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House of Representatives Commonwealth of Pennsylvania HOUSE OF REPRESENTATIVES COMMONWEALTH OF PENNSYLVANIA ************ House Resolution 64 ************ House Consumer Affairs Committee Room 60, East Wing Main Capitol Building Harrisburg, Pennsylvania Wednesday, December 15, 1999 - 10:35 a.m. —oOo— SFORE: morable Chris Wogan, Majority Chairperson morable Stephen Barrar morable Gene DiGirolamo morable John Fichter morable John Lawless morable Ron Raymond morable Paul Semmel morable Samuel Smith morable Keith McCall, Minority Chairperson morable Ron Buxton morable Ted Harhai morable Edward Staback morable Edward Wojnaroski TROUTMAN REPORTING SERVICE (570) 622-6850 .SO PRESENT: >dy Stuck Majority Executive Director .sa Nicholas Majority Research Analyst izanne Kopko Majority Administrative Assistant )b Mustin Minority Executive Director TROUTMAN REPORTING SERVICE (570) 622-6850 CONTENTS :TNESSES PAGE .lliam J. Cologie, President 6 PA Cable and Telecommunications Association Harrisburg, Pennsylvania >m Carey, General Manager 46 Adelphia Communications Erie, Pennsylvania lie Albright, General Manager 58 Charter Communications Johnstown, Pennsylvania mis Scott, Education Consultant 69 Suburban Cable Oaks, Pennsylvania irol Rosebrough, General Manager 86 Susquehanna Communications Williamsport, Pennsylvania :itten Testimony Submitted By; spresentative Robert W. Godshall 53rd District :. Louis S. Meyer, President Pennsylvania Citizens Consumer Council TROUTMAN REPORTING SERVICE (570) 622-6850 4 CHAIRPERSON WOGAN: Good morning everyone. id once again, welcome to this hearing being conducted by e House Consumer Affairs Committee. This hearing is dng conducted pursuant to House Resolution 64, which rports to be an investigation into certain aspects of the lerations of the cable industry in Pennsylvania. Those of you who have long memories will icall that this resolution did not have its origin in our immittee. It started out in another committee, Finance. id a majority of the members of the House of ipresentatives thought that any such look at the cable idustry, whether it's advised or ill-advised, should be •re properly within the jurisdiction of our committee. So here it is. And we're fulfilling our institutional mandate today by holding this hearing. I'd .ke to start by having my member — my colleagues and ;affers introduce themselves starting on my far left with ipresentative St aback. REPRESENTATIVE STABACK: Ed Staback, LC kawanna, Wayne. REPRESENTATIVE RAYMOND: Ron Raymond, Delaware »unty. REPRESENTATIVE FICHTER: John Fichter, •ntgomery County. MR. MUSTIN: Bob Mustin, Democratic Staff. TROUTMAN REPORTING SERVICE (570) 622-6850 5 CHAIRPERSON WOGAN: Chris Wogan, Chairman. MS. NICHOLAS: Lisa Nicholas, Majority Staff. REPRESENTATIVE WOJNAROSKI: Ed Wojnaroski, mbria County. REPRESENTATIVE DIGIROLAMO: Gene DiGirolamo, cks County. REPRESENTATIVE LAWLESS: John Lawless, mtgomery County. CHAIRPERSON WOGAN: Thank you, ladies and mtlemen. And I should mention as well that my colleague id Chairman, Keith McCall, who just had to leave, very ily led the forefight to defend the integrity and irisdiction of the House Consumer Affairs Committee on ds issue. And we thank him for that. I'd also like to thank a longtime staffer for ie House Consumer Affairs Committee, most people whom I link are familiar with her. She's done an excellent job. s're very, very sorry that she's leaving. She's going er to the Evil Empire. No, I'm kidding. She was hired by the Public Utility ramission. June Perry, thank you very much. We wish you til. We know you'll do an excellent job for them. And tat is why yesterday in the middle of — not the .ddle — but during the end of the hearing, we lost June id someone else showed up sitting at my right. TROUTMAN REPORTING SERVICE (570) 622-6850 6 And we welcome two — actually welcome two new affers in the last couple of weeks: Lisa Nicholas, who's tting to my right now, and Jody Stuck who is sitting next ' June Perry. So welcome aboard. And June, we wish you e very best. We know you'll do an excellent job over ere because you were trained well over here. Without further ado, our first witness today William Cologie, who was our first witness yesterday. lcome, once again, to the House Consumer Affairs nnm ttee • MR. COLOGIE: Thank you, Mr. Chairman. Before get started, I too would like to express my condolences your loss of June Perry to the PUC and warn the incoming aff they have big shoes to fill. We've had the pleasure working with June for, I think, about eight or nine tars now she's been on the Committee staff. And she's ways been a consummate professional and a joy to work th, and we wish her well. I am Bill Cologie, and I'm privileged to serve President of the Pennsylvania Cable and lecommunications Association. It's a trade association at represents the cable TV industry in Pennsylvania. We ve 45 member companies operating cable systems in innsylvania and more than 200 associate members who are ppliers to the industry. TROUTMAN REPORTING SERVICE (570) 622-6850 7 These include cable programming networks, rdware suppliers, and other companies that provide goods d