The Seattle City Council on Monday unanimously approved legislation that ditches a longstanding cable franchise district system — a decision that could impact how much Seattleites pay for cable TV, what type of service they receive, and how CenturyLink rolls out its new fiber-optic TV service.
More than four decades ago, the city created franchise districts that required cable TV companies to provide service to all neighborhoods within a given area. For example, if you served customers in the Ballard, you would also have to offer service to people in Magnolia and Interbay within seven years since the neighborhoods are in “Cable Franchise District I.”
The idea was to prevent TV providers from hand-picking affluent neighborhoods to serve, and potentially leaving low-income households without access to cable TV.
On Monday, though, councilmembers agreed to eliminate the five franchise districts in a deregulation that the city says will increase competition. The new rules will go into effect in 30 days.
“The geographic divisions no longer make sense in a City where every home now has access to cable services,” the city’s Department of Information Technology wrote in a bill summary. “Instead of promoting cable access to residents, the districts now serve as barriers to competition because existing Code provisions require a franchise grantee to build a cable system for an entire cable district.”
Councilmember Bruce Harrell, who sponsored the legislation and heads up the council’s Technology Committee, said the new laws are “a good thing for the city.”
“We have allowed or encouraged cable providers to put their capital into different communities where they are not operating now,” he said at Monday’s meeting. “That’s how we get the competition that we want.”
As a way to ensure that service is available to under-served communities, Harrell made amendments to his original bill that require providers to submit quarterly reports to the Office of Cable Communications. These reports must verify that the companies — within two years for new entrants; immediately for renewed contracts — are offering cable to a “significant portion” of households that fall below the median income level.
The legislation does not define what “significant portion” means; that will be decided by the Office of Cable Communications, which is also responsible for analyzing the quarterly reports and imposing potential penalties to companies that do not meet requirements. An internal memo penned earlier this month shows how the city was considering a specific minimum percentage of low-income households to be served, but the council ultimately was OK with the “significant portion” language.
In an interview with GeekWire today, Harrell said that using strict percentages can be “quite frankly, completely arbitrary.”
“In some cases, 20 percent may make sense,” Harrell said. “In other cases, 50 percent might make sense. I didn’t want to be arbitrary.”
At Monday’s meeting, Harrell thanked fellow councilmember Nick Licata for helping drive the amendments.
“By having the cable companies come to the city with quarterly reports, we can assure that our low-income neighborhoods will not be ignored and will receive adequate cable coverage,” Licata said.
“The spirit of this legislation is to create competition, not to comply with monopolies,” Harrell added. “We don’t want a monopoly.”
The legislation also includes other requirements for providers related to customer service and multi-family buildings. For example, companies must now provide a human customer service representative on the phone within three minutes. Cable TV providers are also now restricted from imposing long-term exclusive contracts on multi-family dwelling unit buildings.
But the elimination of franchise districts is perhaps the most impactful change. So what does this mean for consumers and companies like Comcast, Wave Broadband, and CenturyLink?
As city leaders have reiterated, competition may increase. But whether that drives down overall prices is another story.
“I don’t think that by itself removing the regulations on the so-called cable districts will be sufficient to inspire this sort of competition that we are talking about,” councilmember Kshama Sawant said on Monday.
Comcast, which provides TV, Internet, and phone service to approximately 200,000 Seattle residents, charges anywhere between $16.40 to $142.99 per month for cable TV. Wave Broadband, which serves 13,000 residents, offers its basic service at $25.95 per month, and its upper-level product at $82.04 a month.
However, the company to watch closely is CenturyLink.
CenturyLink currently offers phone and Internet services in Seattle, and did not previously have a cable TV franchise district like Comcast and Wave. But the company has started to roll out a fiber gigabit Internet product in ten Seattle neighborhoods. This was largely made possible after the City Council approved legislation in September removing “excessive administrative requirements” for companies that want to build broadband utility boxes in neighborhoods. The city does not regulate Internet via franchise agreements like it did with cable TV.
This rollout is important to note because CenturyLink’s new TV product, called Prism TV, is delivered not via cable or satellite but rather fiber — just like the company’s new Internet offering. Former City of Seattle CTO Bill Schrier noted this fact in a piece he wrote when CenturyLink announced plans for a gigabit Internet service in Seattle seven months ago.
“The holy grail of competition, of course — and the cash cow for Internet providers — is Cable TV,” Schrier wrote on Crosscut. “Which highlights one possible reason CenturyLink is so eager to bring true fiber to Seattle.”
Prism TV costs anywhere from $49.99 a month to $94.99 a month in markets where it is available, and CenturyLink allows customers to bundle both Prism TV and Internet.
CenturyLink also charges $79.95 per month for its gigabit Internet service when bundled with other qualifying services like a home phone or TV subscription, usually for a minimum total combined cost of $115 per month.
