This summer, the legislature will consider whether to amend confusing language in a law that overhauled the way cable television is regulated statewide.

At stake is the viability of the public TV channels that broadcast town council meetings, community college courses and citizen-produced programming.

When state legislators passed the Video Service Competition Act (VSCA) two years ago, their goal was to increase competition. As the technology for delivering Internet, voice and video converge, AT&T, Verizon and other telecommunications companies say they plan to enter the TV business. Along with Time Warner, they lobbied the General Assembly heavily in favor of the law, which created a statewide franchise system for video service. Over time, those state franchises will replace the agreements cable companies used to negotiate with local governments.

One of the few things legislators asked of those companies was to keep setting aside space for public access, education and government channels. Thanks in part to lobbying from the N.C. League of Municipalities, the VSCA guaranteed channel space and funding for the public outlets, known as public educational and governmental access (PEG) channels.

Or so everyone thought.

But laws often have unintended consequences, while their intended consequences can fail to materialize.

In fact, nearly 18 months after the VSCA was enacted, neither AT&T nor Verizon has submitted a single application to provide video service in North Carolina. Of the 118 new state franchises, almost all were submitted by Time Warner; only two new providers have entered the market; and only one service area has any competition.

Meanwhile, many PEG channels have seen their funding evaporate under the new law.

On Wednesday, May 6, the Revenue Laws Study Committee voted in favor of a proposal to clarify confusing language in the VSCA, in order to make sure that money intended to fund PEG channels actually gets to them. The next stop for the proposed amendment will likely be the state House and Senate finance committees.

“There are so many issues with this law,” says Chad Johnston, director of The People’s Channel, a Chapel Hill nonprofit that produces programming for the local public access TV station. “All we want to do is make sure in the next year to three years that those PEG channels out there don’t disappear. In our position, if we don’t get one quarterly check, we’re out of business.”

But the cable and telecommunications industries are fighting the proposed amendment.

Mark Prak, a lobbyist representing the North Carolina Cable Telecommunications Association, has told legislators that the industry objects to the proposed changes, in part because the amendment would guarantee that third-party PEG producers like The People’s Channel get money distributed to local governments.

“I’ll bet he’d like to get his money straight from the government and hook up to the government spigot,” Prak says of Johnston. Prak says the language of the proposed amendment would effectively send the money directly to those third parties, instead of to “politically accountable” local governments. “It’s bad policy,” Prak says.

“He makes it sound like there’s this wild West with PEG,” Johnston says, “that there are these fly-by-night companies that will come in and get the money, then somehow run wild in the community. I’ve spent a year negotiating a contract with my town and I can tell you, it’s not the wild West. Every PEG operator in the state is held to very high standards.”

The People’s Channel case illustrates several problems with the VSCA.

Johnston knew the law about as well as anyone. He paid careful attention when legislators hashed out the bill’s language during the 2006 short session. He was among a group of PEG channel supporters and local elected officials across the state who lobbied to make sure the law preserved funding for channels like his.

They thought they’d succeeded. “We were even expecting a temporary increase,” he says.

But his expectationsand his channel’s budgetwere confounded by the law’s vague language. “We’ve had a rough year,” Johnston says. “I had to lay off people because I didn’t have cash.” Two of his four full-timers are gone, including his fundraising and outreach coordinator.

Most of the money that funds The People’s Channel’s $160,000 annual budget comes from a PEG subscriber fee, about $.80 per month that Chapel Hill cable customers pay under the agreement the town has with Time Warner. The minute competition does come to Chapel Hill, that local agreement will be null and void, and the fee goes away.

That’s one reason the legislature created a supplemental fund for PEG channels as part of the VSCA.

But the law didn’t clearly define what a “channel” is. Nor did it specify that funding should go to the entity that actually produces a channel’s programmingsome local governments operate their own channels, yet public access and education channels are often operated by a third party, such as a nonprofit or a community college.

Furthermore, legislative staff drastically undercounted the number of PEG channels that would apply for funding. The law set aside $2 million of cable and satellite TV tax revenue annually to support PEG channels, based on the expectation that a maximum of 80 channels would apply. Each channel would have received $25,000 annually. In fact, 276 channels were certified with the state as of March. That means little more than $7,000 is available for each channelabout the cost of a digital camera.

Where did all those channels come from? In fact, another unintended consequence of the law’s language is that it allows channels to be counted by more than one local government. Legislative staff, PEG supporters and the cable industry agree that duplication is a major problem.

Both Chapel Hill and Orange County received money for Chapel Hill channel 8, on which The People’s Channel broadcasts.

Yet neither government has passed that money on to The People’s Channel. The law says local governments must spend the supplemental money on PEG channels, but it doesn’t specify which channels.

Chapel Hill spokesperson Catherine Lazorko says the town manager and town council have yet to decide how to distribute PEG funding. Chapel Hill operates its own government channel, 18, which broadcasts public meetings.

Orange County, which certified a total of three PEG channels, decided to spend all $29,400 of its supplemental PEG funding on its own government channel, 265, which broadcasts county commissioners meetings. The annual budget for Channel 265 is approximately $40,000.

Assistant County Manager Gwen Harvey says she consulted an attorney with the Triangle J Council of Governments before making the decision.

“We believe in public access and what it means to a progressive community like Orange County,” Harvey says. She points out the county continues to hire The People’s Channel to videotape commissioners’ meetings, and she says she’s looking for other ways “to partner on projects” on a fee-for-service basis.

“Everyone’s equally concerned about what the legislation has done and what it will do going forward,” Harvey says.

The N.C. League of Municipalities’ proposal would more clearly define what a qualifying channel is, require local governments to pass funding on to a channel’s operator, and require governments distribute the PEG funding they receive equally among channels.

“It’s not a controversial bill at all,” says Catharine Rice of the Southeast Association of Local Government Telecommunications Officers and Advisors, which supports the proposal. “It really doesn’t affect the cable industry at all, and yet they’re trying really hard to kill it.”

Prak has told legislators he opposes the proposed bill, but he says he’s not trying to kill it. “We’re not opposed to fixing the double counting problem,” but he says the language of the proposed changes won’t do that. “I’d rather see it reworded. There can always be unintended consequences of drafting legislation.”

Correction (May 13, 2008): The name of the act is the Video Service Competition Act.

Correction (May 9, 2008): Orange County’s assistant county manager is named Gwen Harvey, not Beth.