Cable TV Flynn -oppose S F 47City Manager's Office
50 West 13th Street
Dubuque, Iowa 520014864
019) 5894110
(319) 589~149 FAX
January 31,2001
VIA e-mail and First Class Mail
fftynn~legis, state.ia.us
The Honorable Thomas Flynn
Senate Chamber
State Capitol Building
Des Moines, IA 50319
Dear Senator Ftynn:
I am writing on behalf of the City of Dubuque to urge your active opposition to S.F. 47, which
addresses the granting of additional cable television franchises in Iowa communities. This bill
follows the standard form of innocent-appearing "level playing field" legislation being
introduced in state legislatures across the country on behalf of the established cable television
industry.
Its real purpose is to help incumbent monopoly cable companies delay or defeat competitive
entry-, under the pretext of'fairness.' It could more accurately be rifled a "Cable Incumbent
Protection Bill.
This apparently well-intentioned provision provides great opportunities for mischief. It would
allow incumbents (who already enjoy the advantages of an entrenched customer base, installed
plant, and revenue stream) to raise spurious issues and threaten legal action against communities
who may actually have a chance to bring in a competitor.
S.F.47 would bind all Iowa communities to apply virtually identical conditions to companies
whose actual situations may be (and probably are) quite different. It thus goes far beyond
normal nondiscrimination rules, which recognize that differently situated entities may reasonably
be treated differently.
The bill takes no account of the fact thata second entrant already faces severe disadvantages in
seeking to compete with a long-entrenched incumbent. The original monopoly cable company,
when it first built its system, could count on gaining 100% of those interested in getting cable
service, because there was no alternative. The newcomer, however, is unlikely to capture more
than half of that market. And it must incur very large up-front capital costs before it can even
begin to obtain any revenue. Thus, the apparent equality sought by the incumbents here leaves
out crucial competitive disadvantages faced by their competitors.
Service People Integrity Responsibility Innovation Teamwork
For example, the proposed language assumes that a wide range of conditions must be identical
for two franchisees. But many of these conditions are dkeetly related to the size of the
operation: for instance, construction schedule, performance bonds, extent of territorial coverage,
etc.
In particular, note that the language does not state whether PEG Access capital grants -- a key
component of franchise requirements -- are to be compared on a per-subscriber basis, or in
absolute dollar amounts. If the latter, then an incumbent cable company with 100,000
subscribers can argue that its competitor, a startap company with 100 subscribers, should pay the
same dollar mounts. This is not fairness; it's a barrier to entry.
The effect of this bill is not to "ratchet up" the terms of a second franchise to those of a
hypothetically more burdensome first franchise. Rather, it is designed to "ratchet down" the
terms of the incumbent's franchise. There is no comparable requirement that an incumbent live
up to any better deal (for consumers) to wtfich a newcomer might agree. In other words,
consumers can only lose.
We suggest you ask cable company lobbyists to identify even one case where an incumbent
cable operator has gone out of basiness due to an unfair franchise granted to a competitor by an
Iowa City. It should quickly become clear that what cable incumbents really want is protection
from their competitors.
This legislation is a preemptive strike against competition. It should be rejected. Let the
entrenched incumbents compete in the market, rather than in the courts.
We urge your active opposition to this bill.
Sinc er~)/~
Michael C. Van Milligen
City Manager
MVM:jh
Cc:
Via E-mail and First Class Mail
Senator Mike Connoly
Representative Pat Murphy
Representative Robert Osterhans
Representative Para Jochum
Representative Paul Scherrman
Via First Class Mail
Dubuque Mayor and City Council Members
Merrill Crawford, Cable Franchise Administrator