Policy Documents

I Want My MTV: Reforming Video Franchises for Competitive TV Services

Steven Titch –
November 1, 2006

Video franchises are the revenue-sharing agreements that cable TV companies sign with local
governments in return for the right to offer video services to customers. Historically, in return for the revenue the company gives the municipality (a portion of gross video revenues), cable TV companies get exclusive use of the city’s right of way and monopoly use of the market. As the country’s largest telephone companies begin to deploy broadband networks that can support cable TV-like services, they have been pressing for changes in the process. They are pushing legislation that would not only open franchises to competition, but also let them apply for a statewide franchise in one fell swoop, eliminating the need to go from municipality to municipality to negotiate individual agreements, as cable companies were forced to do in the past.

For the phone companies, these national or statewide franchises offer expedited but not exclusive market entry, faster revenues and a more predictable procurement and deployment schedule. For incumbent cable TV companies that already enjoy exclusive franchises for municipalities, it removes their monopoly, allowing competitors to serve the needs of the market and to do so on a statewide or even nationwide basis. For customers, this reform allows them to choose their services from several competitors, driving prices down and service up. Predictably, cable TV companies are resisting this reform movement.

In August 2005, Texas became the first state to pass legislation to create statewide franchising. Since the beginning of 2006, six more states, California, Indiana, Kansas, New Jersey, North Carolina, South Carolina, have enacted similar legislation. Virginia and Arizona enacted franchise reform, but stopped short of authorizing statewide authority. The Louisiana legislature also passed video franchise reform legislation, but it was vetoed by Gov. Kathleen Blanco.