Telcos, cable companies face off over TV franchises

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with Verizon and state legislators to come up with a bill for statewide franchises that fits cities' needs. The league's priorities include collecting taxes and access fees for whatever TV services are delivered, and free access to community broadcasts.

"If Verizon agrees to giving us everything we ask for, I don't see what the disadvantage could be to a statewide agreement," said Michael Darcy, assistant executive director for the New Jersey State League of Municipalities. "Nobody thinks the negotiation process is a pleasurable experience. It's time-consuming, and it costs a lot in lawyer fees. I think if the terms are right, everyone can benefit from a shortened time frame."

"If Verizon agrees to giving us everything we ask for, I don't see what the disadvantage could be to a statewide agreement."

--Michael Darcy, assistant executive director, New Jersey State League of Municipalities

While SBC and Verizon are both looking to enter the television market as quickly as they can, their fundamental strategies for dealing with franchises are different. Verizon is trying to change state law, while at the same time seeking local franchises throughout the country. Already it has six agreements--four in Texas, one in California and one in Florida.

Verizon also is building a new fiber network, which extends directly into homes. Its initial television offering will use traditional broadcast technology to offer service.

SBC is not seeking any local franchises. Instead, it is taking the legal stance that it should not be subject to any franchise laws because the television service it plans to offer is transmitted over its existing copper telephone lines using Internet protocol technology.

But opponents say SBC's legal footing is questionable. They argue that the means of delivery has little to do with how a service should be regulated. Rather, SBC's TV service should be subject to the same rules that apply to similar services offered by cable providers. SBC so far seems undaunted.

"Our view is that a more streamlined process is preferred and favors consumers," said Kevin Belgrade, a spokesman for SBC. "The TV market today is void of any real competition. Big cable companies have a lock on consumers, which has resulted in double-digit price increases."

For Verizon, the battle in Texas is especially critical, since if it loses there it will have to wait two more years before it can introduce a similar bill to the reconvened state legislature. What's more, Texas is one of the states where Verizon is furthest along in its deployment of the Fios fiber-optic network.

It has already completed building the network in eight Texas cities and expects to start offering television service to residents in Keller, Tex., by the end of the year. It also has construction under way in about two dozen other cities, which it expects to complete next year.

While it has already managed to get four franchise agreements in Texas, Verizon still has many more to get. And because of the many months it takes to secure franchise agreements, Verizon says current franchise rules could seriously delay the rollout of new services.

"We're already lobbying in Washington to take a federal approach to franchising to replace the labor-intensive city-by-city approach," said Verizon's Kula. "And we will continue pursuing franchises."

[p.shearer]

new regulation is the answer

What compelling public interest is being served by government regulation of this television? In the past cable companies had a natural monopoly and therefore regulation was justified by anti-trust considerations. Today, with a multiplicity of entertainment options (your local cable company, Disk Network, Direct TV, Net-Flicks, ect) it only makes sense to teardown barriers to entry, not to establish new ones.

The cable company makes a valid argument concerning not having two set of rules. Eliminate both sets and let free-market principals prevail. This is what is best of the consumer.

[George Cole]

Net-Flicks

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