FCC is at it again: Proposed changes to benefit big cable, harm local access channels

Editor’s Note: This story has been revised to include a letter from state Sen. Adam Hinds to FCC Chairman Ajit Pai concerning the proposed rule changes.

Berkshire County — If new rules are adopted by the Federal Communications Commission, local public-access cable stations such as CTSB could go out of business, leaving local residents without options for keeping a close eye on their town governments or school districts.

As it did last year with the repeal of net neutrality, the FCC has stirred up a hornet’s nest of discord in Berkshire County and beyond. Those who run the county’s three access channels say the new rules, which would severely impact their revenue streams, would likely put them out of business and deprive the public of valuable programming available nowhere else.

Federal Communications Commission Chairman Ajit Pai

Under existing FCC rules, towns and cities nationwide are allowed to negotiate franchise agreements with cable television providers. Those municipalities can require in the agreements that the cable companies meet certain community needs such as setting aside channels for public, educational or governmental (PEG) channels. These needs are funded by a franchise fee in the cable bill customers receive each month.

However, the FCC’s proposal would permit cable companies to assign a value to these channels, deem them in-kind contributions and then subtract that amount, and the value they place on any other in-kind contributions, from the franchise fees the cable company pays the local community, known legally as the local franchising authority.

These in-kind contributions could include free or reduced cable connections to town halls, backhaul of signals, interactive program guides, or perhaps channel spectrums allotted to the PEGs themselves, according to the northeast region of the Alliance for Community Media, a trade organization.

“The result would be to charge these ‘expenses’ back against the franchise fee and essentially undermine the intent of the Cable Act,” Mike Wassenaar, spokesman for the alliance, said in a news release. “The national impact on PEG Access and local municipalities could be devastating.”

That means those who enjoy catching up on what’s going on in their town halls could be in for a shock if the new rules are adopted. That also means bad news for fans of open government.

Shawn Serre. Photo courtesy Pittsfield Community Television

“Our work is critical, especially in the small towns,” Shawn Serre, executive director of Pittsfield Community Television, said in an interview. “If they put us out of business, we can’t do any of these things.”

To make matters worse, cable access channels have seen their revenue streams shrink as more people abandon cable in favor of various internet-based video streaming devices such as Roku, Amazon Prime Video and Apple TV. So when consumers cut the cable television cord, they no longer pay a franchise fee, which reduces the operating revenues of the PEGs.

To view the proposed FCC rule changes, click here. Or click here to read the FCC press release, which essentially functions as a brief executive summary. One can only guess as to what the FCC’s motives are, but the sources The Edge contacted were not shy about doing just that.

“Corporate greed—that’s all this is,” Serre said.

Asked whether the new rules were designed to steer new revenue streams toward the cable companies in an era of cord-cutting, Serre replied, “That’s pretty much the way it’s going to play out.”

“They’re trying to offset the losses,” added Leo Mahoney, station manager of Community Television of the Southern Berkshires in Lee. “The cable companies are bleeding because of the cord-cutters. This move is a way for them to start recouping.”

To be fair, the rule changes have been proposed by the FCC itself and not Charter, Comcast or any of the other cable behemoths. But suspicions run deep that the cable lobby had exerted lobbying muscle on the FCC for rules changes that would enhance revenues in an era of some decline.

Media and First Amendment attorney Paul Rapp. Photo: Richard Lovrich

Paul Rapp is an attorney based in Berkshire County whose practice includes media and First Amendment law.

“It’s nonsense,” Rapp said of the proposed rule changes. “It’s just more of the FCC giving away money to big cable, which they’ve done repeatedly since Pai became commissioner.”

It was a reference to Ajit V. Pai, a former associate general counsel at Verizon, who was appointed chairman of the FCC by President Trump and was said to be the prime impetus behind the controversial repeal of net neutrality.

One of the premises of that move—as in the case of the current proposed rule changes, as well—is that putting corporations on a longer leash will uncork economic potential. Rapp threw cold water on that idea.

“There is the old mantra that, if you loosen regulations, it will spur new investment,” Rapp opined. “I don’t buy it. These are government-created monopolies handed to publicly traded companies and they have a duty to maximize shareholder value.”

Linda Miller, center, chair of the Five Town Cable Advisory Committee at a December 2017 meeting. To her right is member Steven Moritz of Lee and to her left is Rene Wood of Sheffield. Photo: Terry Cowgill

“It’s happening because a corporation named Charter asked for it,” said Linda Miller, who chairs the Five Town Cable Advisory Committee. “That’s called Trump tactics.”

Well, why is the FCC proposing to change the rules to make it difficult, if not impossible, for the PEGs to survive? The text of the proposed rule changes is almost 32 pages long and cites lots of case law. The headline on the press release from the FCC calls the rule change a “proposal to reduce barriers to infrastructure investment.”

A one-page statement from one of the FCC commissioners, Michael O’Rielly, makes the case more succinctly for the proposed rule changes:

First, it correctly proposes to count cable-related ‘in-kind’ contributions against the cap on franchise fees. The absence of such a limitation leaves franchise authorities with the ability to end-run the fee cap, making a mockery of the law.

And this isn’t simply a theoretical issue, as there are concrete instances in which franchise authorities have already abused their powers to force these ‘contributions.’

