History of Harrison Cable – Started in early 1950’s by Bob Wheeler for the purpose of getting TV without an antenna. Bills were $3.50/month kept on note cards. First three channels on system were channel 3 and 10 in Springfield and channel 4 in Little Rock. The purpose of cable was to get remote channels, and for the Harrison area that meant the in-state Little Rock channel. Only strong Little Rock channel in the early days was KARK – KATV tower was located close to Pine Bluff and KTHV had a weaker signal and location. I was reminded by Bobby Wheeler that the towers in Grubbs Springs were for KARK. At 6:00 on April 15, 1954, KARK-TV Channel 4 went on the air and locally with its first television program.
Recent reasons given for taking KARK off the air included DMA (designated market area), duplication of programming on NBC affiliate in Springfield MO, retrans fee too high for KARK, and the need for more bandwidth by Cox for Internet and additional programming.
Problems with those various reasons – local cable has carried KARK for nearly 60 years, DMA (designated market area) applies more to satellite than cable, Paragould municipal cable has nearly an identical situation with TV from Memphis, TN and Little Rock, AR and still carries multiple channels from ABC, NBC, and CBS. Only in the situation of three ABC stations where there is a local station involved in nearby Jonesboro; is there a channel that gets priority over others. According to their management, the stations in the secondary markets (70 mile range) get no priority for duplications.
No mention has been made of excessive retrans fees for KARK.
Duplicate program reasons – Stated in Cox letter to city dated November 18, 2011. KYTV carries NBC but has the right to preempt for local and regional events not related to Harrison’s interests. For example there was an extremely positive segment about FedEx on the NBC’s Brian Williams Rock Center News Magazine. Locally the 1700 FedEx Freight employees had received a memo about the program. Only to find out the program was preempted on KY3 for a Missouri State basketball game. Other situations have involved weather north of Springfield, and other sports event preemptions with no Harrison interest.
Actual reason based on communication I have received from Len Pitcock of Cox was more specifically for additional bandwidth – Result was the elimination of the highly popular statewide KARK analog programming with no reduction in rates, for Cox’s opportunity to add digital “garbage” programming that is yet to be determined at additional rates. Shouldn’t have happened without a clear explanation!
Why did Cox take risk? After Twin Lakes Cable sold to TCA they sold to Cox Communications in 1999 at a price of $4,000 per sub. Rates for cable TV were approximately $35/month average. Today’s national average is about 3 times that for TV ($105); additionally Cox offers telephone and Internet services that can add another $100 to bill for a total of $200+. Triple play customers are those with cable TV, Internet, and telephone. Cable systems have values ranging from $8,000 to $12,000 per sub. So the poorly calculated risk taken by Cox’s Atlanta based corporate marketing is that any losses will be offset by new unnamed TV channels or services where they make a larger gross margin with more bandwidth – including Internet and phone.
What can be done - First step would be a formal request from the city to Cox requesting that KARK be put back on local system, since their reasons for removal were inadequate and unacceptable.
There is need of an analyses of payments received from Cox for franchise fees since they bought system from TCA in 1999. Comparison of metrics annually over the 13 year period to determine consistency of franchise fees. This will require at minimum the annual itemized invoices and payments, and at maximum a detailed audit; depending on the willingness of Cox to provide requested information covered in Sec 4.08.06.
After a recent meeting with Mayor Crockett and Jeff Pratt the only information made available to me was a copy of Cox franchise fee check for $71,339.75; based on an invoice Cox had generated. My personal cable franchise fee is $2.67/mo or $32.04 annually. If you divide $71,339.75 by 32.04 you get 2,227 subs with 5,271 HH or 42% penetration. Sounds low to me. Penetration during the early days was 95% (per Bobby Wheeler).There was no copy of invoice readily available, and description on check stated it was for 2011 Franchise Fees (not partial amount, etc.). Sec 4.08.06 of franchise agreement states Cox will pay annually 3% of gross subscriber revenues to city, so $71,339.75 translates to $2,377,991.67 gross TV only revenues subject to franchise fees. An average TV bill would be $1,068 annually or $89/month below national average of $105. In private business, when someone uses your property and then writes his own invoice and check, most would like a detailed, itemized explanation; particularly when numbers are considered low. Using today’s estimated subscriber count the evaluation of the local system has gone from nearly $9 million to a range between $18 and 22 million during a period when their local commitment has gone just the opposite, from a business which had high local commitment to one with nearly zero.
Renewal of franchise agreement will be very important. Issues include some major changes coming to TV. Plans for fiber to home or premise. Will Internet TV or IPTV be subject to franchise fee? Google TV, Apple TV, Amazon, Walmart Vudu, Microsoft Xbox, and Netflix will have a major impact over the next 5 years as well. Google and Apple are aggressively removing set top boxes – NY Post 3/7/2012
Items to be subject to franchise fee and review of current franchise fee rate since national limit is 5% or an additional 2% or $47,559.83 in 2011 for general fund.
A franchise fee is a fee collected and paid directly to the city, village or township in which you live for use of public rights of ways and the community's expenses associated with the regulation and administration of cable TV services
Recommendation would be to for council to approve and set aside the additional 2% fee for the purposes of effectively managing the relationship with Cox Communications and the franchise renewal. People subscribing to Cox Cable should be willing to pay the additional fee for the local administration and representation of their cable TV, Internet, and telephone interests.
Cable franchises are the agreement or ordinance setting forth the terms on which a cable company is given permission to provide cable service in a municipality. By state and federal law a cable company has to have such a franchise to use the public rights of way for its lines and to provide service.
Franchises cover several types of issues, such as:
- Strategy and cost reduction for using mobile devices such as iPad,iPhone,etc for TV remotes and the Cloud for content storage(movies,etc.) to replace set top box requirements
- Strategy for using behavioral marketing from social media to target ads and reduce cost of content. With time shifted programming from DVR/Cloud this should be a priority. (see https://sites.google.com/site/cuoirent/home LinkedIn Herb Lair and Twitter herb5247)
- ESPN suite currently costs $7/mo of cable bill and will soon go to $10/mo which generates $1 billion a month from subscriptions. All cable TV basic service has been required to carry ESPN which means that the casual or non-sports subscribers which make up 70% of the subscribers are subsidizing the sports addicts who make up only 30% of the subscribers. Cox has a new level TV Economy at $34.95, without ESPN, that has been given minimum public awareness. Cable has been slow to act on this and may still wilt to ESPN pressure.
- What services are to be provided
- Where the cable company has to provide service
- The fees and other compensation the company provides the municipality and the public
- Protections for use of the rights of way
- Extensive customer service protections (such as answering the phone on time)
- Channels for use by the municipality, schools and the public and financial support for such channels.
- Franchise fees effectively having the "five percent" federal franchise fee applied to as broad a definition of revenues as is legally possible.
- Improvements for municipal, school, and public access channels by having fiber optic feeds from them to the cable company (improves quality of signal). Also, adding the ability to broadcast live from remote locations.
- The cable company providing at no charge an "I-NET" which is a fiber optic network connecting municipal buildings for video, voice, data and other applications.
- State of the art emergency alert systems where the municipality can use the cable system to instantly notify its residents of emergencies.