It’s unclear how much CenturyLink would charge for Prism TV in Seattle or a TV/gigabit Internet combination. But with the council’s decision on Monday, it has the green light to sell something like that as soon as next month — and certainly offer some competition to Comcast, which recently increased Internet speeds in Seattle.
Sue Anderson, CenturyLink’s vice president of operations for Washington, told GeekWire that the new ordinance “will encourage competition in the market that will benefit Seattle consumers and businesses, regardless of size or income, by driving lower and more competitive pricing.”
Anderson also noted that CenturyLink is “committed to serving all types of neighborhoods in the Seattle area, regardless of income level.” She explained how the company is already offering its gigabit Internet in “diverse neighborhoods including Beacon Hill, West Seattle and Ballard.”
“We believe that serving populations at all income levels is the right thing to do for the community and also makes good business sense,” Anderson said.
Anderson did not comment on when and where Prism TV might be offered in Seattle.
CondoInternet, a subsidiary of Wave Broadband, began offering fiber Internet service to residents in Eastlake in November for $60-to-$80 per month. Comcast said earlier this year that it will roll out gigabit Internet some time in 2015.
“The revised cable codes will not impact our ability to continue to expand our fiber optic infrastructure and deliver services to our Seattle customers,” said Steve Kipp, VP of Communications for Comcast Washington. “While we already serve the vast majority of Seattle, we welcome the opportunity to extend our services beyond our current boundaries if it makes good business sense to do so. It is important to note that Comcast has consistently offered its entire range of services, including all available cable television packages as well as its fastest available Internet speeds, to all customers within its service area.”
It will be interesting to see how Comcast, CenturyLink, Wave, and any other companies package their TV services in particular neighborhoods now that the franchise district rule is gone. The legislation will go into effect at a time when many Americans are canceling their cable subscriptions as more low-cost streaming TV options become available.
“The focus of Seattle’s new cable regulation appears to expand where providers like Wave can offer our TV services within the city,” said Wave executive vice president Rob Katz. “This is good news for us and consumers because it gives them more choices.”
Mayor Ed Murray, who supported the new legislation from the get-go, has been vocal about having more competition for TV and Internet. After Comcast’s $45 billion purchase of Time Warner Cable in February 2014, Murray jumped on Reddit to answer questions about his blog post that argued against Comcast’s deal.
“While the City does not have the power to prevent Comcast’s $45 billion purchase of Time Warner, we can take steps to make sure competition is stronger in Seattle,” Murray wrote. “One step will be to evaluate our City’s relationship with Comcast.”
Seattle’s franchise agreement with Comcast, which will be updated with the new legislation, expires January 20, 2016. The city has spent the past few years reviewing this relationship and reaching out to the public for input.
In a statement, Murray said that Monday was “an important day for Seattle with the passage of our new cable code.”
“The revised code encourages the entry of competitive cable television providers throughout the city,” Murray said. “Competition is the best way to help our community realize lower cable television prices and improved customer service. In addition, the code reflects our commitment to equity by requiring providers to serve diverse communities and neighborhoods.”
Meanwhile, the city is also studying the cost and implications of a publicly-funded Internet system, and meeting with private companies who are interested in partnering with the City and using its dark fiber. In 2013, the city’s plan to have Gigabit Squared implement a fiber-to-the-home network crumbled after Gigabit failed to raise adequate funding.
Harrell said today that the new cable TV legislation is completely separate from the city’s municipal broadband plans.
“This does not at all reduce the ability to build a municipal broadband network,” he noted.
Perhaps the strangest part of the city’s decision on Monday was a press release announcing the vote. In it, Harrell is quoted with this statement: “Coach Pete Carroll’s philosophy is a relentless pursuit of competition. We represented that philosophy in updating the cable code law with a focus on enhancing competition to stimulate more options and improved customer service to benefit our residents.”
Harrell is referencing Seattle Seahawks head coach Pete Carroll. Indeed, Carroll has preached the “relentless pursuit of competition” since he arrived in Seattle five years ago.
But the football analogy seemed a bit out of place in a city-issued press release about a completely unrelated topic — and that’s exactly what Harrell’s office was hoping for.
“I thought we would spice it up,” Harrell said. “Don’t you get tired of the same old boring quotes?”
Harrell actually has years of experience in the telecom industry, which he says helps him examine issues like revising cable TV franchise agreements. In the 1990s, he was a lawyer for U.S. West — a telecom company acquired 15 years ago by Qwest, which was then acquired by CenturyLink in 2011.
Harrell said there were no potential conflicts of interest with this particular legislation, given his experience with U.S. West.
“CenturyLink is a completely different company than U.S. West,” he said. “I don’t know any of these people now.”
[Editor’s Note: CenturyLink and Wave Broadband are GeekWire annual sponsors.]