Kitsap County isn’t in the cable business, but it does have an interest in assuring its residents can tap reliable cable services through regulatory franchise agreements with companies such as AT&T Broadband.
On Monday, the three Kitsap commissioners had to decide whether the county’s non-exclusive franchise agreement with AT&T could be amended — a tricky proposition, because spiking approval could provoke the cable company to sue the county, while the effect of making the change on local customers is largely unknown.
“It’s a question of picking our fights,” said County Commissioner Tim Botkin.
AT&T owns TCI Cablevision, a cable provider in most parts of Kitsap County. In early March, AT&T announced its desire to merge with Comcast Corp.
But under the terms of its franchise agreements, AT&T is required to ask partner counties and cities about such changes in ownership, and whether the agreements can carry AT&T Comcast’s name, not just that of AT&T.
In turn, the responding counties and cities had 120 days to come up with an answer, according to Federal Communications Commission (FCC) regulations.
That deadline passed July 1, but a one-week extension was granted to Kitsap County.
“Today is the day,” said county information services manager Bill Perrin.
“If they want to merge, they will merge,” said Jacquelyn Aufderheide, a Kitsap County deputy prosecutor. “The question is whether they can change parent control of the franchise.”
Botkin and fellow commissioner Chris Endresen voted to approve the change on Monday, citing other sources of competition in the cable marketplace and legal issues.
South Kitsap Commissioner Jan Angel, on the other hand, abstained from a vote, saying the financial state of the two companies with plans to merge is not solid. She feared shaky numbers could lead to poor customer service, higher rates and fewer capital investments.
Monday’s decision doesn’t change TCI’s relationship with the county, but does approve changes to the franchise agreement with AT&T as requested.
“I have real concerns,” Angel said. “Usually a merger strengthens the two companies, but this one seems to do the opposite, and it doesn’t seem to benefit the customers.”
Angel also registered alarm because King County refused a similar request under its franchise agreement with AT&T, citing financial concerns and existing troubles with local customer satisfaction.
Angel pointed to an analysis provided by Ashpaugh & Sculco that showed AT&T Comcast would have about $32.7 billion of combined debt.
Debt or not, the county could still have risked getting sucked into an expensive, lengthy lawsuit with AT&T if officials refused the change in the parent company name on the franchise agreement.
“This is truly the 800-pound gorilla,” Endresen said.
Endresen and Botkin eventually agreed to the change, not just because of those liability issues, but because the existing franchise agreement with AT&T can be revoked if customers aren’t served well in the future.
“Plus, this is not an exclusive franchise,” Endresen said.
In other words, other cable companies with an interest in providing service could apply for a franchise and, thus, compete with others.
Already, Charter Communications has a franchise agreement. And there is other competition, including satellite dish services.
“We could bring the market forces to bear here,” Perrin said.
Perrin said basic cable rates are controlled as well, with changes reflecting cost-of-service increases, according to FCC regulations.
Perrin said TCI has completed extensive improvements to its infrastructure and, perhaps more importantly, he can’t remember when a customer complained about service quality.
“I get complaints when the channels are changed or their is a new tax line on the bill that needs to be explained, but as far as quality of the picture, I can’t remember a conflict,” said Perrin, who currently monitors cable franchises for the county.
Botkin said he respected Angel’s concerns, and her research into the matter, but voted for approval.
“If we were to deny this, they could sue us individually,” Botkin said.
According to the FCC, denials aren’t reasonable unless specific local issues make such requests unviable.
“I just don’t see any reason that we should withhold or deny this request,” Endresen said. “I think if we did, it could be termed unreasonably withheld.”
As of Monday, FCC approval of the proposed merger was pending.
In addition, it’s up to the cities of Poulsbo, Bainbridge Island and Bremerton to make their own determination on similar request, because they, too, have franchise agreements with the company.