Benefits of Eliminating Franchises

Where franchise reform has been adopted, the benefits have been both immediate and substantial. The recent approval of franchise reform by the California Assembly prompted AT&T to announce its intention to invest more than $1 billion in network upgrades in the state. The recent passage of statewide franchising in Indiana will produce an expansion of high-speed DSL service to 33 rural communities. Franchise reform in Texas resulted in new broadband service to 71 communities, and an analysis by the Perryman Group projects more than $3.3 billion in new telecom investment and thousands of new jobs for the state.[33] It took Verizon a mere 17 days to obtain the first statewide franchise awarded.

In 2004, the GAO examined six market pairs to analyze the impact of competition between a cable company and a broadband service provider.[[34] According to the study, the communities with broadband competition experienced lower rates (23 percent lower for basic cable, on average) and higher service quality.[35]

The GAO has also concluded that satellite competition lowers cable rates only slightly, but does induce the cable incumbent to add more independent networks to its channel line-ups.[36]

Several studies have shown myriad spin-off benefits to lower cable rates. To the extent that rates drop, current customers are likely to upgrade their service while households that currently don’t subscribe will do so. This increase in demand, in turn, spurs high-tech capital investment and job creation, which benefits all Americans.

Researchers Robert W. Crandall and Robert Litan analyzed 2006 survey data and concluded that the introduction of competition from wire line companies will increase the number of video service subscribers between 29.7 percent and 39.1 percent.[37] This expansion of the customer base ultimately exceeds the drop in rates, causing franchise fee revenue to grow — which makes municipalities’ opposition to reform all the more puzzling.

"We find that local franchise fee receipts in areas currently without a wireline competitor will increase by between $249 million and $413 million per year," the study states. "We also find that local employment will improve as a result of (wire line) entry into the (video) market, since capital investment, such as the deployment of fiber for video services, has historically resulted in job creation. For example, we estimate that the $2 billion that Verizon invested last year in its new broadband product created between 3,300 and 7,400 additional jobs.

Finally, the one incalculable benefit to franchise reform is perhaps the most valuable. Reducing government interference in the video market — any market — bolsters free enterprise, which is a necessary condition for liberty to thrive.