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Will 2nd cable provider bring down prices?

February 7, 2019
Micahael Wojcik

As the Rochester City Council unanimously approved a new cable franchise agreement Monday, one member acknowledged he had motive beyond bringing a second cable provider to the city.

“This will be the second company with the capability of offering true citywide broadband (internet service) and the best infrastructure we’ll have in this community,” Council Member Michael Wojcik said of the franchise agreement. “My hope is this will bring down prices for everyone.”

He said also hopes the city can work with MetroNet to establish terms that can provide affordable broadband options to “income-challenged” homes.

In an earlier meeting Monday, he asked Brian Grogan of the Moss and Barnett law office, which has helped guide the process of creating the new franchise agreement, whether it’s possible to add language to the agreement that would provide city support for efforts to reach lower-income homes.

Grogan said such an offer would likely need to be part of an agreement outside the franchise deal, since it only governs the cable aspect of MetroNet’s planned service. Phone service is regulated at the state level, and internet oversight is a federal issue.

Additionally, state law requires cities to treat cable providers on a level playing field when it comes to their agreements. As a result, the MetroNet agreement is largely based on Charter’s 2016 franchise agreement.

As a result, Grogan said the city can’t offer a reduced fee, which is 5 percent of the company’s related gross revenues, to encourage MetroNet to offer reduced broadband rates.

However, he said the city would have flexibility on how the funds are used after they are paid. That means a side agreement could be created to use the funds to support a broadband program.

At the same time, he noted building a new franchise is a large undertaking and will likely be time-consuming for MetroNet.

The company has indicated it will require a year of design and construction before debuting its service in Rochester. After that, it states past experience shows a need for two years to expand service throughout the city. The timeline meets the demands of the new agreement, which gives the company five years to have service available to 80 percent of the city’s households.

“They expect to beat that,” Grogan said, noting he’s seen a confidential map of the planned coverage area, which appears to offer broad coverage without specifically alienating sections of the city.

While the agreement allows the city to compel MetroNet to build beyond the 80 percent mark if it captures 27.5 percent or more of the market, Grogan said that’s unlikely in five years, noting approximately half of a community’s households typically accesses cable service and MetroNet will need to capture a significant number of current Charter customers to hit the mark.

“The likelihood that the city will be able to compel beyond 80 percent is slim,” he said.

While weather delays prevented MetroNet representatives from making it to the council meetings Monday to discuss plans, the company’s franchise application stated it plans to offer three tiers of cable service, with more than 227 video channels and 50 music channels, as well as on-demand services and specialty networks. Rates for the tiers are expected to range from $16.57 to $83.04, depending on the cost associated with including local broadcast networks.

In other city business, the council:

• Authorized creating a sustainability coordinator position and urban design and heritage preservation coordinator position by using funds already set aside for a strategic initiatives director.

• Approved a conditional-use permit for the final plan of the Hyatt House project being developed by EKN Development Group at the former American Legion site at the intersection of Civic Center Drive and First Avenue Northwest.

• Postponed a decision on a conditional-use permit for the final plan for a 50-unit apartment building proposed for the intersection of First Avenue Southwest and Fourth Street. After splitting 3-3 on a vote, the council asked for options related to parking requirements.

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