Friday, October 28, 2005 - The Progress & Freedom Foundation Blog

Franchising--It's about the taxes

The W$J's article today on the demands local governments have made before allowing Verizon into the local video market lay bare the fact that franchising isn't about management of rights-of-way, or recompense for use of public property, but about taxation and in-kind goodies that localitiies can coax from would-be entrants.

The Journal sets out the buffet of demands localities are making:

In New York state, Verizon faces requests for seed money for wildflowers and a video hookup for Christmas celebrations. Arlington County, Va., wants fiber strung to all its traffic lights so it can remotely monitor traffic flow. Holliston, Mass., is seeking free television for every house of worship and a 10% video discount for all senior citizens. Others want high-speed Internet for sewage facilities and junk yards, flower baskets for light poles, cameras mounted on stop lights and Internet connections for poor elementary students.

Franchising, then, is about taxation by regulation and little more. Of course, there is an agency problem here with local governments. The residents of these cities, I would hazard a guess, would rather have more broadband and video choice and competition than, say, wild flower seed money or free cable for churches (church-state separationists should have a heyday with that one). Nevertheless, the city officials hold a blocking position to new entry and they want: stuff.

The cable industry, meanwhile, is suffering from a slight case of the Stockholm Syndrome. Cable has resigned itself to playing Santa Claus for localities through the franchise agreements. All things being equal, it would be happy to relinquish this role. That said, if cable has to play Santa Claus, then it only follows that telcos get to play Easter Bunny, the tooth fairy or some other beneficent role.

posted by Ray Gifford @ 10:42 AM | Cable , Communications , Universal Service , Wireline