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Steven Depolo

Franchise agreement showdown: Can Philly get Comcast to help its neediest residents?

Comcast looms large here. Its headquarters is the tallest skyscraper in the city, and the second one — a 1,121-foot-tall, $1.2 billion undertaking — is being built up by city workers. The cable giant based here in Philly is reportedly eyeing a third tower in Center City and it employs some 8,000 people in Philadelphia.

Far below the towers is one of the poorest big cities in America with an education funding crisis to boot and, of the 25 largest American cities, it has the third worst broadband penetration rate, meaning thousands are without access. Meanwhile, the Comcast-NBC Universal Corporation takes tax breaks from the city and state for bringing in work and revenue — advantages some say indicate Comcast should be doing more for the community.

But the massive company’s relationship with the city could dramatically change as Mayor Michael Nutter’s administration, City Council and Comcast itself hammer out details of a franchise agreement, a pact that’s reviewed once every 15 years that the city is using to ask Comcast to expand access and improve customer service.

On Thursday, a seven-hour public hearing before a City Council committee has been scheduled to review a tentative agreement between Comcast and the city. Both Comcast and city officials have indicated they’re optimistic about where the agreement is headed. Other stakeholders are seeing this as a rare chance to talk directly to Comcast about paying more to the city of Philadelphia.

“Charity is necessary and it’s the responsibility of a company,” Hannah Sassaman, policy director of the Media Mobilizing Project, said. “But charity is not the same as contracted change, which is what can happen here. We have a once-in-a-generation shot.”

Here’s a look at the issues at hand and what’s at stake:

What’s a franchise agreement anyway?

Back in 1984, the federal government realized that there was little regulation of cable television prices outside of local governments, so it passed the Cable Communication Policy Act of 1984 which put a limit on cable franchise fees — the money that local governments collect in exchange for allowing cable companies to run wires, fibers and poles through public spaces.

The limit placed was 5 percent of total gross receipts, meaning Philly keeps 5 percent of all the money Comcast makes on its cable service. That amounted to about $17.5 million last year, according to The Inquirer. The 1984 bill also stipulated that cable companies provide for public, educational and government (or PEG) public access channels.

Every 15 years, the agreement that cable companies have with the city comes up for reconsideration. In Philadelphia, Comcast operates four different “franchises” throughout the city which cover different sections, but they’re all owned by Comcast. Verizon Fios also has access to run its cable through public spaces here.

Though the 5 percent fee collected by the city on cable is expected to remain the same now that the 15 years are up since the last negotiation, the city is using the franchise agreement as leverage to ask Comcast to fulfill other requests.

Why do people want Comcast to do more for the city?

Comcast, though it’s a Fortune 50 company, gets a lot of breaks here. Its current headquarters in Philadelphia is subject to the 10-year abatement (and its next tower will be, too) which exempts it from certain real estate taxes. The abatement was meant to encourage building in the city, but it’s also ultimately affected the property taxes that would have gone to the school district.

In addition to the abatement, Comcast pays low state corporate taxes — some 3.4 percent compared to an average of more than double that — and it has a holding company in Delaware allowing it skate by other taxes by being based there.

So what’s the city want from them, then?

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The city has a few bigger asks of Comcast, namely providing totally free broadband access in the city’s underserved neighborhoods and sending millions to the school district to fund technology education. A tentative agreement that was reached that’s being vetted this week doesn’t appear to include either of those.

But Comcast has agreed to certain conditions. The corporation has said it will expand its Internet Essentials program, which offers discounted Internet access to low-income families with children who qualify for certain school lunch programs, low-income senior citizens and those with disabilities.

Currently, Internet Essentials reaches only 15 percent of those eligible to use it, so Comcast is exploring along with the city how it can remove some of the barriers to getting Internet Essentials. Currently, there’s a requirement that families go without Comcast Internet for 90 days before they can actually get Internet Essentials.

Other major parts of the agreement include new wifi in city buildings, a call center exclusive to handling customer service complaints from people in Philadelphia and $18 million over the next 15 years to government access channels. Comcast has also promised to fix thousands of poles and pedestals that aren’t up to code.

Comcast released a statement after the agreement was reached saying it’s “satisfactory to the city, Comcast, and our customers, and enables us to continue investing and innovating in Philadelphia.” Critics say the agreement between Comcast and the city that’s being vetted this week is in the right direction, but leaves much to be desired.

“It’s a good start, but it’s not enough,” Sassaman said. “For example, it’s great that it has a call center, but is that union jobs? Will they be making a living wage? There are new discounts for Internet Essentials, but let’s expand to folks unemployed or out of work.”

How does the city know that this is what it needs from Comcast?

A 571-page document says so. Every city that has a franchise agreement with Comcast or any other cable company has the right to conduct what’s called a “Needs Assessment,” or a document that looks into what cable companies — because of their huge use of public space — should do for the cities that they’re based in.

Philadelphia released its needs assessment in April after it was conducted by CBG Communications, Inc., a telecommunications consulting firm based in Paoli. CBG’s efforts included statistically significant polls of Comcast users and non-Comcast users in the city, as well as a number of tests that looked into Comcast’s infrastructure in the city and what it’s paying to be here.

What it found: In addition to a number of issues with Comcast’s infrastructure and code enforcement, people in Philadelphia really hate Comcast. They hate Comcast more than its customers in many other cities, and Comcast is based here. According to the report, more than two thirds of customers indicated they were dissatisfied or very dissatisfied with their service.

And when it comes to customer service, the most common words used by survey respondents in Philadelphia were: Terrible, better, poor, horrible, awful, lacking, bad and horrendous. When respondents were asked if they would pay a few dollars more a month to better subsidize public access channels, many responded “yes,” but those who responded “no” most often cited that they’re already paying too much.

Said one respondent: “Comcast gets millions of dollars in tax breaks… I get none and live on Social Security! Comcast owes Philadelphia and its citizens. Let them pay for it!”

Comcast subscribers in Philadelphia also reported paying more for their service than elsewhere. This chart comes from the needs assessment:

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Philadelphia Needs Assessment

Is there a precedent for cable companies affecting change in cities?

There seems to be. CenturyLink/ Qwest Broadband Services in Seattle provided 40 mbps Internet (some four times faster than Internet Essentials) at a discounted price for low-income residents. Comcast has offered higher discounts to seniors in other cities. And education advocates often look to San Francisco where the much smaller, privately-held Salesforce donated millions to the local school district to further technology education and, hopefully, build up its own workforce.

So what happens next?

The City Council Committee on Public Property and Public Works has blocked off a room for a public hearing beginning at 1 p.m. and lasting until 8 p.m. on Thursday. Headed up by the office of Councilman Bobby Henon, members of the public can sign up to testify here, and that testimony is expected to begin at 5 p.m. Expect to hear a lot from the city and from Comcast in the hours leading up to that.

What do advocates want to get out of it? “The hope,” Sassaman said, “is to get the best franchise in the United States.”

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