Marin Telecom Agency Battles Comcast Over Fees

In July 2009, the opened in downtown San Rafael with state-of-the-art studio, editing and camera equipment available to the public. The center operates the Marin public access channels, Channels 26, 27, and 30 on Comcast, airs government meetings, runs educational programs and is .

The media center is going to take a severe hit, according Marin Telecommunications Agency (MTA) officials, which oversees and operates CMCM, if Comcast doesn’t remit the one percent gross revenue fees, just over $600,000 annually, that MTA says it is owed.

“Without receipt of the [public, educational and government, or PEG] fees, CMCM will likely have to severely curtail our public services and in the worst case scenario, cease operations entirely,” said CMCM Executive Director Michael Eisenmerger.

But Comcast says they’ve already paid all they’re going to pay.

$3.1 Million to Build Media Center

“We don’t believe our customers should have a third bill,” said Comcast Vice President of Communications Andrew Johnson.

Comcast pays franchise fees, worth five percent of the company’s revenue every month, to the towns and municipalities it operates in for the right to use the public right of way and do business in those locations. In Marin, those agreements are reached collectively with MTA representing all the Marin towns except Novato and passing on the franchise fees directly to the towns.

Under state law, Comcast also has an obligation to pay the PEG fees for public, educational, and government programming and content, such as supporting public access and local TV.

In June 2006, Comcast and MTA reached a 10-year franchise agreement in which Comcast paid its $3.1 million in PEG fees upfront so that MTA could use that money to get the media center off the ground. Comcast then charges customers about 49 cents per bill to pay back that $3.1 million.

But all that changed last year.

Marin Wanted a New Deal

The Digital Infrastructure and Video Competition Act (DIVCA) was passed by the California State Legislature in 2006 to allow AT&T to come into the state market quickly, giving towns the option of moving from a locally controlled franchise to a simpler state franchise. Under a state franchise agreement, there are no negotiated contracts like the one Comcast and MTA had reached. The utility would simply be obligated to remit one percent of its revenues in PEG fees. In turn, the utility could then make up those one percent fees by charging them to the customers.

Nearly all AT&T franchises are state franchises and AT&T pays MTA its one percent PEG fees of about $40,000 per year.

In June 2011, MTA voted to change its Comcast agreement to a state franchise agreement under the California Public Utilities Commission, largely because they believed the one percent remittance would result in a larger amount of PEG fees to help fund the media center.

“We did quite a bit of analysis last year and decided it would be beneficial,” said MTA Executive Officer Barbara Thornton.

But Comcast Hasn't Paid Up

The only problem with that plan is that MTA hasn’t seen any of those one percent fees, which amounts to just over $600,000 a year from Comcast.

“MTA should have started to receive those fees,” said Thornton, “but they haven’t been paying them.”

Comcast officials argue that they don’t owe MTA anything until the original 10-year, $3.1 million deal is paid back.

“We worked very hard to try and reach this agreement,” said Johnson. “Our bottom line is we have no interest in changing the contract.”

According to Johnson, at the start of 2011, about $1.5 million of the original $3.1 million remained to be repaid.

Johnson said Comcast doesn’t want to stick their customers with another fee on top of the approximately 49 cents per customer bill that pays back the $3.1 million and the five percent of the monthly bill that goes directly to the towns for use of their right of way and infrastructure. MTA, he said, wants to make customers pay an additional tax in the form of the one percent PEG fees.

But Comcast customers are actually already paying the additional one percent PEG fees.

Johnson acknowledges that Comcast began collecting the one percent fees in mid-2011 after MTA initiated the change to the state franchise and most customers can see it listed on their bills. Comcast simply isn’t turning those fees over to MTA.

“We remain confident that Comcast is not required to remit the one percent PEG fee until the PEG obligation under its previous local franchise is fully satisfied through recovery of the applicable amounts from customers,” said Johnson, meaning until the $3.1 million is paid back Comcast won’t be turning any money over to MTA.

The $3.1 million was initially slated to be paid back by 2016. But if Comcast is applying the one percent fees worth about $600,000 per year towards that debt, it could be paid back earlier. But Johnson said there’s no way to forecast when it will be paid back because of customer turnover.

MTA disagrees with Comcast’s interpretation of the law.

Will it Go to Court?

In letters sent to Comcast, MTA attorney Greg Stepanicich argues that DIVCA allows either Comcast or MTA to make the change to a state franchise, superceding previous agreements. He also argues that Comcast has a legal obligation to pay the one percent PEG fees – and only then do they have the option of getting back the fees from customers.

“They haven’t paid us, but they’re billing customers,” said Thornton.

The Community Media Center has about $1 million of the initial money from Comcast left, according to Eisenmerger, and a lean annual budget of about $500,000. The center does make money by charging for some services – you could hire them to make a video for you – and has some grant money. But there are also restrictions that limit what some funds can be spent on.

In fact, the one percent PEG fees are legally limited to only be spent on capital costs and not operating costs, something that a number of local public access channels and services are fighting. Thornton said, however, that the interest from the one percent PEG fees could be used to support the center.

The MTA board meets again on Feb. 8 and will consider its legal options moving forward. Thornton said the California Public Utilities Commission has no enforcement mechanism to resolve the dispute, so the agency would have to take the fight to court to try to force Comcast to pay.

“We’re considering our options,” she said.

“We’re hopeful no one’s going to be spending tax money on a lawsuit,” said Johnson. “We want both parties to come together. We’re going to remain around the table.”

What do you think MTA should do?