Cable Franchise Fee AppealMEMORANDUM
November 25, 2002
TO:The Honorable Mayor and City Council Members
FROM:Michael C. Van Milligen, City Manager
SUBJECT:Oral Arguments in the Appeal of the FCC's "Pasadena" Decision
Cable Franchise Administrator Merrill Crawford is recommending that the City of
Dubuque participate with a coalition of cities, the National League of Cities and NATOA
in a court appeal of the FCC's Pasadena franchise fee decision and that the City
contribute an additional $5,000 from the Cable TV Fund for this effort. This decision
permits cable operators to add to cable subscribers' bills the proportion of franchise fees
generated by other revenue streams, such as advertising and home shopping services,
I concur with the recommendation and respectfully request Mayor and City Council
approval.
Michael C. Van Milligen
MCVM/jh
Attachment
cc: Barry Lindahl, Corporation Counsel
Cindy Steinhauser, Assistant City Manager
Merrill Crawford, Cable Franchise Administrator
CITY OF DUBUQUE, IOWA
MEMORANDUM
November 25, 2002
MEMO TO: Michael C. Van Milligen, City Manager
FROM: Merrill Crawford, Cable Franchise Administrator
SUBJECT: Oral Arguments in the Appeal of the FCC's "Pasadena" Decision
INTRODUCTION: The purpose of this memorandum is to recommend that the
City of Dubuque contribute $5,000 from the current Cable TV Division operating
budget for further support of the Appeal of the FCC's "Pasadena Franchise Fee"
decision.
BACKGROUND: At their November 19, 2001 meeting, the City Council voted to
join other individual cities and organizations in appealing an FCC decision
permitting cable operators to add to cable subscribers' bills the proportion of
franchise fees generated by other revenue streams such as advertising and
home shopping services. The appeal is lead by the Texas Coalition of Cities For
Utility Issues (TCCFUI) and is joined by the National League of Cities and
NATOA. The City of Dubuque contributed $5,000 to the appeal.
The coalition of cities has filed strong briefs and reply briefs in the case. The
FCC, in contrast, has submitted rather weak arguments. Nick Miller, senior
partner of the Miller & Van Eaton law firm which is representing cities in this
case, reports that the cities' position appears strong as they approach the
hearing of oral arguments next month, but that additional financial support is
needed from the coalition.
The problem initially arose in 2001 in Pasadena, CA, where the cable operator
implemented a series of creative accounting techniques for making the individual
subscriber pay extra for franchise fees generated by revenue streams having
nothing to do with subscribers. The FCC ruled that the practice was acceptable.
The cities appealed. Other cable operators quickly began implementing similar
plans across the country. We've been able to persuade Mediacom not to begin
such a practice here, at least until the court appeal has been decided.
It has always been the City of Dubuque position that franchise fees are rent paid
for the permanent occupation and use of public property for commercial
purposes. Like all business expenses, franchise fees should be recovered from
within the rates charged for services and are not to be added onto subscribers'
bills in the nature of a sales tax. Further, commonly accepted accounting
practices attribute expenses to the revenue streams they help to generate. To
redirect all of these expenses onto subscribers, and to add them on top of the
unregulated rates paid for cable service, is improper, patently unfair, and in our
opinion, illegal. Nevertheless, if the FCC decision is not overturned, the practice
will be surely be implemented nationwide, including here in Dubuque.
RECOMMENDED ACTION: The Recommended Action is that the City Council
authorize the contribution of $5,000 in support of oral arguments in the Appeal of
the FCC's Pasadena Franchise Fee Decision, funded from the current operating
budget of the Cable Television Division.
Cc: Pauline Joyce, Administrative Services Manager
Barry Lindahl, Corporation Counsel
Tim O'Brien, Assistant City Attorney
Cable TV Regulatory Commission
Cable Community Teleprogramming Commission