Amid the legislative chaos of this year’s lame-duck session in Lansing, local officials in Grand Rapids and elsewhere are concerned over revenue cuts that could impact local programming while benefiting large telecommunications and cable companies.
The threat is two-pronged.
Last month, state lawmakers sent a bill to Gov. Rick Snyder that would reduce the amount companies like AT&T pay to local governments for space on utility poles for building out emerging broadband service.
The second is a September proposal by the Federal Communications Commission that could effectively eliminate annual payments from companies like Comcast to use public rights of way. These are known as “franchise fees” and are capped at 5 percent of the provider’s gross revenue from cable.
While S.B. 637 does not address franchise fees, critics say cable companies will likely follow internet and cellular providers in seeking fewer regulations and lower fees to use public rights of way for their network infrastructure.
The revenue from franchise fees allows for local public access “PEG” content provided through cable companies, which stands for public, educational and government programming. In Grand Rapids, these include GRTV channels 24 and 25.
The Grand Rapids Community Media Center — which provides programming through the Wealthy Theatre, 88.1 WYCE-FM, The Rapidian and GRTV — says the proposals could eliminate millions of dollars of annual funding from its budget.
The FCC proposes to count in-kind contributions like free or discounted cable and access to facilities or equipment toward the franchise fees. As a result, municipalities may be forced to pay for these channels, which could cost millions of dollars, or give them up.
Linda Gellasch, executive director of the Grand Rapids Community Media Center, says paying to access those PEG channels would be “prohibitive.” Franchise fees, which are first passed through the city, currently make up nearly 50 percent of the CMC’s funding, she said.
“Our organization was built on this. These channels are the public soapbox,” Gellasch said. “It will mean some severe cuts.”
The Grand Rapids Community Media Center was formed in 1980 for running public access channels. Gellasch says CMC “leverages” franchise fees to support other media platforms through Wealthy Theatre and WYCE, for example. Franchise fees also have paid for equipment and studio space for GRTV.
“It would impact across the board the media platforms we have here,” Gellasch said, adding that it’s part of an ongoing effort spanning more than a decade to reduce regulations and fees around large companies using public rights of way.
The FCC rule was proposed in September and is currently in the public comment phase.
While the proposed FCC rule is a direct threat to CMC’s budget, S.B. 637 could slowly erode the amount cable companies pay to municipalities for accessing public property for its cable and fiber network, critics say.
Gellasch says it’s unclear what fiscal impact the two proposals would have on local revenue, but she said the city “will lose several millions of dollars.”
Mike Watza, a Detroit-based attorney and general counsel for PROTEC, which advocates for municipalities on rights-of-way issues, called the FCC’s proposal “a huge reversal of policy.”
It’s a reversal backed by the trade group NCTA — The Internet & Television Association because it would prevent municipalities from overcharging cable companies fees and other in-kind contributions to use public rights of way. Across the U.S., cable operators pay about $3 billion annually in franchise fees to state and local governments.
“Unfortunately … a number of jurisdictions have come to rely on the franchising process not as a means of encouraging the deployment of valuable service in their communities, but as a means of leverage to exact financial commitments and obtain products and services paid for by cable operators and their subscribers,” the NCTA said in comments submitted to the FCC last month.
The group adds that “duplicative or onerous regulations and fees and other regulatory obstacles hinder the deployment of new facilities and services and ultimately raise costs for consumers.”
Municipalities are similarly concerned about S.B. 637, which cleared the Legislature late last month. The bill streamlines the permitting process for telecommunication companies to install small cell wireless facilities on utility poles for up to $200 per device.
“All of these efforts by telecoms have been driven by money, period. They want a reduced rate,” Watza said. “This bill is totally one-sided and gives them taxpayer-supported rights of way essentially for free, and we get nothing in return. It’s as insidious as anything that’s going on out there.”
Bill supporters say it will help expand broadband to rural areas — and the state’s competitiveness — while streamlining the permitting process across all 83 counties, including with uniform fees. Supporters include major telecom companies like AT&T, Verizon and Sprint, as well as the Michigan Chamber of Commerce and several local chambers.
To Watza’s “disappointment and surprise,” the Michigan Municipal League was neutral on S.B. 637.
John LaMacchia, assistant director of state and federal affairs for MML, said the group “decided early on” to seek amendments to the bill that had bipartisan support and a “high likelihood of passing.” S.B. 637 passed the Senate 33-3 in March and the House 74-35 on Nov. 28.
“We were faced with a difficult decision,” LaMacchia said. “We took a neutral position to secure items we gained in negotiations.”
Those gains include protections for historic, downtown and residential districts; clarifying the permitting process; and setting procedures to remove equipment when it’s no longer operational.
LaMacchia acknowledged that municipalities already are facing a battle over revenues at the FCC.
“There’s going to be an impact no matter what,” he said. “Our objective was to try and find the best policy we possibly could while understanding the hurdles that were in front of us.”
Although S.B. 637 doesn’t address franchise fees, critics say the two issues are linked and that cable companies will seek a similarly favorable deal for access that’s allowed under the bill.
“That’s how things slide on the slippery slope,” Watza said. “We’ve been warning about this for 20 years.”
Grand Rapids Mayor Rosalynn Bliss sent an Oct. 3 letter to state lawmakers opposing S.B. 637, saying the city is already successfully working on small-cell permits with Verizon, AT&T and Mobilitie. Of 141 permits submitted to the city between the three companies, 78 have been approved while 35 are still under review, according to city data. Bliss notes that the Grand Valley Metro Council has a similar permitting process with more than a dozen communities.
“Collectively, we believe that our story proves that a collaborative and consistent approach to permitting for small cell technology has been achieved, which has the dual benefit of deploying this technology while recognizing the need for local stewardship of the public right of way,” Bliss wrote in her letter.
City spokesperson Steve Guitar said while Grand Rapids doesn’t have an official position on the FCC proposal, it uses franchise fees to fund “various public and private communications tools. The City has significant concerns with the proposed changes.”
According to Gellasch at the Community Media Center, the issue around local control over rights of way was overshadowed by lame-duck bills like paid sick leave and minimum wage, while the controversy over net neutrality has overshadowed franchise fee cuts.
“This represents a similar limiting of public access and free speech,” Gellasch said.