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from: Crains Detroit

Detroit, Comcast spar over fee
By Amy Lane
3:01 am, August 6, 2007

LANSING — A dispute between the city of Detroit and Comcast Corp. is driving legislation that would strengthen cities' ability to require certain fees from providers of cable TV and similar video services.

At issue in Detroit and in Senate and House bills is a fee to support public, education and government, or PEG, access channels. Michigan's December 2006 video-franchise law provided for PEG fees of up to 2 percent of gross revenue and a separate annual franchise fee of up to 5 percent of revenue, as part of a new franchising system for telecommunications companies like AT&T Inc. and cable providers like Comcast.

But the way the law is written allows companies with franchise agreements existing at the law's January inception to avoid, in new agreements that they sign, paying the 2 percent PEG fee if they weren't paying it previously. That's become an issue in Detroit where Comcast, which previously paid no Detroit PEG fee, balked when the city tried to assess the 2 percent fee in its new agreement.

The city filed a Michigan Public Service Commission complaint to require Comcast to pay the fee and is now seeking legislation that would accomplish the same result. The city estimates the fee will generate about $1.6 million annually.

“We do believe that Comcast should not be treated differently than any other video service provider,” said Lucius Vassar, Detroit's chief administrative officer.

Comcast maintains it is following state law. In an April letter to the head of the Detroit Cable Communications Commission, Juan Otero, Comcast's vice president of government affairs, said it was appropriate for Comcast to decline to pay the fee because prior agreements did not call for one.

In an interview last week, Otero said conversations with the city are ongoing, but he declined to discuss specifics. He said there are a “small number” of other communities in which Comcast is disputing the PEG fee.

“We are working diligently with our local communities to try and get through this process in a way that meets our needs and comports with the state law,” Otero said. “There's a lot of communities and frankly a lot of terrain that we're working through.”

The company's goal, he said, is to “follow the state law to the letter.”

But state Sen. Buzz Thomas, D-Detroit, said the law contains an inadvertent loophole that “completely goes against the spirit of what we tried to accomplish, which was to level the playing field.”

Detroit's franchise agreement with new entrant AT&T, for example, contains the fee. AT&T is signing franchise agreements with communities as it introduces U-verse, a product that combines digital TV and high-speed Internet access.

Vassar said Senate Bill 636, sponsored by Thomas, clarifies the Legislature's intent for uniformity among all providers.

Thomas and others said the 2 percent fee was designed to help compensate communities for the potential loss of in-kind services, such as connections among buildings and free cable to municipal offices, schools, libraries and public-safety centers. Cable companies have provided such services under previous franchise agreements but are not required to do so under Michigan's new law.

Senate Energy Policy and Public Utilities Chairman Bruce Patterson, R-Canton Township, has agreed to hold a hearing on Thomas' bill.

House Energy & Technology Committee Chairman Frank Accavitti, D-Eastpointe, said he also plans to look at the issue. House Bill 5047, sponsored by Bert Johnson, D-Detroit, is the counterpart to Thomas' bill in the House.

Amy Lane: (517) 371-5355, alane@crain.com