Policy Study

Better Prices and Better Services for More People

Assessing the Outcomes of Video Franchise Reform

Executive Summary

Franchise reform, the movement to replace local regulatory regimes that govern legacy cable monopolies with statewide franchise agreements that encourage competition and improved service, has taken on new urgency. Encouraged by telephone companies eager to provide an array of new broadband video services to anxious customers, ten states-Texas, Indiana, North Carolina, South Carolina, New Jersey, California and Michigan-have enacted bipartisan franchise reform since 2005.

Franchise reform lowers the legal burdens traditionally imposed by local franchise agencies. These agencies have long regulated local cable monopolies by creating a single statewide franchise application process through which companies can gain access to the entire state’s market. In addition, franchise reforms restrict or eliminate the sometimes arbitrary concessions imposed by local franchise agencies. Franchise reform, however, does not eliminate the fees which are paid by cable or video broadband providers to local franchise agencies.

Where enacted thus far, franchise reforms benefits have been undeniable. Consumers have enjoyed greater choice and a range of new services, including on-demand video and “a la carte” content selection, at lower cost. Legacy cable providers have responded to new competition by lowering costs and improving service.

While critics of franchise reform predict that statewide reforms, which lack build-out provisions requiring broadband providers to serve low-income communities, will privilege wealthy households at the expense of the poor, such concerns have not been borne out by experience. New broadband providers, including AT&T and Verizon, have deployed high-speed broadband services to wealthy and lowincome neighborhoods alike.

Finally, while local governments that depend upon franchise fees for tax revenue have not been harmed by franchise reform, long-term technological trends suggest that municipalities would do well to wean themselves from franchise fee dependence sooner, rather than later.

The benefits to consumers, including greater choice, improved service, and lower cost, require remaining states to bring reforms that help end local monopolies and usher in widespread broadband adoption in the United States.