Cable television providers are now charged a 5 percent franchise fee for all television, pay-per-view and other video services they provide in the unincorporated areas of El Paso County, including Falcon. The county states the fee revenue is in exchange for the providers' use of rights of way in county land; the revenue will be used to fund a government access channel.
In July, the El Paso County Board of County Commissioners approved a new franchise agreement to allow Century Link, previously Qwest Communications, to begin offering a service similar to cable television, known as Internet Protocol Television. Because of the similarity to end users of IPTV to traditional cable, including the use of rights of way, the county had the authority to require Century Link to enter into a franchise agreement similar to existing cable providers, according to the resolution.
The charge of a franchise fee by local governments such as cities and counties is authorized by the Federal Communication Commission and federal law. According to the Cable Communications Act, a franchise fee of up to 5 percent can be charged to cable providers for the use of government owned rights of way. This revenue is similar to franchise fees and other taxes charged by the state and federal governments on Internet and telephone service. Fees for the use of radio bands are charged to radio and television broadcasters and cellular phone providers. The CCA and El Paso County's agreements with cable providers require that the revenue is used for public, educational and government channel service that cable providers must also carry to customers.
The 5 percent fee is calculated on all video-related services on a subscriber's bill for each month. This includes basic cable service, all additional premium channel services, initial installation charges and pay-per-view purchases, according to the FCC. If cable is bundled with other services, such as Internet and phone, additional fees for those services are already levied by the state and federal agencies overseeing those industries.
According to the CCA, “A cable operator may designate that portion of a subscriber's bill attributable to the franchise fee as a separate item on the bill.”
Cable subscribers in unincorporated El Paso County could see an increase in their bill under a new line item in the detailed section of the bill describing the El Paso County franchise fee. Subscribers of Falcon Broadband will see this on their October bill, said Ben Kley, general manager.
“We are not going to surprise customers with a rate increase without explaining where the money is going and why,” Kley said. Providers can include the fee as an expense in their top line revenue, but they will probably have to increase their base rates by that amount to continue covering their existing expenses and income, he added. Comcast representatives also informed commissioners that their customers will see an increase in their bill with a similar new line item.
The county's franchise agreements with cable providers allow the companies to do business in unincorporated El Paso County and make use of public rights of way for utility corridors and cables buried along roadways. The agreements put in place in 2006 stated the county had the ability to enact a franchise fee between zero and 5 percent. However, the county had not chosen to enact the fee until now, according to audio recordings of a July 3 county commission meeting.
Commissioner Amy Lathen, who represents Falcon, said the agreement to allow Century Link to provide television service in El Paso County made it necessary to collect the fee from all the providers. “If Century Link comes in and is charged for rights of way access and another provider isn't, then that gives Century Link an unfair disadvantage in the market. And the law states that can't happen,” she said.
“The fee is mandated for access to public rights of way. The money is restricted and some of it will be used for public communication.”
Kley said the public should be compensated for providers using public lands and resources. “When we or any provider installs new cable or makes repairs, we have to pay permit fees to the county just like anybody going to regional building to compensate the county and the public for the inconvenience and any damage to roads or public land,” Kley said. “This new fee is for the county to create the new governmental video channel.”
At a presentation to the Eastern Plains Chamber of Commerce Sept. 5, Kley said that at a full 5 percent of gross video revenues a county governmental channel would be more expensive to customers than 98 percent of the non-premium channels they receive. He said an average customer with a $70 cable bill for video will pay $3.50 for the county channel, but is only paying $1.50 for USA Network and less than $1 for the NFL network or ESPN2.
Imad Karaki, support services director for the county, told commissioners at the July 3 meeting that a county government channel would have been helpful to residents during the Waldo Canyon fire. “One of the challenges we've had is putting out information that is consumable and useful to our citizens as they have been evacuated and as they are trying to find services in the community. All that confusion comes in an incident of this magnitude,” Karaki said. When asked if the press conferences and commercial television coverage wasn't adequate, he said, “There is a lot to be said for people who have specific information on these items to be able to create short videos.”
Subscribers of satellite television service such as DirecTV and Dish Network will not be charged the franchise fee. However, those residents will not have access to the county government channel, and the content on the channel cannot be streamed from the county’s website.
“We always knew the county had the option of implementing this fee, but with the agreements as written it also could have been a 1, 2 or 3 percent fee to pay for the channel they want,” Kley said. “They didn't have to go for the full 5 percent right off.”
Lathen said the county will review whether the 5 percent amount is appropriate. “We need to make sure that the percentage is the right amount. If we really only need 2 percent, then we need to review it. I've asked staff to get back to me with that,” she said. “I want to be really careful that it's not excessive, if it's going to be passed on to consumers, unless it is federally mandated or necessary.”