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From: Holman Courier

Wisconsin Video Franchise Bill Costs State Money

April 12, 2007
By Jo Anne Killeen

While the mantra behind a proposed cable franchise bill is to get government out of the way of the free market in order to increase competition, proposed legislation to take over franchising of cable companies would create eight new government jobs, increase government costs and reduce state and local sales tax revenues.

It would also eliminate a source of revenues received by municipalities, according to the Wisconsin Department of Revenue.

Wisconsin municipalities could lose up to $5.4 million per year if proposed legislation to transfer cable franchising authority from local governments to the state is enacted. In addition, state sales taxes might decrease an estimated $5.4 million, it will cost the state almost half a million dollars per year in administration that is not currently budgeted, and local sales taxes might decrease by up to $400,000 per year under the bill.

The legislation, known as the Video Competition Act (AB 207) is on the fast track for Assembly floor debate by the end of April, with Assembly Speaker Mike Huebsch, R-West Salem, signing on as co-sponsor.

The Revenue Department recently issued a report on the fiscal impact if the bill becomes law. According to the report, “cable franchise fees would decrease by $5.4 million, with the assumption that ensuing competition would reduce cable prices.”

Municipalities had been receiving up to 5 percent of franchise fees, which could be used for general revenue or specific purposes. The local governments would continue to receive franchise fees, but a smaller amount.

The new bill excludes from the definition of “gross revenue” amounts billed to recover taxes, fees, surcharges or assessments; certain charges related to telecommunication services, information services and advertising bundled with video services; late payment charges; and maintenance charges.

Two departments at the state level would have to incur expenses for new staff, technology, and office equipment. The Department of Financial Institutions, which would have the authority to grant the franchises, estimates three people would have to be hired and with salaries, fringes, supplies and system development would cost $259,000 for the first year and $219,000 per year in subsequent years.

The Department of Advertising and Trade Consumer Protections would have to hire five additional staff with accompanying annual expenses of approximately $312,000 per year.

For the past three years, telecommunications complaints as a category have ranked second in the total number of complaints received. In 2006, the department handled 1,499 written telecommunications complaints.

Of those, though, an average of 132 annually are related to cable TV service. The DATCP is projecting an increase in complaints similar to the number of complaints currently received in the telecommunications category.

While the bill would hurt municipalities, consumers are expected to benefit due to the increase of competition in the markets. The Revenue Department estimates savings to consumers on average to be $7.39 per month. However, consumers might be paying more in local taxes to make up for the revenue shortfall in their respective municipality.

In 2006, franchising fees brought $114,331 in revenue to Onalaska. This amounts to 32 percent of all of the city’s licensing fees and 1.54 percent of the overall budgeted revenue.

The village of Holmen collected $18,800 in cable fees in 2006, which is 100 percent of the licensing fee revenue. The amount represents 1 percent of the total budgeted revenue for the village.