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Detroit Sues Comcast To Retain Franchise Authority
Sets up interesting battle over state vs. local rights
by Karl Bode Tuesday 29-Jun-2010 tags: legal · business · Op/Ed
We've long covered how the phone companies, eager to get into the TV business, convinced dozens of states to pass "franchise reform" laws over the last few years that placed all franchise responsibilities at the state level. While lauded by carriers (whose lobbyists wrote most of these laws) as a panacea for TV competition and lumbering and/or demanding local bureaucracies, many of the laws are absolutely horrible -- eroding consumer protections, freeing carriers from any and all build out obligations, and in some cases even eroding local eminent domain rights.

Just how bad many of these laws are is one of the more under-reported telecom stories of the decade.

Slashdot directs our attention to the fact that Detroit has now sued Comcast, insisting that the cable giant still has to adhere to a 1985 franchise agreement despite the fact that Michigan now has a statewide agreement forged in 2006. Under the statewide agreement (given it was written by carriers) Comcast of course no longer has to do much of anything to help the local community -- and Detroit's obviously annoyed, given they're one of many U.S. communities that can obviously use all the help they can get. This entire fracas sets up an interesting showdown between state and local interests:

The city said that since imposing a new franchise agreement in April 2007, Comcast has violated the 1985 franchise by ceasing to provide free drops and service to municipal school buildings, failing to provide a data network for communication between city buildings, ceased making payments to support local public and educational programming, and closed local public and educational video studios and ceased providing mobile units, equipment, staff and maintenance. The suit asks the court to overturn the 2006 state law and declare the 1985 franchise agreement still in effect.

Many of these states didn't realize how awful these laws were until they were passed, thanks to phone company astroturf groups like TVUS -- who demonized the dysfunction of the very local franchises that without which -- most cable users wouldn't have service today. While local franchise rules certainly could have used "reform" and some localities certainly are greedy in negotiations -- the actual reform enacted was often little more than wishlists written by Verizon, AT&T and Comcast lobbyists that did absolutely nothing for either TV prices or competition -- and in many cases made matters much worse for the end users.

This Detroit fight would appear to be one to watch and is the first of its kind that we've seen.

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ender7074

join:2006-11-21
Saint Louis, MO

Cable TV?

Doesn't Detroit have more pressing problems other than Comcast like the huge unemployment rate and devastating deficit spending? Guess cable TV is more important than that...
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FBGuy
yippee ki yay
Premium
join:2005-03-19

Re: Cable TV?

the government can't fix the unemployment problem. especially the government in detroit.

cdru
Go Colts
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Fort Wayne, IN
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said by ender7074:

Doesn't Detroit have more pressing problems other than Comcast like the huge unemployment rate and devastating deficit spending? Guess cable TV is more important than that...
Last I checked, Detroit's government consists of more then one person. Maybe even more then one department. I think it's entirely plausible that they could both go after Comcast AND continue to operate in some capacity. While winning against Comcast probably won't do a whole lot about unemployment or the deficit directly, it may re-enable community services as well as fund significant IT expenses that the city has started to carry the cost since the franchise agreement possibly was terminated by the state's action.
chronoss2009
Premium
join:2008-09-23
kudos:2

Re: Cable TV?

said by cdru:

said by ender7074:

Doesn't Detroit have more pressing problems other than Comcast like the huge unemployment rate and devastating deficit spending? Guess cable TV is more important than that...
Last I checked, Detroit's government consists of more then one person. Maybe even more then one department. I think it's entirely plausible that they could both go after Comcast AND continue to operate in some capacity. While winning against Comcast probably won't do a whole lot about unemployment or the deficit directly, it may re-enable community services as well as fund significant IT expenses that the city has started to carry the cost since the franchise agreement possibly was terminated by the state's action.
ok it now has 4 people
bt

join:2009-02-26
canada
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Let's look at the list of complaints:

ceasing to provide free drops and service to municipal school buildings
They now need to pay for it or cut it and fill the void with something else. (the debate over what it was being used for can go somewhere else)

failing to provide a data network for communication between city buildings
Now need to build, buy or rent a network. Any way you cut it, increased communication costs for the city.

ceased making payments to support local public and educational programming
Now, either the city funds it or the community loses it.

closed local public and educational video studios and ceased providing mobile units, equipment, staff and maintenance
Job losses, income losses for associated support businesses.

Every issue listed in this article is linked directly to increased costs or decreased service levels for city and community services.

Romney2012
Defeat Obama 2012-Chg we can believe in
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join:2002-03-03
USA
kudos:4

Suing wrong party - should sue state

If Detroit doesn't like the new state law on franchising, they should be suing Michigan in state court. Or under worst case, suing Michigan in Federal court if they think the state law violated FCC rules. Comcast is merely following the law. The fact they like the new law and lobbied for it shouldn't make them the target of the lawsuit.

