigan PACS that cycle. In the next two years, Comcast's spending jumped again to nearly $370,000.

A Comcast spokeswoman declined to discuss the contributions.

AT&T, for its part, spent more than $200,000 during each of the last three election cycles. Both companies have risen in the ranks of top PACs. In 2006, Comcast and AT&T were 49th and 40th respectively based on amount of PAC contributions. In 2008, Comcast jumped to 25th while AT&T rose to 37th.

Rich Robinson, executive director of the Michigan Campaign Finance Network, says that during the last phase of the 2006 election the spending was no coincidence and probably built influence.

"What great timing, so all the recipients could count on it when they needed it most," he says. "Those who give money, like the Comcast PAC, are rational economic actors. They do what they do, they make investments because they're looking for a policy return on investment."

Nofs disputes Robinson's conclusion. "I think the Legislature just wanted to get it over with because it was a hot issue," he says.

Still, Nofs concedes adjustments need to be made specifically as payments are made to municipalities. These include franchise fees — the original "rent" for the right-of-way for cable service, up to 5 percent of a provider's revenue — and PEG payments, typically not more than 3 percent of a cable providers' revenue. Disputes over fees are the subject of most of the nine formal complaints municipalities made to the Michigan Public Service Commission and part of the ongoing legal disputes between the local franchising agencies, municipalities and providers.

"I think the Legislature should go back into that part of the bill and look and see what's going on," Nofs says. "You don't know how Comcast and courts and municipalities are going to look at it. If they can't, then I think the state Legislature should give the MPSC the authority to in there and resolve that issue."

What's on?

When Thad Scott was a kid in the early 1980s, he'd ride his bike once a week to a studio, then provided by the local cable company, near his Grosse Pointe home. He hosted the science segment of "Young Viewpointes," an educational but entertaining program that aired on the local cable channel.

"It was an interesting outlet, back when people didn't have as much respect for or exposure to the sciences," says Scott, now an electrical engineer with Chrysler Corporation. He credits the cable show with fostering his interest in science as a youngster. "It was a motivator," he says. "Everybody appreciates bringing attention to the things they're passionate about."

Scott's program is long gone from TV5, the local access channel in the Grosse Pointes and Harper Woods, but the station still provides programming tailored for the local community: "Great Lakes Log" focuses on topics related to the marine community; "Art Design" covers arts and culture; host John Prost interviews local politicos and the station broadcasts Detroit Economic Club speakers.

Local cable channels throughout Michigan provide such outlets for locally produced programs on topics of local interest with guests from the local community. They also broadcast city council and school board meetings and other governmental and education programs.

"If we lost programming, people would be unhappy," O'Reilly says. "This isn't to say you've got a large audience share — it isn't like eyes are glued on the channel — but people go by and periodically look at it. Over the years, it's been my experience that people come up to me and comment on something they saw at a council meeting or a show they watched. You know they're seeing it one way or another."

Dearborn does live broadcasts of its City Council meetings held in the evenings. In Detroit, Channel 10 shows nightly broadcasts with gavel-to-gavel coverage of the daytime Detroit City Council meetings. Viewers can watch without the interpretation or spin of the media.

"We have a chance to air it. We can say to the community, 'You weren't there, but you can see it.' That's the benefit of the access," says Detroit's McDermott. "You have that daily access to tune in and see your government at work."

The funding for PEG channels has always been part of cable providers' "payments" for use of local right of ways. If the funding goes away, municipal officials warn, so does a crucial element of the public's access to its local governments in the more than 100 communities that have PEG programming.

Attorney Mike Watza, who has represented dozens of Michigan communities involved with telecommunications issues, says the programming is supported with an up-to-3 percent payment based on a cable provider's revenue because that's been part of the "deal" for cable in exchange for access to the local communities.

"It's part of the public service they have to do," he says. "Part of their public service is to do some good for the public as a whole and that's PEG."

Those payments are in dispute in some communities since the new Michigan law took effect. In Detroit, for example, according to a complaint filed with the Michigan Public Service Commission, Comcast has refused to pay PEG fees.

Meanwhile, Watza is litigating the federal lawsuit about, in part, where the PEG stations are assigned on the proverbial dial. Traditionally they've been near the local network affiliates so that people with basic service have them, and because those prime locations were negotiated into the local contracts. "It allowed people to access local programming, to have channel locations in places that are easily watched or viewed," says Dearborn's O'Reilly.

But because the new state law doesn't specify channel assignment, Comcast and AT&T have tried to place the PEG channels away from their traditional locations in the lower numbers where other local channels are often located. They'd still offer them, as required by federal law, but where they'd be located is part of several disputes.

AT&T would put the menu for all such local programming on Channel 99 and viewers would have to choose from a menu there to watch a program. "Channel surfing" wouldn't land viewers on a city council meeting or local art show, for example.

