Report Makes Case for Cable Franchise Reform

Published November 1, 2006

A new policy brief from the Mackinac Center for Public Policy, a Midland, Michigan-based think tank, finds the entry of new competitors and changes in video technology makes it imperative that the cable franchising process be reformed.

Current franchise regimes reinforce local cable monopolies even as telephone companies attempt to gain access through new platforms, including fiber-to-the-home and Internet Protocol (IP) video. “Unfortunately, municipal franchising has evolved from a means to protect consumers to a regulatory advantage that protects the incumbent cable operator from competition,” writes Diane S. Katz, director of science, environment, and technology for the Mackinac Center, in “Assessing the Case for Cable Franchise Reform.”

The report, which surveyed cable rates in many southern Michigan communities, found those rates increased annually at an average rate nearly 38 percent above the annual inflation rate from 1991 to 2006.

Katz details the history of cable regulations and video franchising from the industry’s beginnings in the late 1940s. The report shows how current technology and market forces have rendered the decades-old cable franchise regime obsolete.

In addition, the report discusses the benefits and flaws of Michigan House Bill 6456, which would establish a statewide franchising process that would eliminate costly and time-consuming negotiations with the state’s some 1,200 franchise authorities. Katz criticizes a provision in the bill that prevents incumbent cable companies from seeking a statewide franchise once a competitor enters one of its markets.

Although Katz writes, “As a matter of policy, there is little rationale for maintaining a franchise regime of any sort,” the paper includes five recommendations for franchise reform:

  • elimination of barriers to competition;
  • elimination of build-out requirements;
  • elimination of rate regulation and franchise fees;
  • elimination of performance standards, which tend to neutralize competitive differentiation; and
  • ensure no segment of the market enjoys a regulatory advantage.

Steven Titch ([email protected]) is senior fellow for IT and telecom policy at The Heartland Institute and managing editor of IT&T News.

For more information …

“Assessing the Case for Cable Franchise Reform” is available through PolicyBot™, The Heartland Institute’s free online research database. Point your Web browser to and search for document #19823.