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Cable franchise fees

Hey, remember how the city of Houston had to lay off a bunch of workers to to close a $179 million budget deficit? Well, there’s more where that came from.

The Texas House on Thursday approved legislation that would limit fees telecommunication and cable companies pay cities to use their rights of way, likely opening up a new spending gap of at least $12 million two days after Mayor Sylvester Turner laid out his proposed budget for the upcoming fiscal year.

Senate Bill 1152, authored by state Sen. Kelly Hancock, R-North Richland Hills, passed the House on a 92-50 vote on the third and final reading Thursday. The legislation, which had received Senate approval early last month, heads back to the upper chamber, where lawmakers will decide whether to approve the House version.

The measure would eliminate what cable companies and some lawmakers say is an outdated double tax levied on companies that transmit cable and phone services over the same lines. The bill would eliminate the lesser of the two charges, starting next January.

Opponents say the bill amounts to a gift for large telecom firms, which would not be required to pass the savings on to consumers because the state is barred from regulating cable rates. Turner had urged lawmakers to oppose the measure, saying it would deliver a financial hit to Houston.

Those who back the bill say companies still would pay millions for the remaining charge, arguing that cities would lose only a small portion of their revenue. The House companion bill’s author, state Rep. Dade Phelan, noted Wednesday that only one other state — Oregon — still charges both fees.

Turner blasted lawmakers in a statement Thursday, accusing them of attempting to “unconstitutionally take the value of Houston’s right-of-way” through the bill. He also lauded state Rep. Harold Dutton, D-Houston, for attempting to stop the legislation through a procedural maneuver.

[…]

A Legislative Budget Board analysis determined that Houston would take in $17.1 million to $27.5 million less revenue under the bill. Estimates for other cities include $9.2 million in Dallas, $7.9 million in San Antonio and $6.3 million in Austin.

An updated estimate provided by the city Thursday projected it would receive $12.6 million to $24.4 million less revenue during the 2020 fiscal year, which begins July 1.

It sure has been a great session for cities, hasn’t it? Here’s that earlier story, which I confess I never got around to blogging about. You know who else has had nothing to say about it? Bill King and Tony Buzbee. Way to be looking out for the city’s financial interests, y’all.

As for the fee itself, I can see the argument for getting rid of it, but let’s be clear about two things. One, if you believe this will result in a reduction in your cable or internet bill, I have some oceanfront property in Lubbock you might be interested in. And two, given the financial hit this will impose on cities, would it have killed anyone to phase this in after a year or two, so cities – all of which are required to have balanced budgets – could have had some time to adjust? What exactly was the rush here? Look at the roll call vote, and if you’re in one of those cities – especially Houston – and your Rep supported this, please call their office and ask them that question.

Aereo

From Dwight:

Aereo, which already has disrupted the television landscape in New York City, is coming soon to Houston and 21 other U.S. markets – but only if it survives legal attempts to kill it.

On Tuesday, Aereo CEO Chet Kanojia announced at CES in Las Vegas that the company would embark on a major expansion of its service, which currently is only available in the Big Apple. Aereo will fuel its efforts with a $38 million financing round.

Aereo lets you receive traditional broadcast television on non-traditional devices, streaming the signals to PCs, tablets, smartphones and even Roku boxes. It works by providing each subscriber with his or her own dime-sized antenna – clustered by the thousands in arrays – which then pulls in local signals for each market. The service includes an in-the-cloud DVR so you can pause, rewind and fast-forward shows.

Aereo starts at $8 or $12 a month for a subscription, or you pay $80 a year. There’s also a $1 day pass. You can also try out Aereo, but only if you’re in New York City.

Even though it collects cash from its customers, it doesn’t pay broadcast stations a penny, and that’s caused some consternation – and, as you’d expect, legal challenges.

Here’s more on those legal challenges.

A federal judge in New York ruled in July that the service doesn’t appear to violate copyright law because individual subscribers are assigned their own, tiny antenna at Aereo’s Brooklyn data center, making it analogous to the free signal a consumer would get with a regular antenna at home. Aereo spent the subsequent months selecting markets for expansion and renting space for new equipment in those cities.

“The court decision was the green light in our perspective,” CEO and founder Chet Kanojia said in a recent interview at Aereo’s sparse offices in a former engine factory in Queens. “This is an opportunity of a lifetime to build up something meaningful to change how people access TV.”

Aereo is one of several startups created to deliver traditional media over the Internet without licensing agreements. Past efforts have typically been rejected by courts as copyright violations. In Aereo’s case, the judge accepted the company’s legal reasoning, but with reluctance.

If the ruling stands, Aereo could cause a great deal of upheaval in the broadcast industry. It could give people a reason to drop cable or satellite subscriptions as monthly bills rise. It also might hinder broadcasters’ ability to sell ads because it’s not yet clear how traditional audience measures will incorporate Aereo’s viewership. In addition, it could reduce the licensing fees broadcasters collect from cable and satellite companies.

Broadcasters have appealed the July ruling. At a November hearing, appellate judges expressed skepticism about the legality of Aereo’s operations. In addition, the original judge’s ruling was preliminary, made as part of a decision to let Aereo continue operating while the lawsuits wind their way through court. Even if courts continue to side with Aereo on the legality of its setup, broadcasters still could nitpick on the details and try to argue that the antennas don’t actually operate individually as claimed.

I’d certainly call Aereo’s business model disruptive, so there’s quite a lot at stake here. For now, all you can get on Aereo is broadcast channels plus the Bloomberg Network, which reached a deal with Aereo. I’d think that if Aereo survives the challenges, or gets Congress to clarify the law in a way that accommodates what they do, it’s likely they’d make deals with other cable channels to carry them as well. It’s possible that this could lead to the kind of a la carte TV service that people have been predicting/demanding for years. Or it could get squashed and nothing will change for a decade or more. Who knows? Aereo’s press release is here, and you can pre-register for their service here. Hair Balls has more.