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burger2000

join:2001-06-25
Madison, WI

Re: Suing wrong party - should sue state

My thoughts exactly and I have a feeling Comcast will argue this point also.

56403739
Less than 5 months left
Premium
join:2006-03-08
Naples, FL
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Re: Suing wrong party - should sue state

said by burger2000:

Comcast will argue this point also.
They can try to have the court formally invalidate the entire 1985 franchise agreement and if successful the case is over. However, if the court rules that any part of the 1985 agreement is still valid, it opens the Michigan statewide (and possibly all of them since this is in Federal court) for additional judicial scrutiny and possible reversal.

56403739
Less than 5 months left
Premium
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Naples, FL
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You can't sue to enforce FCC regulations. You file a formal complaint instead.

Comcast may be "following the law" but they do have an obligation to ensure that their previously-agreed-to contract terms are met. The state of Michigan is not the defendant...Comcast is...and Federal court is the correct venue.
hottboiinnc
ME

join:2003-10-15
Cleveland, OH
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Re: Suing wrong party - should sue state

very true. Comcast can NOT adhere to the State agreement until tone is signed with the state. And usually there is the clause attached that says ONLY after the city contracts are expired are they allowed to apply for the State Agreement.
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pnh102
Reptiles Are Cuddly And Pretty
Premium
join:2002-05-02
Mount Airy, MD

Misplaced Priorities

Detroit looks a lot like how it was portrayed in the RoboCop movies. Perhaps instead of wasting time dealing with minor problems like cable franchising, it might want to focus on things like rampant crime, terrible schools, high unemployment, and just about everything else that makes life in that city suck.
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baineschile
2600 ways to live
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join:2008-05-10
Sterling Heights, MI

Re: Misplaced Priorities

Anyone other MI people want to come to the defense of Detroit?

HonestEnd

join:2006-03-01
Sterling Heights, MI

Re: Misplaced Priorities

Nope...
dynodb
Premium,VIP
join:2004-04-21
Minneapolis, MN

"Franchise" agreements = extortion

These so-called "franchise agreements" are little more than government extortion.

"Want to do business in our town? Well, first you'll have to provide some kickbacks in the form of cash and free services. In return, we'll protect you from competition and give you a piece of paper allowing you to conduct commerce. Pay up... or else."

What local governments have been doing in the name of "franchise agreements" is almost indistinguishable in principle from what the Mafia is known for.

56403739
Less than 5 months left
Premium
join:2006-03-08
Naples, FL
kudos:2

Re: "Franchise" agreements = extortion

I'm thinking you've never owned or run a local retail business.

There are occupancy permits, business licenses, employment taxes, sales taxes, annual fees and ongoing building inspections which are all basically extortion with very little justification or return (via services) to the business.

The cable companies have done quite well for themselves over the last forty-something years and agreed to whatever terms those franchise agreements included in return for handsome profits.
dynodb
Premium,VIP
join:2004-04-21
Minneapolis, MN

Re: "Franchise" agreements = extortion

How many other buisnesses are told that they must give the city free stuff in addition to taxes and license fees before they're allowed to do business?

Are resturants told they have to serve city employees for free if they want to open a business? Is the local newspaper required to reserve advertising space for free ads from the city before they can publish?

Jodokast96
Stupid people really piss me off.
Premium
join:2005-11-23
Erial, NJ
kudos:2

Re: "Franchise" agreements = extortion

said by dynodb:

How many other buisnesses are told that they must give the city free stuff in addition to taxes and license fees before they're allowed to do business?

Are resturants told they have to serve city employees for free if they want to open a business? Is the local newspaper required to reserve advertising space for free ads from the city before they can publish?
But those other businesses weren't also given a monopoly to operate in the city either.
awluck

join:2000-05-24
Duluth, GA

Re: "Franchise" agreements = extortion

Please remember that Comcast insisted on the monopoly conditions before spending the money. Don't like the terms, don't sign. Love how Americans, especially capitalists, seem to think government is the problem. Like making businesses live up to their agreements. Fairpoint, anybody?

Jodokast96
Stupid people really piss me off.
Premium
join:2005-11-23
Erial, NJ
kudos:2

Re: "Franchise" agreements = extortion

Exactly. But they wanted it both ways. The cities just tried to get as much out of it as possible. It's little more than legal extortion, but Comcast benefited just as much if not more in the long run.

Romney2012
Defeat Obama 2012-Chg we can believe in
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USA
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The FCC doesn't allow monopoly franchise agreements and haven't for a long time.
Skippy25

join:2000-09-13
Hazelwood, MO

Re: "Franchise" agreements = extortion

You mean the don't "officially" allow monopoly franchise agreements.
dynodb
Premium,VIP
join:2004-04-21
Minneapolis, MN
said by Jodokast96:

said by dynodb:

How many other buisnesses are told that they must give the city free stuff in addition to taxes and license fees before they're allowed to do business?

