City files complaint against Bright House Networks over unpaid fees

July 27, 2009

A municipality has filed the first formal complaint against a cable television operator since state telecommunications reform three years ago unplugged local government oversight of operators.

The city of Indianapolis alleges in a complaint with the Indiana Utility Regulatory Commission that Bright House Networks underpaid its franchise fees to the tune of about $40,000 between 2004 and 2006.

The city also said the utility has refused to provide cable to the Marion County Clerk’s office without cash upfront, which is a departure from past practice.

The amount of money in question is a drop in the bucket, given that the city collects about $7.7 million a year from Bright House, Comcast and AT&T for the use of public right-of-way to provide video and data services.

But the complaint is notable in that it illustrates the newfound powerlessness that municipalities face in the wake of House Bill 1279, which stripped them of the power to negotiate cable franchise agreements with video providers and to enforce customer service and other provisions.

 “The filing by the city of Indianapolis is the first filing by a municipality regarding the video franchise portion of the statute,” said Danielle Dravet, spokeswoman for the IURC.

“The IURC has had communications with many municipalities throughout the state regarding the application of the video franchising statute. However, these have not been in the form of formal complaints.”

Under the three-year-old statute, video providers can elect to—and most do-–obtain a video franchise from the state, instead of city or town government. Municipalities that once had franchise agreements in place still collect fees. They amount to roughly 5 percent of the gross revenue a provider generates in a territory.

Backers of HB 1279 argued that a statewide franchise was good for consumers because it would streamline the introduction of competing providers. And the providers themselves would no longer have to negotiate franchises with potentially hundreds of municipalities statewide.

That was especially important to AT&T—the prime backer and benefactor of the bill. AT&T quickly obtained a statewide video franchise and began offering around the state its “U-verse” video/Internet/phone service over phone lines.

It was the first real competition for cable companies since digital satellite arrived in the 1990s.

But while U-verse and other services have for many been welcome competition to cable TV operators criticized for frequent rate increases, deregulation has defanged municipalities from enforcing consumer complaints. The IURC, which received 2,019 video complaints from consumers from mid-2006 to mid-2009, can only address complaints to the extent they fall under Federal Communications Commission customer service guidelines.

Municipalities that want help from the commission must file a formal complaint.

But that is problematic, said State Rep. Matt Pierce, D-Bloomington. He points to issues the City of Bloomington Telecommunications Council has with AT&T’s U-verse. The council received complaints that accessing the five public educational and government channels provided through the Monroe County Library requires U-verse customers to scroll through a maze of drop-down menus and may violate state and federal rules governing access to these so-called PEG channels.

“You don’t have the power to deal with it directly now. You have to go through this bureaucracy in Indianapolis,” said Pierce. And formal complaints entail legal fees.

“All the communities look at it and say, ‘We don’t have the resources to battle a multinational company in court [IURC proceeding].’”

A common rallying cry of backers of telecom reform was that the ability of consumers to choose other options was ultimately the best form of consumer protection.

Bright House had not yet filed its response to the Indianapolis complaint as of *IBJ deadline.

Rick Maultra, the head of Indianapolis’ telecommunications agency, declined to comment. The city alleges Bright House used an inaccurate method to determine its franchise fee, including allegedly overstating an allowable bad debt deduction.

According to city records, the amount of revenue flowing to the city from video providers has remained steady since 2006, if even up slightly from the $7.26 million in 2006. Franchise fees collected by the city go to the general fund, with a portion of that allocated for the production of public access channel programming.

The Indianapolis telecommunications agency once dictated a broad array of performance measures and compliance rates, governing everything from installation to service interruptions. Now it can take complaints but is powerless to enforce resolution of the issues.•



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