Sammamish starts cable franchise negotiations from tough place

March 6, 2014

By Ari Cetron

New: March 6, 1:14 p.m.

Patricia Waltner was fed up. Over the course of a month, she’d just had pieces of equipment break, the replacements break and a series of other customer service problems with Comcast, the only cable provider in Sammamish. She called around and found out that she had no other options – other companies simply don’t serve the plateau.

“All I want is a choice,” she said. “There’s got to be better service out there somewhere.”

The Sammamish City Council is beginning to review the cable franchise agreement it has with Comcast, but whether or not that will lead to more choices is an open-ended question.

The issue came up at the council’s retreat, said Mayor Tom Vance. He said the council is mostly concerned with ensuring that cable providers provide the service people want.

“Our goal is to make sure we are giving our citizens and businesses whatever they need,” he said.

In general, cable companies cut deals with places where they operate so the company can use publicly-owned property. The companies need to get wires to homes, and the most efficient way to do that is by using public rights of way. The most commonly understood examples of rights-of-way are city-owned strips of land that run along the edges of roads, or telephone poles.

Cable companies pay the cities where they operate for the right to use some of the space, and often offer other amenities.

In Sammamish, there’s an annual payment (see sidebar) and the city gets the use of channel 21.

Those sorts of deals are fairly typical, said Steve Kipp, vice president of communications for the Washington region of Comcast. Not all localities want or can use a cable channel, he said, so it’s not a standard part of agreements. Payments can vary depending on the location, but often are 5 percent of the gross revenues made by the company in each jurisdiction.

The contract with Sammamish also contains a clause which states that if the city wants to allow another cable provider access to the rights of way, they have to get the same deal Comcast does.

“If another company comes in and tries to serve Sammamish, it’s a level playing field,” Kipp said.

He declined to say if such clauses are typical. He further noted that since Sammamish’s franchise agreement is under negotiation, he could not comment on specifics of the deal.

Kipp stressed that there is nothing in the current franchise agreement which would prohibit another company from coming into Sammamish.

Nor could there be – the federal government has prohibited exclusive franchise agreements since 1992.

“The agreement, like all agreements, is non-exclusive,” Kipp said.

Although agreements are non-exclusive, industry analysts explain that nationwide, having more than one cable company in an area is relatively rare. Companies have to put in a lot of upfront costs to put in the new lines, and there’s no guarantee of how many customers they’d be able to poach from the already-entrenched company.

Sammamish has not had a new cable provider approach the city about providing service in recent memory, said Kamuron Gurol, development director for Sammamish. Gurol is also heading the city’s effort at developing its new agreement.

In the past, Sammamish banded together with a group of other localities to develop a single larger agreement.

Gurol said Sammamish is beginning to reach out to those other cities again.

 

Not leaving

While other companies can come in, it would be extremely difficult to kick Comcast out. Under federal law, once a company has been granted a franchise agreement, a local government can’t make it leave unless it fails in one of four areas.

Generally, the cable provider would either have to violate the terms of the current agreement, provide inadequate service, or stop providing service before any local government could remove them.

Kipp said that Comcast has more than 150 franchise agreements in Washington. Almost all are renewed in informal discussions, he said.

Cable companies typically favor “informal” renewals, according to Brian Grogan, a telecommunications lawyer based in Minnesota. For one, the companies have staff working on renewals all the time, while government officials only see them once every 10-15 years. As a result, cable companies typically have an advantage when it comes to negotiations.

“Second, cable operators recognize that a franchising authority has no ability to deny franchise renewal under the informal negotiations,” Grogan wrote in a paper delivered to the National Association of Telecommunications Officers and Advisors in 2004. “Given that the city has no ability to deny renewal, cities have very little leverage to mandate aggressive franchise requirements under informal proceedings.”

Even given these constraints, Sammamish is hoping to forge an agreement with better terms, said Vance.

Kipp said that Comcast also hopes to come to an agreement. He said they appreciate the opportunity to serve Sammamish, and want to work with the city.

The Planning Commission is studying the issue now, said Vance, and will present its findings to the City Council within the next few weeks.

 

Franchise fees

Comcast pays Sammamish an annual fee for the right to use city-owned rights of way. The amount has steadily increased in each of the past five years. From 2009 to 2013, the total increase has been about 26 percent.

In 2013, franchise fees were about 1.3 percent of the city’s total revenues, which totaled $46.5 million.

  • 2009 $489,996
  • 2010 $532,455
  • 2011 $553,213
  • 2012 $589,344
  • 2013 $617,660

Source: Chris Gianini, deputy finance director, city of Sammamish

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