Legislators SF 168 Cable franchCi~ Manager's Office
50 West 13th Slzeet
Dubuque, Iowa 520~Tl-&_q64
(319) 5894110
(319) 5894149 FAX
February 15, 2001
VIA E-MAIL AND
1 ST CLASS MAIL
mike__connolly~.legis.state.ia.us
The Honorable Mike Connolly
Senate Chamber
Iowa Capitol Building
Des Moines, IA 50319
Dear Senator Connolly:
I am writing on behalf of the City of Dubuque to urge your active opposition to S.F. 168
(formerly S.F. 47), which addresses the granting of additional cable television franchises in Iowa
commtmities, This bill follows the standard fom~ 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'thimess.' It could more accurately be titled a "Cable Incumbent
Protection Bill."
This apparently well-intentioned provision provides great opportunities for mischief. It would
allow iacumbcnts like AT&T Broadband (who already enjoy the advantages of an entrenched
customer base, installed plant, and revenue stream) to raise spurious issues and threaten legal
action against conmmnities who may actually have a chance to bring in a competitor.
S.F. 168 would biad all Iowa communities to apply virtually identical conditions to companies
whose actnal situations may be (and probably are) quite different. It thus goes far beyond normal
oondiscrimination rules, which recognize that differently situated entities may reasonably be
treated differently.
Thc bill takes no account of thc fact that a second entrant already faces severe disadvantages in
seeking to compete with a Iong~eotranched incumbent. The original monopoly cable company,
whoa it first bnilt its system years ago, could count on gaining 100% of those households
interested in getting cable scrvice, bccat,se there was no alternative.
Today's newcomer, however, is nnlikcly to capture more than half of that market. A potential
competitor must incnr '.'er3' large up-froot capital costs'before it can even begin to obtain any
The Honorable Mike Connolly
February 15, 2001
Page 2
revenue. Thus, the apparent equality sought by the incumbents in S.F. 168 leaves out crucial
competitive disadvantages faced by their competitors.
For example, the proposed language assumes that a wide range of conditions must be identical
for two franchisees. But many of these conditions are directly 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 ~vhether 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 startup company with 100 subscribers, should pay the
same dollar amounts upfront. 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 which a newcomer might agree. There would be almost
no way under S.F. 168 for cities to negotiate the correction of deficiencies or improve upon
current levels of cable television service, either in renewing an incumbent's franchise or in
granting a second franchise. In other words, consumers can only lose.
We suggest you ask cable company lobbyists to identify even one case ~vhere an incumbent cable
operator has gone out of business due to an unfair franchise granted to a competitor by an Iowa
city. It should quickly become clear that what AT&T Broadband and other cable incumbents
really want is protection from their competitors.
This legislation is a nationally coordinated 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 S.F. 168.
Sincerely,
Michael C. Van Milligen
City Manager
MCVM:jh