A franchise fee is a charge collected by your cable provider on behalf of Cobb County Government or your local city government. The Federal Government allows local governments to charge approximately 5.5% per cable subscriber in the form of a franchise fee. Local governments are able to collect this fee because cable television providers utilize public rights-of-way to deliver their services.

The 5% franchise fee is calculated on more than just the items on your bill. Cable companies earn non-subscriber revenues by selling advertising, airtime and other services via the cable system. The FCC released the following statement on October 4, 2001.

The Federal Communications Commission (FCC) today said cable operators may pass through to consumers and itemize on monthly bills the entire amount of a franchise fee assessed by the local franchising authority, including franchise fees from non-subscriber related revenue, pursuant to the Communications Act.

Cobb County receives reports from cable providers each quarter which details all revenue sources that are included in franchise fee calculations. The franchise fee portion of your bill will likely calculate to be between 6.3 and 6.7 of your total cable bill. The additional 1.3 % to 1.7 % is attributed to non-subscriber revenues.

Cobb County collects approximately $3.5 million dollars per year in franchise fees. These monies are deposited in the county’s general operations budget and are used along with other sources to support county government operations including Cobb’s Department of Transportation.

DOT is responsible for all work that is done in the rights-of-way around the county. Inspectors work with the county’s permitting office to monitor construction projects that involve digging and other types of construction in the rights-of-way. These projects include the underground delivery of natural gas, telephone, cable television, water and other fiber optics cable services.

Many underground utility lines run along county roads and require constant monitoring to prevent workers from damaging them. Cobb has been fortunate over the past couple of years and avoided major interruptions to utility services due to construction damage. Franchise fees are a part of the process that keeps all underground utility services undamaged and operational in the rights-of-way.

Cobb County does not have authority to regulate basic tier cable rates. Although the Federal Communications Commission currently permits some local governments to regulate and approve pricing for cable services, this practice is limited to communities with only one provider or which limit the number of providers allowed to serve a geographical area.

Cobb County currently has three cable television providers, including a local exchange carrier (BellSouth Entertainment) and access to satellite home programming. These factors prevent Cobb County from qualifying for rate controls.

The FCC has a fact sheet on their web site for consumers that provides the requirements to determine if a local franchise authority (i.e. Cobb County) can regulate rates. Here is an excerpt:

Rates for a cable system's service tiers and associated equipment may be regulated only if the cable system is not subject to effective competition. There are four separate tests to establish that effective competition exists:

• The households subscribing to a cable system constitute fewer than 30 percent of the households in its franchise area; or
• (a) there are at least two unaffiliated multichannel video programming distributors (one of which may be the cable system in question), with each offering comparable video programming to at least 50 percent of the households in the franchise area, and (b) the households subscribing to all but the largest multichannel video programming distributor exceed 15 percent of the households in the franchise area; or
• The franchising authority is itself a multichannel video programming distributor offering video programming to at least 50 percent of the households in the franchise area; or
• A local exchange carrier or its affiliate (or any multichannel video programming distributor using the facilities of such carrier or its affiliate) offers video programming services directly to subscribers by any means (other than direct-to-home satellite services) in the franchise area, but only if the video programming services so offered in that area are comparable to the video programming services provided by the unaffiliated cable operator in that area. In the absence of a demonstration to the contrary, a franchising authority may presume that a cable system is not subject to effective competition.

Cobb County Government is prevented from rate controls based on the availability of BellSouth Entertainment programming and the availability of satellite programming to county residents.

The FCC confirmed this position July 2000 in FCC Order DA-1672. In this order, MediaOne, now Comcast, filed a petition with the FCC to have basic tier rate controls revoked for most franchise authorities in Metro Atlanta. Cobb County was one of the communities impacted by the order. Here is an excerpt:

MediaOne has also shown that BSE (BellSouth Entertainment) has commenced providing service not only within the Communities but also within several other nearby communities within the greater Atlanta area, is marketing its services in a manner that makes potential subscribers reasonably aware of those services, and otherwise satisfies the "LEC" effective competition test consistent with evidentiary requirements set forth in the Cable Reform Order. 7. Based on the foregoing, we conclude that MediaOne has submitted sufficient evidence demonstrating that its cable systems serving Atlanta, Georgia and the communities listed in Appendix A are subject to effective competition. _ VIII. ordering clauses 9. Accordingly, IT IS ORDERED that the petition for a determination of effective competition filed by MediaOne of Colorado, Inc. IS GRANTED.

For many of Cobb's residents, satellite television has proven to be a good option for programming services. Recent research indicates that many residents are now using satellite for home viewing. Below is a sample of a few zip codes and the impact of satellite programming.

The two primary providers of satellite programming in our area are DirecTV and Dish Network. Both providers have Web sites that explain their programming and costs of their services. There are also local businesses that sell and/or install satellite systems.

Cobb County does not grant exclusive cable franchises and is open for other companies to compete head to head with Comcast, BellSouth or Charter. We are constantly working towards increasing the number of cable providers franchised to operate in Cobb County.

Despite our efforts, there has been very little interest in the cable industry in competing for customers on the same street. Most companies choose to avoid serving customers on the same street. The cable industry appears to be more focused on purchasing other cable providers, merging or preventing unsolicited buyouts of their companies than expanding into new territories.

The industry term for cable companies building on the same street and competing for existing customers is called competitive overbuilding.

Attracting companies for competitive overbuilding is a big challenge. A few facts to consider:

As an example, consider a new subdivision with 100 homes. When the original cable provider comes in and begins to offer service, they will most likely attract 60 to 80 of the homes as customers. It will take that company approx. 10 years to recoup the cost associated with the expansion and then begin to turn a profit over the initial costs of running service to the subdivision. Recent industry estimates indicate that the cost to lay one-mile of fiberoptic line is approximately $40,000.

When the second company comes into the same neighborhood they will pick up approx. 35 to 40 percent of the first companies customers. The rate of return on their initial investment will easily approach 20 years to reach a profit over initial expenses.

A common opinion is that the new company will capture more of the existing customers than the 35 - 40 percent as indicated in the model. Here are a couple of factors for consideration in this estimate. In a recent survey of 1,000 random property owners in Cobb we found the following: about 25 percent felt that their cable provider did a poor job in service delivery and customer service. 50 percent rated their company as OK in the same areas. Another 25 percent rated their provider as excellent in the same areas.