services to our industry. I appear before you today to dress matters raised in a resolution introduced by presentative Karl Boyes of Erie and passed earlier this ar by the House of Representatives, as well as to give e Committee some insights and overview of the state of r industry. I'll be followed by witnesses who will give e Committee additional insight into cable operations and r contributions to the communities in which we operate d our special role in education in Pennsylvania. The ble industry in Pennsylvania provides service to 572,000 households and businesses with traditional cable levision services. My association's members provide these rvices in every Pennsylvania county and in all but the st rural municipalities. Local municipalities, through e granting of franchises — those are permits to occupy e public rights of way — license which companies are thorized to operate in their jurisdictions. It is the occupation of public rights of way, ring across city streets or burying cable under city reets, that legally separates cable from other providers multichannel video service. As you probably know, there TROUTMAN REPORTING SERVICE (570) 622-6850 8 e other providers of multichannel video service operating Pennsylvania today. We have, for example, Direct Broadcast tellite. They're the providers of things like DirecTV id Echostar that provide service directly to homeowners a small satellite dishes which you might see in someone's ont yard or attached to the side of their house. Satellite Master Antenna Television, SMATV, is other provider. SMATV systems are essentially private ±>le systems. You'll find these minicable systems lerating on private property in apartment complexes, mdominiums, in gated communities, hotels, motels, spitals, universities, virtually anywhere where there are mcentrations of people. Unlike cable systems, they do not occupy or oss public rights of way. We also have Multichannel ltipoint Distribution Systems, MMDS, so-called wireless ±»le. They use a wireless technology to transmit ogramming. For years, an operation in Popvision has lerated in Philadelphia, offering a wide range of sports id premium programming to their subscribers. The newest competitor on the scene for us are lied Open Video Systems or OVS. They are a new class of deo systems created with the passage of the ilecommunications Act of 1996 to facilitate the entry of TROUTMAN REPORTING SERVICE (570) 622-6850 9 lephone companies into the cable business. RCN is an example of an OVS provider, and they ve franchises to provide this service in communities roughout Southeastern Pennsylvania. Essentially, OVS impanies build networks very much like cable networks but .th what the act calls, quote, reduced regulatory burdens, id quote. By law, the OVS provider and its affiliates e only allowed to use one-third of the capacity of their stems with the other two-thirds available for competitors i offer video programming. Though franchises are not squired by federal law, municipalities are free to impose ich requirements. Cable companies have a long history of iteraction with local government. Since the 1950s, we ive been required to get permits to occupy city streets, a actice which later evolved into the granting of anchises. Some in this room — I think Representative Lymond made reference to it yesterday, the franchise wars : the '60s and '70s when municipal officials would itertain proposals from rival cable companies vying for ie right to wire a community. It was through this competitive process that iny municipalities granted a single franchise to serve ieir communities, resulting in what for years was a de TROUTMAN REPORTING SERVICE (570) 622-6850 10 cto monopoly for the cable operator selected in that ocess. Since Congress passed the 1984 Cable Act, elusive franchises have not been permitted. Representative Boyes' resolution specifically ises the matter of franchise fees the cable industry Hects and pays to Pennsylvania municipalities. As you y know, municipalities are authorized to require cable mpanies to collect and pay franchise fees of up to 5 rcent of their revenues. These vary from community to community. Some ve opted not to charge franchise fees. Some communities :vy the fee only on basic service only. And there are immunities that collect anywhere from 2 to 5 percent on a ble company's gross revenues. Unfortunately, for our purposes, nobody illects nor reports the exact amount of franchise fees in innsylvania. However, our national association, the tional Cable Television Association, reports that last tar cable companies collected and paid $1.8 billion in anchise fees. In Pennsylvania, where we have approximately 5 id a half percent of the nation's cable subscribers, we mservatively estimate that 5 percent of the 1.8 billion s collected here. That means roughly $90 million was illected for Pennsylvania local governments through this TROUTMAN REPORTING SERVICE (570) 622-6850 11 actice. Members of my association would find me remiss I didn't point out that cable's biggest competitor day, the Direct Broadcast Satellite folks, are not bject to that government-mandated fee.
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