Indiana is set to become the second state to implement a single statewide video franchising process.
Cable companies have spent years negotiating case-by-case franchising contracts for video service with individual towns, cities and counties, but telcos looking to deploy IPTV are trying to change the process. The ILECs and some competitors want to change the video rules to grant statewide blanket franchises, allowing them to clear deployment hurdles faster and saving millions in transactional costs.
Indiana House Bill 1279 would implement the statewide franchise approach and is on its way to Gov. Mitch Daniels, who is expected to sign it. AT&T Inc.’s home state of Texas last year became the first state to replace local franchising with a single form.
Meanwhile, the HB 1404 measure in Virginia is heading to Gov. Timothy Kaine, and is considered a compromise act. It streamlines the franchising process by giving local franchising authorities four months to approve franchise requests instead of the 12-to-18 months that is the Virginia average.
However, the Virginia bill also implements required build-outs. ILECs have been criticized for focusing their fiber and IPTV services only in affluent neighborhoods and neglecting “digital divide” communities. Virgina’s bill has attempted to address this by allowing municipalities to maintain their regulatory control, and requiring new players to cover 65 percent of a locality within seven years.
In a February hearing before the Senate Commerce Committee on the subject, telcos argued that the need to obtain local permission to provide video services is a big market obstacle for IPTV and a hurdle for deploying broadband in general. Cablecos rebutted that statewide franchising offers competitors an unfair advantage to market entry.
AT&T CEO Ed Whitacre said the ILEC will not meet its deployment timeline under the current system, which would require signing around 2,000 separate franchise agreements. “If we were somehow miraculously able to sign one franchise agreement every single business day of the year, it would still take over seven and one-half years to complete this process,” he said.
Cablevision Systems' COO, Tom Rutledge, countered that local franchising ensures video providers meet local goals rather than shoehorn a one-size-fits-all service into communities regardless of needs. He also noted a need for fair play. “A level playing field means that succeed or fail based on innovation and effort rather than because our competitors may get better rules,” he said.
Some highlights from the Feb. 15 hearing transcripts:
AT&T Chairman and CEO, Edward E. Whitacre, Jr.: "First, more than 20 years after the passage of the Cable Act, cable operators are still not subject to effective competition. Second, the best evidence of the lack of effective video competition is that, unlike the pricing trends in every major segment of the communications marketplace, cable prices continue to rise – over three times the rate of inflation. Third, new video providers stand ready to bring real competition to the video market, but this cannot happen if they must first negotiate thousands of separate local franchises. Fourth, Congress should enact legislation that encourages video competition in the same way it has encouraged competition across the communications industry – by removing legacy barriers to entry. Five, in doing so, Congress can and should protect legitimate local interests by both requiring that all video providers pay a reasonable, consistent fee to municipalities and maintaining the cities' long-standing authority over public places and rights-of-way.
Brad Evans, Cavalier Telephone Inc.: “Copper-based IPTV providers should be exempt from any requirements for a mandatory buildout. A buildout requirement would make IP TV investments totally unfeasible."
Verizon Communications Inc. CEO, Ivan Seidenberg: "Verizon believes a streamlined national video franchising process – combined with our willingness to ensure that legitimate local concerns are met – presents a win-win for localities, consumers and the marketplace.”
Cablevision Systems' COO, Tom Rutledge: "Franchising is an important part of fair competition. Our franchises contain commitments that are important to the communities that we serve but are being questioned by phone companies in their new video plans. For example, Cablevision has made service to every neighborhood in a community a key part of its local franchises. In New York and New Jersey, Verizon's fiber upgrade is focused on wealthier suburban areas but leaves rural and urban centers virtually untouched."
Commerce Committee Co-Chair Sen. Daniel Inouye, D-Hawaii: “Whether a video service is called a cable service, IP TV, or is based on some other type of technology, the regime for regulating these types of services – where the provider controls the content included in the service offering – should be consistent.”
