Cable veteran and Cox Arizona VP Ivan Johnson is on a mission. "The cable industry needs to wake up to the fact that while we still view cities as partners, the reality is that what we’ve been paying for that partnership has made it a one-way partnership…a legal form of extortion," he says. "This is a nationwide inequity that needs to be changed." Johnson made a start, along with Cox Arizona’s legislative team and the Arizona Cable Telecommunications Association. In March, Gov. Janet Napolitano (D) signed the Arizona Cable Customer Tax Relief Act. The bill’s supporters say it blocks cash-strapped cities from using Arizona cable operators as easy targets. Among other things, it caps franchise fees at 5% and bans the use of in-kind, channels, capital grants or future taxes/fees as a condition of obtaining a new or renewed franchise. A former NCTA official, Johnson spoke about why the cable operator-urban market relationship must change. Why is this legislation significant? For the first time [cable] has finally stood up on its hind legs and said, "There’s an inequity in terms of right-of-way users." What cities have historically gotten out of cable operators for using the same dirt that the electric, gas and phone companies have been using makes no sense. The legislation in Arizona was the first one in the nation that did something about that. What are the prospects for this becoming a larger fight? You’re starting to see people in the states look at the right-of-way inequities. The governor of Kansas has signed something that’s ratcheted back what cities can extract from cable operators. Virginia has done something similar, but I don’t think it has ratcheted it back far enough. Are you encouraging other Cox systems to join this crusade? Yes, absolutely. But it’s a very difficult paradigm to change. Still, I think we’re seeing some progress. I think Kansas is partly a result of what happened in Arizona and in Virginia, at least on the part of Cox people. There was an awareness of what happened in Arizona. All the cable operators here in Arizona were supportive of us. Why did cable enter into these lopsided franchise deals with cities in the early ’80s? In the 1980s we didn’t have a lot of experience in urban markets, so everybody did what we thought made sense. Cable companies thought we were going to have a monopoly, the golden goose—a very deep well of wealth. If you look at what cable companies offered to win the very competitive franchise wars of the very early ’80s, it was ridiculous. We promised too much and the cities ended up demanding too much. Cities would say, "You want a license? You have to give me this, or I’m not going to renew." And then? Competition really started to ramp up—that changed the way we dealt with cities. So about two and a half years ago, for the first time that I’m aware of, the obligations in a franchise renewal with a city were rolled back. We did this in Mesa, Ariz. We eliminated capital grants, dramatically reduced public access and equipment and got a hard reduction in the franchise fee of about 1%. Even after all that we’d still be paying more than anyone else for using that right of way. When did you decide to take this strategy to the legislature? Right after Mesa, about two and a half years ago. With the telcos bearing down on cable, is this the right time to rock the boat with the cities? First, look what happened in Texas [on the franchise bill] with our historical allies, the cities. The cities bailed out early in that process and Texas came up with an absolutely terrible piece of legislation. Look, we have a good relationship with cities in Arizona, I still consider them my partners. But it’s amazing to me still that anyone can say we are not a good partner when at the end of the day, even in Arizona, what we continue to contribute to the cities in the way of in-kind and hard dollars continues to be greater and in most cases twice what anyone else who uses the right of way contributes. That paradigm needs to change. And that doesn’t make us bad guys because we’ve recognized that the environment’s changed.

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ACAC Shaken by USTelecom STIR Proposal

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