Wednesday, January 04, 2006

Council to keep Cox fee at 3%

The City-Parish Council last night passed on an opportunity to raise the rates it charges Cox communications by 1%. That's real money folks, from a corporation that is getting off light in a city where it had played real ugly for a while.

The news was reported in an Advocate story on the Council meeting:
Under the franchise agreement, the council had the right this year to raise the fee from 3 percent to 4 percent of gross annual revenue.

The administration recommended -- and the council accepted -- to maintain the 3 percent level.

Councilman Dale Bourgeois said Baton Rouge charges Cox 5 percent of gross revenue.
The feds set the limit at 5% and typically the reason given by municipalities for not charging the full amount is to save its citizens money. That rationale wasn't mentioned today but another was:
But raising the franchise fee on Cox would result in higher rates for eventual LUS telecommunication customers, as a state law passed last year requires LUS to charge its customers an equivalent of the fees and taxes paid by competitors.
Wassthat? It's a complicated tale and the outcome for Lafayette citizens is not as simple as that seems to indicate.

It all goes back to the misbegotten "Local Government (un)Fair Competition Act" One of the (un)Fair aspects of the bill is to place LUS' cable rates and only LUS' rates under the control of a state body: the PSC. This isn't like regular price regulation, where the regulatory body is charged with taking a fair look at the costs of provisioning a service and making sure that consumers aren't overcharged. This is a decidedly irregular form of price regulation. It is designed to makes sure the consumer pays more than they would without the regulation. The (un)Fair Competition Act (passed by "your" legislature) directs the PSC to ignore the real costs of provision and force LUS and the city of Lafayette to charge the public as if it did not own its owns rights of way, as if it did not already pay to maintain those rights of ways, and to charge the public as if LUS had to pay any tax or charge that its corporate competition might have to. This is most decidedly not based on how much LUS returns to the general fund...there is no suggestion that any real tax equality is to be considered. That is because LUS' "in lieu of taxes" payment is already more, much more, as a percentage than Cox pays to all levels of government. (I hear Cox hasn't paid federal income taxes in years.)

So this law is structured to make the user pay more than LUS would otherwise charge even if it has already returned more value to the local community than Cox returns to all levels of government. You can see why I call it (un)Fair. The language of the law's title is profoundly Orwellian.

The consequence of all this convoluted messing with LUS' rates (and, I repeat, only LUS') is that any charge against Cox raises the rates the state will tell LUS that it has to charge its customers.

That's what the remark in the article was about.

Apparently that was the end of the matter. I like the outcome, so I'll not kick too hard. But I do think that there should have been more conversation.

One of the virtues of the in lieu of tax system is that it has the effect of adding to the city-parish general fund using fees for service instead of taxes. Any additional money that LUS gains as an indirect result of the city charging Cox a bit more will go into the general coffers. As does the money we charge Cox for using our property. That's good for potholes and social services.

This is the last time we can raise the price we've charged Cox without raising the price the state will force on LUS. To the extent that a benefit of a local utility is to lower the tax burden we are missing the last chance to do that without additional controversy. The city surely fears that Cox will respond by raising rates in Lafayette and blame the city. Maybe. But not as surely as it once would have. Cox and the cable companies can raise their rates anytime they want only because they don't have any real competition. But with lower prices in the offing from LUS maybe Cox would decide it couldn't afford to risk raising those prices to recover 1% if its local revenues. ...After all it didn't raise rates recently in Lafayette when it did in Baton Rouge and that seemed solely due to the specter of competition. Maybe Cox is not so invulnerable as it has seemed in the past. Worth thinking about.

Then again, we've already a seen a more temperate Cox. They're not opposing the LUS project in ways that are quite as ugly as they once did. They argued their point at the PSC and we've not heard much from them since. Quid pro quo? Not to my knowledge.

At any rate, that little blip in city-parish council report was clearly important; just how is less clear.

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