The 6th Circuit Court of Appeals issued a ruling in City of Eugene v FCC last week that was both disappointing and significant in a good way for community media and PEG channels across the country.
It was disappointing in that it affirmed the idea that so-called “in-kind” benefits, such as free services that companies agree to as part of their contracts with local governments can be classified as “exactions” by the FCC – and then be counted against the 5% revenue cap of franchise fees that local governments derive from cable agreements. The idea apparently is that when a company agrees to an item in a contract, it’s not really agreeing at all and is being forced to agree to an item by local or state government. It’s really quite sad how powerless these multi-Billion-dollar corporations are.
Of course, the record belies this kind of nonsense. If local and state governments could actually force “exactions” from the cable industry, HD would be widespread in communities of all sizes, not just in a few urban markets where local negotiation can actually occur. And the use of Electronic Program Guides would be universal, rather than a rarity.
The bright side of this ruling is the Court accepted our arguments against the FCC that any calculations of the value of these “exactions” should be based on their marginal cost, not on fair market value. This is extremely significant for our members, as the cost of cable service, line drops, fiber backhaul and other necessary services could be prohibitive if their price was set by the cable provider based on a “market”.
I know of at least one public access provider that has given up channel capacity because the local cable company was going to charge thousands of dollars per month on transmission costs to their headend. Similarly, some communities are facing massive bills for cable service to government and school buildings at $75 per account per month – the “fair market value” for the service. If that service was counted against franchise fees, the cable company would actually have to determine the marginal cost of the cable drop according to this ruling.
Further, it reduces the hypothetical cost of a PEG channel radically if the FCC were to ever re-open the issue of valuation of the channels themselves.
All the parties in the case are examining next steps – including re-introduction of the Protecting Community Television Act which gets rid of this “in-kind” scheme altogether. We’ll talk about the ruling and practical impacts this Thursday at our monthly member Public Policy call – I’ll hope you’ll join us. Let us know at email@example.com if you need to Zoom coordinates for this member only call.