Comcast wanted to reassign the analog stations to the digital 900 range, far away from the most-watched channels and not available on basic cable packages, says Leslie Helwig, general manager of Bloomfield Community Television, where the station produces about 500 programs a year, mostly staffed, filmed and produced by volunteers dealing with local topics.

"Even for those people who had digital, they were angry because who goes up to 915 or 911 to watch TV? People don't surf there. As much as I'd like to think our programs are real destinations unto themselves, people find us through surfing," she says.

Subscribers who choose basic (low-cost) cable packages would no longer have access to the PEG channels unless they upgraded — at a cost — to a digital package or purchased a digital converter. The lower channels have been analog channels, the higher numbers would be digital.

Objecting to the change, Meridian Township, located near Lansing, was the original plaintiff on the federal lawsuit filed last year. Bloomfield and Warren joined the suit.

"It angers us that something's being taken away from our residents," Helwig says. "It was about that this channel that goes into a high percentage of our homes was going to become less accessible."

Three days after the municipalities filed suit claiming Comcast could not reassign the stations, Judge Roberts granted a temporary injunction prohibiting Comcast from moving the channel lineup.

"While the court agrees there are some general benefits with digitizing channels, it finds the public interest is better served by the temporary preservation of the PEG channels in their analog format so the public may maintain access to vital information," she wrote in a 16-page decision.

After several months of motions and negotiations, Judge Roberts ruled in December that the FCC should resolve the question of channel assignment. She rejected arguments from Comcast that state law, not federal, should govern the issue. But she also found that some issues were unresolved by federal law because Congress could not have foreseen the move to digital TV when it passed the current law.

"Resolution of these issues," she wrote, "will affect national cable policy and avoid inconsistent rulings."

The FCC comment period ended earlier this year. A ruling is forthcoming.

"It's one of those situations where we can't say that much at the moment," says Comcast spokesman Mary Beth Halprin. "We're not able to comment on any of the specifics right now."

PEG goes digital

Just two weeks after the lawsuit was filed in January 2008, U.S. Rep. John Dingell (D-Dearborn) held a House hearing about the PEG issue.

"This remains an important issue to him," says Dingell spokesman Adam Benson. "It is important to him that reasonable access to the important programming provided by PEG channels continue to be available to his constituents and that PEG channels are treated the same as local broadcast channels when both are required by statute to be part of a company's basic tier of service."

Executives from Comcast and AT&T testified, spending much of their time describing the technology of their systems — which are different and lead to different issues under the new state law.

AT&T's "U-verse" system uses in-ground lines — largely the copper-wire network originally designed and installed for traditional telephone service — to deliver broadband Internet, telephone and television service. "U-verse TV is a competitive game-changer. It brings fresh, innovative IP-based services to consumers thirsty for choice for their video services," said Gail Torreano, president of AT&T Michigan, at the January 2008 hearing.

She touted the planned Channel 99 designation for PEG in her testimony and described how, when viewing that channel, subscribers would see an alphabetical listing of all the cities with PEG programming available in that market area. Unlike current channel offerings where viewers can only see their local channels, U-verse users could see surrounding communities' programs. PEG programs would be digital.

But to view any of the PEG programs, the subscriber would have to use a navigational bar on the screen to select programming.

"Some communities have voiced concerns about the placement of all PEG programming at a single channel, requiring in some cases an additional step of choosing among a menu of community programming," Torreano said at the hearing.

Comcast, meanwhile, has tried to cast the PEG channel dispute as a "temporary, transitional issue" as the industry moves to a digital format. Comcast's competitors, company officials say, are all in digital and Comcast's customers expect more services like faster broadband, high-definition television and on-demand programming. "We must juggle demand for more services," said David Cohen, executive vice president of Comcast Corp., when he testified at the January 2008 hearing. "Part of that juggling involves the digital delivery of channels previously delivered in analog."

Watza says when the industry focuses on technical issues, it's a bait-and-switch away from the real issues.

"If I were the cable industry, I might be inclined to do the same thing for those folks that have analog television. It's an easy fix to go to cable, it really is, and cable is playing that up," Watza says.

But he and the municipalities want the focus back on the original nature of PEG channels: a public service provided in exchange for the access cable gets to communities and to be treated the same way the "must carry" channels are. After all, that's federal law and may supersede the two-year-old state law if the FCC goes the way the municipalities would like.

"Here cable has been getting access to the right-of-way that not everybody can have. Part of their public service is to do some good for the public as a whole and that's PEG," Watza says. "Does Comcast get to get out of the support they've provided for decades? I don't think so."

Sandra Svoboda is a Metro Times staff writer. Contact her at 313-202-8015 or [email protected]
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