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Cable, Phone Companies Take TV Fight to Capital

Posted on: Wednesday, 22 March 2006, 21:00 CST

WASHINGTON _ A battle pitting cable providers against phone companies is heating up in Congress, promising a national repeat of the Texas Legislature's fight over video competition.

And the debate in Washington is becoming just as acrimonious as last summer's war in Austin. Most lawmakers agree on the goal: giving consumers more choice for their pay-television services, and spurring the deployment of advanced broadband Internet lines.

But once again, a tussle with billions of dollars at stake has drawn powerful interests, including the two largest phone companies and a cable industry already under attack from satellite TV.

Last August, Texas became the first state to revamp franchising rules, lending support to efforts by AT&T Inc., then called SBC Communications, and Verizon Communications Inc., to invest across the state.

The law lets new providers apply for statewide franchises for video service, bypassing the city-by-city model the cable industry has used for decades. Virginia and Indiana have recently followed suit with their own versions.

"Texas is a great model," said Dorothy Attwood, senior vice president of regulatory planning and policy for San Antonio-based AT&T.

"It's proven to be a bellwether for the kinds of reform that Congress is talking about now."

Texas is also becoming a laboratory for the companies as they compete with the cable industry in offering packaged voice, data and television services. Verizon's fiber-optic TV offering, FiOS, debuted in Keller last September and has taken 30 percent of the market. AT&T is rolling out its Project Lightspeed TV service in San Antonio this summer.

Cable companies say the phone giants don't need help from lawmakers to get bigger. They're lobbying to derail the process, raising many of the same charges that were fought over in Texas.

"This is clearly a sweetheart deal for an industry that doesn't deserve a special break and a competitive advantage over anybody, let alone the cable industry," said Kyle McSlarrow, president and CEO of the National Cable & Telecommunications Association.

Several proposals under consideration in Washington would give cable companies more equal footing and could supersede the Texas legislation that was more favorable to the phone giants.

The phone industry's success in Washington may prove even more difficult in an election year, despite the strong support of Rep. Joe Barton, R-Texas, who is leading House negotiations.

Barton told a Consumer Electronics Association conference last week that members are close to a compromise. A draft of legislation is expected to be unveiled in the coming weeks.

Still, election-year politics may get in the way.

Even if the House could quickly pass a bill, leaders in the Senate are likely to try tacking on other controversial issues.

Lawmakers have been weighing several changes to the 1996 telecom act that sought to bring competition to the phone industry. But many want to avoid alienating voters with divisive issues before the fall elections, said Kevin Book, a senior policy analyst at investment bank Friedman Billings Ramsey.

"You might be able to get a franchise bill in an ordinary year, but not in an election year," Book said. "You're going to be forced in an environment like this one to see something that has perfect consensus."

Some basic details create roadblocks. One proposal would give cable providers the same rights to sweeping franchises _ rather than the city-by-city approach _ after phone companies have gained a 15 percent market share.

"It is patently unfair and it contradicts letting the free market work," said Todd Baxter, general counsel for the Texas Cable & Telecommunications Association, which has filed federal and state lawsuits over the state franchising law.

Baxter served in the state Legislature last year before stepping down in the fall to become a cable industry lobbyist. As a House member, he tried unsuccessfully to offer amendments during floor debate _ in the Legislature's second special session _ that would have given cable companies the same provisions on their franchises that phone companies would receive.

Cable companies say they've already lost a third of their market to satellite TV providers, a sign of strong competition despite gripes about rising cable rates. The industry says it simply wants equal treatment.

"If you trust the market, you let the consumers pick winners and losers rather than the government doing so," Baxter said.

In Congress, lawmakers such as Rep. Rick Boucher, D-Va., are pressing for similar provisions for all providers.

Some lawmakers are pushing for build-out provisions that would force the new video providers to serve entire communities. Consumer groups have raised fears that some parts of a service area _ those that are less affluent _ could be ignored by new entrants in search of the most profitable customers.

For the phone companies, the key element is speed. Verizon says franchise negotiations can take as much as two years, delaying the deployment to new consumers.

"If we're forced to build out 100 percent in every market we go in, that'll just slow us down in terms of getting competition on a national level," said Michael McKeehan, Verizon's director of Internet and technology policy.

The Federal Communications Commission is evaluating the national franchising concept and held a hearing last month in Keller on video competition.

FCC Chairman Kevin Martin said he supported requiring municipalities to grant or deny franchises in a specified period. "I do think that there's some reasonable time limit" to impose, Martin said.

Attwood of AT&T said the message of new products and lower prices will resonate in Washington just as it did in Austin.

"Consumers understood that argument, and it was a powerful argument," she said. "You're seeing prices drop. You're seeing a tremendous amount of investment, because there's a glide path and a desire to serve customers."

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(c) 2006, The Dallas Morning News.

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Source: The Dallas Morning News

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