Request By:
Ms. Michelle Sharp
WIEL - WKMO
P.O. Box L
Elizabethtown, Kentucky 42701
Opinion
Opinion By: David L. Armstrong, Attorney General; By: Charles W. Runyan, Assistant Deputy Attorney General
On December 17, 1984, Hardin County Fiscal Court voted a resolution which would require renters of residential dwellings in Hardin County, who are served by the Telescripps Cable T-V Company, to pay a twenty dollar ($20.00) security deposit before receiving a cable T-V converter box. This new county policy will apply only to renters of dwellings, but not to cable T-V subscribers who own their own homes. See KRS 67.083(3)(s).
You have further indicated that the Telescripps Cable T-V Company is operating under a franchise from the Hardin Fiscal Court, covering a great amount of Hardin County territory. The cable T-V converter box, necessary for cable transmission, is owned by the cable T-V company. The company found that the converter boxes left in the custody of the subscribers who rent their dwellings were disappearing, without any accountability on the part of the vanishing subscribers. The inevitable conclusion was that the renters simply took the converter boxes with them upon their departure from the service area, with a substantial loss to the cable T-V company.
Apparently, the cable company was successful in getting the Hardin Fiscal Court to issue a resolution which recognizes that the renters must advance a twenty dollars ($20.00) deposit, in advance of extending cable T-V service, in connection with the converter box.
In the county's formal recognition of the cable T-V company's right to require the renters to advance the security deposit, we construe it as an amendment of an existing franchise. We see no problem with that aspect of it, since, on the face of it, it is a correlative matter involving the welfare of the public to be served and the legitimate interests of the company holding the franchise. It extends directly to a condition of service. Section 164 of the Constitution is not being violated, since this security provision was agreed to by the county fiscal court and the enfranchised company. A franchise is an agreement between the granting authority and the holder and partakes of the usual incidents of a contract. City of Owensboro v. Top Vision Cable Co. of Ky., Ky., 487 S.W.2d 283 (1972) 287. Moreover, the original franchise ordinance provided for security deposits for the converter boxes, not to exceed twenty-five dollars ($25.00). Here by the agreement the security idea is merely being put into play, observing the original maximum amount agreed upon in the granting of the original franchise.
See
City of Covington v. Union Light, Heat & Power Co., 243 Ky. 591, 49 S.W.2d 580 (1932), citing the rule that amendment of a franchise, covering utility rates, was not construed as creating a new franchise. The flexibility of a municipality in granting a franchise is discussed in
City of Louisville v. Louisville Home Telephone Co., 149 Ky. 234, 148 S.W. 13 (1912) 15. Thus, since § 164 contains no restriction in the granting of public utility franchises as to terms, except the time period, the particular methods of exercising privileges granted, and reservations, stipulations, desired by and agreeable to the municipality and purchaser of the franchise, are left to their reasonable discretion. In
Russell v. Kentucky Utilities Co., 231 Ky. 820, 22 S.W.2d 289 (1929) 290, the court ruled that the contracting parties can amend an existing franchise, so long as a new franchise is not created. Here, in the Hardin County situation, the only purpose of amendment was to adjust the existing franchise to the present needs.
Now, addressing your immediate question, concerning possible discrimination relating to the security advancement, the television industry possesses many of the attributes of a public utility. It is of a public nature. In 36 Am.Jur.2d § 3, page 725, this is written:
"Generally speaking, the right to carry on any business of a public nature, such as the establishment, construction, and operation of a public utility and the collection of tolls or charges for its use or service, or the use of highways for such purpose, is a franchise. "
The primary purpose of a public utility, including cable television, is to make available adequate service to the customers, and to cause remuneration to be received by the public authority. City of Owensboro v. Top Vision Cable Co. of Ky., above.
Concerning community antenna television, the
Supreme Court of the United States, in United States v. Midwest Video Corp., 406 U.S. 649, 32 L. Ed. 2d 390, 92 S. Ct. 1860 (1972), observed that the Federal Communications Commission had a duty to provide a fair, efficient, and equitable distribution of television service to each of the several states and communities.
The courts generally recognize the right of a public utility to require a deposit from its customers, provided that it is reasonable and not discriminatory. In following that general rule, as to security deposits, the court, in
Union Light, Heat & Power Co. v. Mulligan, 177 Ky. 662, 197 S.W. 1081 (1917) 1083, 1084, wrote as follows:
"While a rule may not be based on the theory that the people as a whole are dishonest, the company has the right to adopt a rule which, while giving the honest citizen what he pays for, will prevent the dishonest from getting that which he will never pay for."
See
Commonwealth v. Kentucky Power & Light Co., 257 Ky. 66, 77 S.W.2d 395 (1934), treating the statutory recognition of the concept of security deposits with public utilities. See also the annotation in 43 ALR2d 1262. See
Barriger v. Louisville Gas & Electric Co., 196 Ky. 268, 244 S.W. 690 (1922), in which the court held that a rule requiring ten percent (10%) of the consumers to put up a security deposit was clearly discriminatory. See
Dawes v. Philadelphia Gas Commission, (U.S. Dist. Ct., E.D. Pa. -1976) 421 F.Supp. 806, in which the court struck down the requiring of low-income customers to pay a security sum for the reason that it was deemed to be discriminatory, violating due process of the Fourteenth Amendment of the Federal Constitution.
See
Puckett v. City of Muldraugh, Ky., 403 S.W.2d 252 (1966), in which the court held that requiring tenants to pay a cash security deposit of one hundred dollars ($100) for water services was excessive and arbitrary. See also the annotation following that case in 19 ALR3d 1227.
CONCLUSIONS
(1) The fiscal court's resolution recognizing the company's right to require a security deposit was an amendment of an existing franchise, and it did not violate § 164, Kentucky Constitution.
(2) When considering the actual experience of the company with the renters, and the fact that the company suffered a monetary loss in extending service to renters without requiring a security deposit for the converter boxes, it is our opinion that such requirement was reasonable and not discriminatory, it being applied to all within that class. Further, under the circumstances, the classification was reasonable. See § 2,