2013 Best Best & Krieger LLP
State Franchising: An idea whose time has past, whose benefits have failed to appear, but whose damages we see every day. PRESENTED BY Joseph Van Eaton Partner PREPARED BY Gerard Lavery Lederer Of Counsel 2013 Best Best & Krieger LLP
Promises Made in Support of State Franchising Enhanced Consumer Choices Lower Prices for Consumers Better Quality Programming High Quality (union) Jobs No Loss of Community Media (claim made in some states.)
History of State Franchising
HISTORIC TABLES PRIOR TO 2005, 10 STATES HAD SOME STATE LEVEL OVERSIGHT WITH THREE STATES SERVING AS FRANCHISING AUTHORITY
Majority of States Considering Legislation Rejected State Franchising 3 5 3 0 2 5 2 0 1 5 1 0 S ta te s p a s s in g s ta te fra n c h is e le g is la tio n S ta te s C o n s id e rin g le g is la tio n 5 0 2 0 0 5 2 0 0 7 2 0 0 9 2 0 1 1 2 0 1 3 Y e a r
Number of States Adopting Legislation Number of states passing state franchise legislation 9 8 7 6 5 4 3 2 1 0 Has Fallen Dramatically 2005 2006 2007 2008 2009 2010 2011 2012 Year
High-water Mark for Franchise Consideration was 2007 OR WA ID MT WY ND SD MN WI MI NY ME VT NH MA CT RI CA NV UT CO NE KS IA MO IL IN OH KY WV PA MD VA NJ DE AZ NM OK AR TN NC SC TX LA MS AL GA AK FL HI LEGEND State w/ Franchising Law State w/ Legis Anticipated Local Franchising and No legislation yet Last updated 01/03/07
State Franchising Status Today Majority Preserve Local Franchise LEGEND State with Franchising Law Local Franchising Legislation Under Consideration Local Franchising No Active Legislation
Evaluation of Benefits/Promises
Failure of Benefits: Prices Continue to Rise $60.00 $50.00 $40.00 $30.00 $20.00 $10.00 $0.00 Source: NATOA Before State Franchise After State Franchise Basic Tier Digital Tier
Failure of Benefits: No Change In Price Slope Post 2006 Source: FCC
Failure of Benefits: Consumer 98% Disagree 2% Agree Satisfaction Ninety eight percent (98%) of local regulators in state franchise states when surveyed disagreed with the statement Customer service is working better now than it was before the implementation of state franchising. Source: NATOA
Failure of Benefits: 2013 American Customer Satisfaction Index Subscription TV industry satisfaction rose from 66 in 2012 to 68% approval in 2013, as an industry only newspapers and Internet service providers have a worse industry index score. Verizon FiOS came out on top of the rankings for a second year, while Charter jumped out of the cellar and over Comcast and Time Warner. Call center satisfaction was dismal, with a low, low score of 65 a full nine points below the ACSI average of 74. Study anticipates that next year s Worst Company In America bracket will be full of cable and Internet providers. Source: http://consumerist.com/2013/05/21/comcast-timewarner-cable-bring-up-rear-in-cable-customer-satisfaction/
Failure of Benefits: Jobs According to CWA report, even if there were gains from state franchising, the approved deal between Verizon Wireless and the big cable companies will cost workers and communities 72,000 jobs. Its clear there were no such gains According to the Bureau of Labor Statistics, the domestic call center industry continues to shed jobs, losing over 500,000 since 2006. According to Bureau of Labor Statistics there were about 309,000 Line Installer jobs in 1996, but only 269,100 in 2010. That s a decrease.
Failure of Benefits to Arrive: Choice New state entrants have not appeared at all, or only to a limited degree in some states (North Carolina), and for largest entrants, competition is limited to telephone footprint Rural areas are losing wireline even in states with statewide franchising Does state franchising make a difference? Verizon has entered without state franchises and is expected to pass 18 million premises by 2018-70 percent of the Verizon wireline footprint No state has made any significant effort to enforce build-out requirements
Losses That Can Be Documented
Failure of Benefits: 60% of States Cut PEG Support 5 States zero out PEG Support 5 States require provider to match Incumbent until franchise has expired or 2012, whichever is sooner. 7 States require state franchisee to match incumbent or provide set percentage in support. 2 states provide support in a new format that cannot fit in neat description.
Failure of Benefits: Loss of Centers Over 100 PEG centers have closed Large majority are public access. California has lost no less than 51 Nearly half of PEG centers who provided financial information to Buske Group reported an average funding decrease of nearly 40 percent 2005-2010 20 percent reported in-kind support has been cut back or eliminated during this five-year period 165 PEG centers reported that they expect elimination or reductions in funding within 3 years Source: Buske Group Report
Gerard Lavery Lederer Gerard.Lederer@bbklaw.com Joseph Van Eaton Joseph.VanEaton@bbklaw.com Contact Information Best Best & Krieger 1155 Connecticut Ave. NW Suite 1000 Washington DC 20036 Phone: (202) 785-0600 Fax: (202) 785-1234 Cell: (202) 664-4621 Website: www.bbklaw.com