City to Get Help With Cable Contract

Mar. 30–The cable television industry has changed dramatically since 1986, when Reading granted a 20-year franchise to Comcast Corp.’s predecessor in return for a 5 percent fee on its local revenue.

That contract expires in January.

Monday night, City Council agreed to hire the Cohen Telecommunications Law Group of Pittsburgh to help it negotiate a new contract with Comcast.

Cohen has been in the cable-negotiating business for 15 years and represents 150 municipalities.

“Our firm does nothing but this,” Daniel Cohen told council last week.

The law group’s contract with the city is for no more than $75,000. Cohen has told the city’s cable committee his fees probably won’t come close to that.

Comcast paid the city $739,000 in franchise fees in 2003, the last year for which numbers are available.

No other cable companies are expected to bid for the service.

City Managing Director R. Leon Churchill Jr. said Reading is looking for three things in the new contract — accommodating the city’s needs, quality service and all the revenue it’s entitled to.

“Whoever negotiated for the cable provider (in 1986) did a real good job,” Churchill said.

Cohen said the firm will take these steps first:

— Audit Comcast’s books to make sure the company complied with the 1986 deal.

— Perform a technical audit of the system to check signal strength, clarity, customer service and federal emergency-broadcast requirements.

— Assess the city’s needs in local programming.

— Organize a public hearing by council.

— Review the franchise fee. It remains at 5 percent of Comcast’s local revenue, but the definition of local revenue needs to be re-examined because of cable’s new services, Cohen said.

The business can be lucrative, both for Comcast and the city. Cohen said that when Comcast acquired AT&T Broadband in 2002, it paid $87 billion, or $2,919 per customer.

The city’s franchise fees of $739,000 in 2003 rose about 10 percent since 1999, when the fees were $670,000.

Council members wonder whether those 2003 fees should have been higher because of Comcast’s expanding local customer base, more services and higher charges.

Comcast spokeswoman Suzanne Armarant said only that the company is looking forward to renewing the contract and serving the area for years to come.

COMCAST’S MONOPOLY: When Comcast’s cable contract with Reading expires in January, do rival cable companies have a chance to enter the local market?

Legally, yes, but financially, no.

The law allows a cable firm to have a monopoly in a municipality. The firm has to pay a 5 percent franchise fee to the municipality to get that monopoly.

Comcast has two nearly unbeatable advantages: It already has installed the cables in Reading and it has an established customer base.

A new firm would have to install its own cables, a huge expense taking months to do, during which many customers would have no service at all.

It’s not something the city wants to happen, so in the vast majority of municipalities, the firm that gets in first is the one that stays.

How much is that franchise fee worth to Reading?

Comcast paid $739,000 to the city in 2003, based on a 5 percent fee on the company’s local revenues. A new company would have less revenue at startup, decreasing the city’s income.

On what revenue does Comcast pay the franchise fee?

On nearly everything customers pay Comcast.

Besides the programming rates, customers pay rentals of the set-top boxes and remote controls, fees for Comcast’s “On Demand” and other services — even for the late fees the company charges when customers are delinquent.

There is one exception. The courts have declared that cable’s high-speed Internet connection services are not subject to the franchise fee.

How can a cable customer complain about service or recommend a different provider?

Customers can call Comcast with complaints, but the city — which used to refer all complaints to Comcast or its predecessors — now wants to hear them, too. Call the city clerk’s office at 610-655-6100.

Complaints and recommendations also can be made at a public hearing on cable service planned by City Council for the summer. A date has not been set.

Source: Reading officials

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