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13 staff that does nothing but cable franchise renewal negotiations. As a result, the company's renewal staff and attorneys are very knowledgeable about the law and how to use it to the company's advantage. Success on the local government's side depends on having equally knowledgeable staff and legal counsel, devoting adequate resources to the renewal process and maintaining a united front. Sharing the cost of the staff, as well as the consultant expertise for the technical compliance review and needs ascertainment, has always made sense, but, in these difficult economic times, it is even more important. Further, having a number of cities (and their cable subscribers) on the local government side of the table provides more leverage against the attempts by Comcast to eliminate or diminish its franchise obligations. Why does Comcast need a cable franchise? As a cable provider, Comcast is required by both federal and state law to secure a franchise from the local government —typically a city, but the franchising authority can also be a collection of cities or a county —in order to provide cable television service using public rights-of-way. This franchise allows the cable provider to build its cable network in the public rights-of-way without having to negotiate with every property owner. In return for a franchise to use the rights-of-way, which are scarce and valuable public property, the cable provider pays a franchise fee, capped by federal law at 5% of gross revenues, and usually has obligations to provide channel capacity and financial support for public, educational and government access channels and to provide an Institutional Network for local government use. Why should we bother with franchise renewal when all television is moving to the Internet? Although a lot of video, including many traditional television programs, is now available over the Internet, it will be many years before all television programming currently distributed via cable and satellite providers is available over the Internet. In fact, there is some concern that the Internet as currently structured does not have enough capacity to handle that volume of video programming. Further, to date, we are not seeing any of the traditional programming networks abandon cable and satellite distribution, and new programming networks — including the recently introduced Oprah Winfrey Network (OWN) —are still being developed and introduced for cable and satellite distribution. So, given the state of the industry, technology and the market, local franchising authorities and cable providers must work with the laws and regulations that are currently in place. Can a renewal request be denied? Yes, both legally and practically. Although most communities do eventually renew the incumbent cable operator's franchise, several communities have successfully denied renewal. The Cable Act permits a community to deny renewal if past performance has been inadequate; or if the incumbent operator is legally unqualified or is unwilling or unable to devote the necessary technical skills and financial resources to the community; or if the operator is unwilling to reasonably satisfy the future, cable -related needs and interests of the community considering the cost of meeting those needs and interests. The operator says everything a local franchising authority asks for will be passed through to subscribers in rates Is that true? Not necessarily. In rate regulated franchise areas (such as the NSCC's member cities), an operator can pass through increases in its external costs to subscribers. Some franchise requirements, such as PEG and franchise fee requirements, are external costs, but not all are. In addition, because the operator is only entitled to pass through the increase in those costs, renewal franchise requirements do not necessarily result in rate increases, depending in part on what was required under the prior franchise, the length of the prior franchise, and the operator's recovery schedule. January 17, 2011