Cable TV and internet provider Spectrum underpaid nine Cumberland County towns by more than $142,000 for the use of public right-of-ways over two years, according to an audit commissioned by the municipalities.
The cable service, owned by Charter Communications of Stamford, Connecticut, pays annual fees known as franchise fees to municipalities in Maine to compensate for using public right-of-ways through which it runs cables. Local governments are entitled to a maximum of 5 percent of gross revenues from cable services under federal law.
In 2017 and 2018, Charter underpaid by tens of thousands of dollars to Cumberland, Gray, Cape Elizabeth, Casco, Harrison, Naples, New Gloucester, Windham and Yarmouth, according to the audit, conducted by a law firm hired by the Greater Portland Council of Governments. Franchise fees often help pay for local access television programming.
Underpayment in those two years ranged from a little more than $1,100 in Casco to more than $31,400 in Cumberland. Including interest and fees, the nine towns are owed almost $166,000, it says. The audit was conducted by Bradly Law, a firm from Minnesota that specializes in telecommunications and cable franchise laws.
The audit was suggested by Bradly Law, which works with 13 southern Maine towns sharing the cost of renegotiating franchise fee agreements with Charter.
Naples officials were unaware they had been underpaid by the cable company, town manager John Hawley said. It never crossed local officials’ minds to look into its franchise compensation until the law firm suggested the audit, he said. The town is is owed almost $20,000 by Charter, according to the audit.
“I was a little surprised,” Hawley said. “If it had been a few hundred dollars, or even $1,000, you could chalk that up to a minor oversight. When you are talking that many thousands of dollars, it is not a minor oversight.”
Charter has not responded to a letter the town sent demanding payment, he said.
Naples uses franchise fees to pay for Lakes Region Public Access, a nonprofit public access television service for recording and archiving public meetings.
Cape Elizabeth Town Manager Matthew Sturgis also was surprised by the audit’s findings. The town is owed almost $31,000 by Charter, according to the audit. Franchise fees are used to pay for and invest in the town’s public access service.
“We are very pleased with the audit,” Sturgis said. “Doing one educated us all in the nuances of these contracts and to make sure the companies we do these contracts with live up to their end of the agreement.”
Charter spokeswoman Lara Pritchard did not directly answer questions provided to the company, including whether it underpaid its franchise fees, and whether it would reimburse the nine communities.
“Cable franchise-fee audits like these are routine, and we are reviewing the auditor’s claims and plan to respond to the communities soon,” Pritchard said.
The audit emerged as part of a 13-municipality cohort that banded together last year to share costs associated with renegotiating franchise agreements with Charter. Agreements can last as long as 15 years.
The nine towns each agreed to a $2,000 fee to conduct an audit of their franchise fees.
“Hopefully this will result in some additional revenue coming their way – at least it will provide some leverage in negotiations with Charter,” said Tony Plante, director of municipal collaboration at the Greater Portland Council of Governments.
The local government agency facilitated the collection of towns coming together to renegotiate the contracts.
Underpayment of franchise fees could stem from longstanding errors in the number of cable customers in a given jurisdiction that has had frequent turnover of cable providers, Plante said.
“It is not unusual to have cable companies make mistakes,” he said. “They are dealing with millions of customers, and over time it is easy to lose track of or have poor quality data on where exactly these franchise agreements are.”
Since the audit only covered 2017 and 2018, it is reasonable to assume the communities continue to be underpaid and may have been underpaid in prior years, Plante said.
“There’s no reason for us to think there was anything malicious behind it – I would certainly like to think that,” he said. “The focus is on identifying the issue and getting it corrected.”
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