California rewrites cable TV franchise laws
9/1/2006 10:01:03 AM, by Eric Bangeman
AT&T and Verizon, both of whom have begun offering TV delivery in addition to phone and Internet, have been lobbying the US government for a so-called national franchise, which would exempt them from having to negotiate with each and every municipality they want to serve. A national franchise clause was included in the telecommunications laws rewrite passed by the US Senate Commerce Committee (it also included an audio and video broadcast flag). However, the fate of that bill is uncertain as it faces a filibuster from Sen. Ron Wyden (D-OR) over its lack of a network neutrality provision.
This week, the two telecom giants got a gift from California, as the state Assembly and Senate both approved a bill granting them statewide franchises. If signed by Gov. Arnold Schwarzenegger, it would let any company offer video services 10 days after notifying the relevant local government of its plans. Each video franchisee would have to enforce customer service and protection standards consistent with California state laws. Franchise payments would be determined and handled by the state Public Utilities Commission via a new Video Franchising Account.
Currently, one of the drawbacks of offering video services is the need to negotiate franchise agreements with local governments. Usually those consist of the city or town granting the cable company the right to install the necessary infrastructure and to deliver TV programming to the municipality's residents. In exchange, the government gets a franchise fee (usually a percentage of revenue) and a certain number of channels set aside for programming nobody watches (think late night public access programming).
As might be expected, Verizon and AT&T are both very pleased with the new law. Verizon West Region president Tim McCallion said that "Californians are one step closer to benefiting from true choice and real competition for home video entertainment." He added, "this bill would accelerate the deployment of this all-fiber-optic network, which sets a new standard of quality and value in television delivery to consumers across all income levels, while maintaining local government oversight in appropriate areas."
Other states have passed similar legislation, and it is under consideration in several more. Such laws would enable the telecoms—and other companies wanting to compete in a municipality—to avoid situations like one in suburban Chicago, where AT&T decided to pull out of franchise negotiations with Naperville. AT&T's decision came after the city insisted that the company make its new fiber-based offerings available throughout the suburb, rather than just targeted areas.
Under the new California law, incumbent cable companies will be able to supercede their local franchise agreements with the new state franchise, which could result in some neighborhoods being served by three or four video providers. That's one goal of the state and national franchise legislation: increasing the number of choices consumers have available to them. In the case of the California law, however, there is nothing requiring video providers to provide service throughout an entire city, meaning that the likes of Verizon and AT&T can cherry-pick among the more affluent subdivisions while leaving large sections in the same locality unserved.