Are resturants told they have to serve city employees for free if they want to open a business? Is the local newspaper required to reserve advertising space for free ads from the city before they can publish?
But those other businesses weren't also given a monopoly to operate in the city either.
Sure- and that's much of the problem. The local government is basically running a protection racket. The government gains free services and money in exchange for a government enforced monopoly.

They do it under the guise of protecting consumers, but in the end these "franchise agreements" only lead to a lack of consumer choice and higher costs that are passed onto the consumer.

Bor

@telus.net
said by dynodb:

How many other buisnesses are told that they must give the city free stuff in addition to taxes and license fees before they're allowed to do business?

Are resturants told they have to serve city employees for free if they want to open a business? Is the local newspaper required to reserve advertising space for free ads from the city before they can publish?
How many of those business use public right of ways? And so what if a democratically elected government of whatever level attaches conditions on doing business in order to advance the public good? Taxes, contrary to what you might think, don't go into the mayor's pocket.

det1

@cox.net

need money

are you all serious cable and city franchises are big business, and comcast could owe tens of millions if they lose. thats the bottom line. that could help detroit with its loss of revenue from the new law

quetwo
That VoIP Guy
Premium
join:2004-09-04
East Lansing, MI

They are not the only ones...

Detroit is one of the latest cities to have their franchise agreements expire. Some cities (like Lansing and Grand Rapids) were near the end of their agreements when the law passed -- and got hosed early on. For example, most of the PEG channels in Lansing went away, and the 'community studio' was moved to downtown Detroit -- and didn't run any local issues. Not only that, but Comcast merged all of their customer centers into a single office, not near a bus route, right next to a highway (so people who commute with anything other than their own car can't get to it).

Detroit is just starting to see the same things that others have been going through the last few years. And have we seen more competition as a result of it? No. In the greater Lansing area, AT&T deployed U-Verse to two small communities -- pretty much cherry-picking the area. Meanwhile everybody else has had their landlines deteriorate even further. DSL for large swaths of downtown area are a joke -- most users can't even get 1MB service from anybody other than Comcast.

But some communities have had success in suing Comcast in the immediate area. Meridian Township (Okemos, Michigan) was wildly successful -- they were able to keep their PEG channels, they retained their community office, and they stopped the digital migration for happening a bit longer. Unfortunately their power will be limited quickly as well, as their franchise agreement ends July of next year...

jester121
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Lake Zurich, IL
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Re: They are not the only ones...

said by quetwo:

Not only that, but Comcast merged all of their customer centers into a single office, not near a bus route, right next to a highway (so people who commute with anything other than their own car can't get to it).
Sounds to me like the city officials failed (once again) to properly manage their public transit routes to adequately meet demand.

baineschile
2600 ways to live
Premium
join:2008-05-10
Sterling Heights, MI

Re: They are not the only ones...

FWIW, the CATA bus system in the Lansing area is one of the highest rated in the country.

jester121
Premium
join:2003-08-09
Lake Zurich, IL

Re: They are not the only ones...

Clearly that's because Comcast's office isn't there.

baineschile
2600 ways to live
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Sterling Heights, MI
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·magicjack.com
said by quetwo:

Meridian Township (Okemos, Michigan) was wildly successful -- they were able to keep their PEG channels, they retained their community office, and they stopped the digital migration for happening a bit longer. Unfortunately their power will be limited quickly as well, as their franchise agreement ends July of next year...
A bunch of old folks that dont want to move forward with technology. Why woudlnt they want to go through the digital migration, and ya know, add 70 HD stations and DOCSIS 3.0?

You and I both know that UVerse wont ever be deployed in the Lansing city limits, itll be interesting to see if they start offering more services around campus.

quetwo
That VoIP Guy
Premium
join:2004-09-04
East Lansing, MI

Re: They are not the only ones...

The old folks wanted to still watch their TVs without having to rent a box for each TV. I don't blame them. The old Comcast model was that you subscribed to the channels -- the new one is you subscribe to channels for each TV. Sure the first TV is free, but each additional one will cost you $5/month ...
frnkblk0

join:2002-08-25
Sioux Center, IA

Not the best

There are at least two positive benefits of the state franchises:
a) accelerated entrance of competitive providers by avoiding negotiation with each individual city
b) addressed the conflict of interest that existed when the city owns their own video system

Unfortunately, as this article points out, some of the non-monetary elements of franchises were unaddressed in the state franchises. That said, my understanding is that most state franchises allowed up to a 5% franchise fee, so it's not like the PEG-related production costs (studios, equipment, people) can't be drawn from that.

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