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Texas Legislature Passes Bill Allowing Telecom Companies to Offer Cable Service

Posted on: Wednesday, 10 August 2005, 21:00 CDT

Aug. 11--Texas consumers may soon be able to find more competitors to cable television service, thanks to legislation passed Wednesday and sent to the governor.

The far-reaching telecom bill gives telecommunications companies the ability to get a statewide franchise to offer video service. That provision came over the loud objections of cable TV companies, which historically have had to fight for their franchises city by city.

Some consumers could also face higher rates for basic phone service under provisions that give telephone companies greater power to set their own prices.

SBC Communications and Verizon Communications, which pushed hardest for the legislation, praised the Legislature and urged the governor to sign the bill. But the Texas Cable & Telecommunications Association said Gov. Rick Perry should veto it, and warned of legal challenges on the horizon.

"The next step in this process will almost certainly be the courts," said association chairman Tom Kinney, "where the substantial legal issues contained in this legislation hopefully will be resolved in a more thoughtful way, without the undue influence of hordes of SBC lobbyists trying to sway the outcome in their favor."

Both SBC and Verizon are testing systems to offer video to consumers in the near future, competing directly with cable companies. The industry calls it the "triple play" of telecom services -- voice, data and video.

Cable companies have gotten a jump in the competition, adding data and then voice services to their traditional television.

But SBC is investing $4 billion through 2008 to build a fiber-optics system to provide voice, data and video, and Verizon is about to begin selling video service on its fiber-optic network, with the first customers in Keller expected in September or October.

SBC Texas president Jan Newton said more competition means "better prices and better products for consumers."

Steve Banta, Verizon's Southwest region president, said that "all Texans should be proud that our state is the first in the nation to open up the video market so that consumers can have a choice of video providers."

Cable companies had first attacked the legislation as being unfair to cities, and permitted "redlining" by letting telephone companies focus on customers in wealthier areas.

Because the Legislature was called into two special sessions to deal with educational funding and property tax reform, the TCTA said lawmakers should have focused its attention on education issues rather than telecom.

It repeated that criticism Wednesday after the House approved the bill 144-1, a day after the Senate approved the same bill. The governor is expected to sign the legislation.

"Even if the legislature is able to pass some limited reforms on these important issues, SB 5 is bad for consumers, bad for competition and bad for Texas -- and should not become law," said Mr. Kinney, president of Time Warner Cable's Austin division.

Dick Kirby, Comcast's executive director for government affairs in Dallas, said cable companies with existing franchise agreements will be at a decided competitive disadvantage to telephone companies.

"The Texas legislation has the impact of picking winners and losers in the marketplace, by giving the big phone companies an unfair competitive advantage," Mr. Kirby said. The legislation is "essentially stripping away most of the franchise requirements that all cable operators are required to live with today when they provide service," he said.

Cities had fought earlier versions of the legislation. However, revised bills grandfathered existing franchise agreements, and forced new competitors to meet some of the same requirements as franchise holders.

"I think that's why I think you saw the Texas Municipal League and the cities go neutral on this," said Mr. Banta of Verizon.

The bill also would allow telephone companies to raise their basic local rates, which have been frozen for years at about $11 a month before taxes and fees. On Jan. 1, an incumbent telephone company such as SBC or Verizon could raise rates in markets with at least 100,000 population.

Markets with 30,000 to 100,000 people also would be deregulated Jan. 1 if the state Public Utility Commission determines that the incumbent telephone company has at least three competitors, including one providing residential telephone service and another offering mobile telephone service not connected to the incumbent.

Smaller markets of less than 30,000 people would be deregulated in 2007 unless the PUC decides it needs to remain regulated.

The immediate impact on consumers is unclear, but public interest groups are wary. The bill was opposed by AARP, Consumers Union, Common Cause, Texas ISP Association, Save Muni Wireless and Technology for All.

"We know you're outnumbered; there are more registered telephone industry lobbyists than members of the House of Representatives," the groups said in a Tuesday letter to state leaders. "But this session was called to reform school finance and lower property taxes, not to appease lobbyists demanding special interest legislation simply to increase their profits."

Companies and lawmakers argued that those customers could receive similar service from competitors. But consumer groups said other options such as wireless or Internet-based phone services were priced far higher.

"I expect higher phone bills for millions of Texans who want little- or no-frills phone service," said Tim Morstad, policy analyst at Consumer Union.

The bill also opens the door for electric utilities to carry Internet signals over power lines, a technology that could improve efficiency of the transmission grid and allow consumers to receive broadband Internet service.

Among the potential services: Automatically notifying utilities of power outages, quicker disconnects and reconnects of customers and automated meter reading. Ultimately, the technology would support pricing plans from power providers that offer different rates throughout a day.

"These are all things utility companies have talked about and wanted for decades," said Jay Birnbaum, vice president of Current Communications, a provider of broadband-over-power-lines, or BPL, service.

Amateur radio operators have objected to the BPL technology, saying it interferes with communications equipment that could be used in emergencies. The companies say that newer technology will not disrupt the radio signals.

By Terry Maxon and Sudeep Reddy

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SBC, VZ, TWX, CMCSK,

Source: The Dallas Morning News

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