Beyond violating their legal authority, such efforts have many destructive impacts, including directly increasing consumer costs and indirectly harming the ability of providers to deploy and offer service.

In other words, towns have “abused their powers” and coerced the cable companies into paying for items that should more properly be funded by others. And the franchise fees directly increase consumer costs, indirectly harming the ability of cable companies to expand and innovate.

Michael Powell, president of the Internet & Television Association and former FCC chairman

When contacted by The Edge, Charter-Spectrum, the widely unpopular cable company that serves almost all of Berkshire County, simply referred us to a 66-page comment posted on the proposed FCC rule changes by the Internet & Television Association (formerly the National Cable & Telecommunications Association), a trade organization representing cable companies and currently headed by former FCC chairman Michael Powell.

Not surprisingly, that document “applauds the Commission’s ongoing efforts to reduce barriers to deployment of advanced cable infrastructure for broadband.” The association further says the proposed rule changes “would help rein in abusive practices and overreaching by franchising authorities, who have long ignored the five-percent cap on franchise fees and the clear limitations on their ability to regulate non-cable services offered over cable systems, to the ultimate detriment of consumers.”

Southern Berkshire residents have had a rocky relationship with Charter from the get-go. Not long after acquiring Time Warner in 2016, Charter angered customers by insisting that basic cable subscribers rent digital-analog converters.

In addition, even under pressure from high-profile Massachusetts lawmakers, Charter has refused to restore the Springfield channels it deleted from its lineup, leaving viewers with local news from Albany and environs. And last month, angry residents of Egremont voted to abandon an agreement with the company to wire the town after being notified it would cost Egremont taxpayers an additional $600,000.

Sen. Ed Markey, D-Mass., at a town hall-style meeting at Barrington Stage Company in Pittsfield in October 2017. Photo: Terry Cowgill

In Massachusetts, advocates for the local access channels have turned to Sen. Edward Markey, an acknowledged leader on telecommunications issues, for help. Markey has serious concerns about the proposed FCC rule changes.

Markey and 10 other senators wrote an Oct. 29 letter to Pai objecting to the fact that the proposal would “alter, at the cable operators’ discretion, the terms of the local franchise agreements,” thereby putting “at risk critical funding for public, education, governmental stations, as well as broadband connections to schools and other public buildings.”

Indeed, it appears the new rules, if approved, would simply void the applicable sections of the current franchise agreements.

Other senators signing the letter include Sens. Tammy Baldwin, D-Wisc.; Maggie Hassan, D-N.H.; Ben Cardin, D-Md.; Jeff Merkley, D-Ore.; Bernie Sanders, I-Vt.; Gary Peters, D-Mich.; Ron Wyden, D-Ore.; Pat Leahy, D-Vt.; Richard Blumenthal, D-Conn.; and Elizabeth Warren, D-Mass.

Markey said there are more than 1,500 public, educational and governmental studios/operations and an estimated 3,000 PEG channels in the U.S. Religious programming, for example, represents 30 percent of local access programming. Tens of thousands of hours of programming is produced by veterans, seniors, the disabled and ethnic, minority and second language groups, Markey said.

Lee High School sophomore Quinn Burnell on the set of ‘The Buzz,’ a CTSB program that showcases news in the region’s schools. Photo courtesy Community Television for the Southern Berkshires

Most, if not all, PEG organizations are nonprofits. CTSB, a 501(c)(3) nonprofit, is a public-access television station available partly online and fully to Charter-Spectrum cable TV subscribers in Great Barrington, Lee, Lenox, Sheffield and Stockbridge. It produces not only videos of government meetings but educational shows such as “The Buzz,” a new show started by a Lee High School student.

The channel has an annual budget of roughly $400,000 that covers the salaries of four staff members and the debt service of its new studios and solar array at Quarry Hill Business Park in Lee. Click here to see CTSB’s most recently available IRS 990 filing. PCTV is a larger operation and has an operating budget of roughly $700,000. Click here to see PCTV’s 2016 IRS 990 filing.

Mahoney said CTSB has enough cash in reserve to meet expenses for only about a year. He said the agreement for the five towns in Charter’s southern Berkshire franchise does not expire until 2023. The region served by PCTV has six years remaining on its agreement.

The last day to make a formal comment on the proposed rule changes was yesterday, but responses to the comments will be accepted for another month.

“Our constituents watch PEG channels to monitor local government proceedings, hear the latest news from nearby college campuses, and consume other locally produced programming including emergency alerts and directives,” Markey and the other senators said in their letter to Pai. “We fear this proposal will result in a dire drop in resources for PEG channels throughout the nation.”

State Sen. Adam Hinds, D-Pittsfield, has also written a letter to Pai expressing his concerns about the proposed rule changes and the “tentative conclusions set forth” in the FCC document that could impact the PEG channels. Click here to read the full letter. Among the most salient passages:

“These organizations have long worked hand-in-hand with people, schools, organizations and municipalities in my district to improve important television programming to the community,” Hinds wrote.

“This coverage has included important programming such as city council meetings, school committee meetings, graduations, veterans and elderly shows, sporting events and so many other programs. It is difficult to describe the value this programming brings to our residents, our schools and our entire community.”