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Business, Free Enterprise and Constitutional Issues; Pro-Life and Pro Second Amendment. Susan Lynn is a former member of the Tennessee General Assembly. She served as chairman of the Government Operations Committee and the Commerce Committee. She holds a BS in economics and a minor in history. She is the Chairman of the American Legislative Exchange Council's Commerce Task Force.

Sunday, April 29, 2007

The Cable Choice Bill

Who would guess that the creation of a single franchise agreement in a small Pennsylvania town could stir such emotion at the Tennessee state capitol 60 years later?

A bill, supported by 71% of Tennesseans, called the Competitive Cable and Video Services Act is meant to expand service, infuse new technology and create competition among providers in the television service market.

However, lobbyists for local governments and the cable industry are working overtime trying to defeat the bill. Their common ground is in retaining the old system of local franchising agreements and build-out, which together have tended to hurt consumers and rural areas by allowing companies to select the more populated and profitable markets and keep out the competition.

Cable and the cities maintain that competition is already possible among cable providers because communities can enter into agreements with as many providers as they chose.

Yet, most consumers know very well that just doesn’t happen. It doesn’t happen because the large capital investment needed to build-out a television service network is usually too cost prohibitive to be accomplished based on a small market with an artificially mandated contractual timeline.

To understand why the bill's sponsors want statewide franchising, it is helpful to review the history of local franchising.

The cabling of television sets began in 1947, in a small town, 90 miles away from the large television transmitting antennas of Philadelphia. A TV store owner, tired of poor reception and poor sales, installed an antenna on a ridge top and ran a cable down the mountain to his store and several homes along the way.

When a group of business men heard of his ingenuity, they organized a business and obtained permission from their local officials to run cable on the condition that the company pay a fee for the right – the local franchise was born.

Unfortunately, the idea of improving reception in small communities soon became mired in federal regulation. For more than twenty years the service remained unprofitable and capital for growth was difficult to obtain.

Regulation aside, paying for television reception seemed ridiculous until the d├ębut of HBO in 1972. The high quality programming quickly enticed city dwellers to pay for service. As demand increased, federal restrictions soon loosened, and new, innovative cable channels helped the industry to grow.

Television service is no longer the primitive antenna on a mountain top capable of serving only a single community. It is satellite technology serving the nation. It follows suit that the costly system of negotiating local franchise agreements with hundreds of local governments, state by state, also seems out of date.

The legislature has heard the many concerns of our local governments and has worked hard to address each one by rewriting the bill.

Contractual agreements often have some negative unintended consequences. However, once we discover them we should not allow them to perpetuate. We do not require telephone companies or internet service providers to operate using the same local franchise agreement process; rather, they operate statewide, taking advantage of economies of scale. In fact, the local franchise process is what has allowed companies to cherry pick the best towns and cities for years leaving rural areas without service.

Statewide franchising is a way to streamline the work required to obtain a contract to operate, stimulate the capital investment necessary to expand service, and encourage a competitive atmosphere among providers, thereby creating real choice and competition for every consumer in our state.

Representative Lynn represents the 57th House District in Tennessee, and she is the Chairman of the American Legislative Exchange Councils Commerce Task Force. Rep.susan.lynn@legislature.state.tn.us.

1 comment:

Anonymous said...

Where I live there is only 1 cable company available. What we do need is more competition. Maybe that would lower cable bills.