Back in May, I blogged that local revenues from video franchise fees were safe as long as cable TV companies used a local satellite head-end to receive hundreds of programming channels and pipe them down to area homes. “Should programming delivery shift to a Web-based client-server model, where the cable box works more like a web browser than a TV channel tuner, subscription-based Internet video could replace today’s downlink-and-transmit model.” It’s happening faster than even I would have thought. The Wall Street Journal reports today that Comcast and Time Warner are investing in technology that helps move Web content to television sets. They see clearly see a future where the Web is a source of first-line entertainment programmingÃ¢â?¬â??Hollywood movies and network TV showsÃ¢â?¬â??and they don’t want to be left out. In addition to quietly purchasing in companies like thePlatform Inc., a startup that builds devices that routes video from the Internet to TVs and cellphones, Comcast is placing more content on its Comcast.net site. Right now, users must be Comcast customers to access and download material, but the Journal reports that Comcast is mulling the possibility of marketing Web-based content to everyone with a broadband connection, a move that would further heighten the competitive stakes. Time Warner Cable, of course, is a sister unit of AOL, which has thrown its hat in the content aggregation ring, and both are owned by media giant Time Warner. Consumers, of course, will be the big winners. Slingboxes have placed the term “place-shifting” alongside “time-shifting,” spawned by VCRs so long ago. Users are no longer stuck with the cable programming line-up. Elected officials who have clamored for a la carte choice have to like this. Never mind “family tiers,” isn’t the ability to download individual programs the ultimate in a la carte? Yet franchise fees will be more difficult to justify when cable companies can deliver programming without a physical presence in local area. Comcast can sell programming from its web site into Time Warner territory, but isn’t hit with the five percent fee that Time Warner is. Local franchise authorities like those in DuPage County, who are clinging ferociously to old franchise fee models, stand to be the big losers. While franchise rules, including the newer state rules, call for fees to be assessed on pay-per-view services delivered via the traditional local head-end, they largely exclude services delivered over a high-speed Internet connection. The problem has been that franchise fees are assessed on a service, not on the fact that cable companies require right-of-way. In most areas, cable companies pay both. And a lot of farnchise “reform” simply extends those extra fees to telephone companies who choose to offer video over existing lines. That’s why the few franchise reform bills that force local authorities to apply payments income to right-of-way make the most sense. Even so, these fees should reflect the true cost of right-of-way–and its accommodation–on the part of the municipality. Service-defined fees will be harder to maintain, simply as a matter of course. The industry’s revenue stream is changing. Local authorities are on the clock.
Steven Titch served as a policy analyst at Reason Foundation from 2004 to 2013.