Verizon CEO calls for pay-TV rule changes

Verizon Communications CEO Ivan Seidenberg called for changes in telecommunications laws so that the Baby Bell phone giant can more easily sell video service over fiber-optic lines.

During a speech at the National Association of Broadcasters conference in Las Vegas on Monday, Seidenberg told an audience made up largely of those in the TV industry that Verizon should not be required to pay fees to local governments for offering pay-TV over fiber. The issue stems from current "franchise" fees that allow local municipalities to bill cable companies for using their public facilities, such as light poles and sewers, to deliver television.

Telephone companies such as Verizon must pay separate fees to stretch their own copper wires to offer phone and DSL services. Seidenberg, however, said requiring the Bells to pay video fees on top of their existing fees would hurt Verizon's video ambitions.

"We ask you to lend your persuasive voice in support of clearing away this barrier to video competition...and provide a true and compelling alternative to cable," Seidenberg told the audience, according to a statement released by the company.

Seidenberg's rallying cry comes as Verizon prepares to begin offering pay TV through its fiber service, called Fios. The promise of fiber stems from its vast bandwidth that allows the delivery of video, phone calling and broadband Internet access through one pipe. The Bells currently offer most of their services over their decaying copper network, some parts of which are more than 100 years old.

Other Bells are getting into video as well. SBC Communications plans to spend $4 billion to upgrade its copper network to fiber, and then sell its own Internet-based TV service to its customers. SBC is partnering with technology giants Microsoft and Alcatel to help build out its product, which is expected to launch in the second half of this year.

The interest among the Bells to get into video reflects the competitive pressures they face from the cable industry. For years, the Bells dragged their heels in selling DSL due to unfavorable telecommunications laws. Because of that delay, cable companies invested billions of dollars into upgrading their networks and have grown to become the nation's largest broadband providers.

Seidenberg's plea to broadcasters opens another contentious battle against the cable industry. Cable companies oppose waiving video franchise fees for the Bells, and are trying to maintain consistent laws for video rights of way.

"The cable companies are crying foul," said Mike Paxton, an analyst at In-Stat/MDR.

Separately, Seidenberg said Fios, which has been launched in 100 communities, will offer broadband Internet access at speeds up to 30mbps downstream and 5mbps upstream. He added that the Fios TV service will support high-definition signals and digital video recording features.

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If the delivery is the same, the regulation should be the same

Whether it's a cable company or a baby bell, if they deliver the same kinds of content then they should be paying the same "franchise fees". Otherwise you don't have a level playing field.

This article is incomplete since it doesn't mention the total fees being paid nor whether the size of the fees vary either.

DSL Video Franchise

The first three words of the FCC definition of a cable television system are: "A CLOSED SYSTEM". If a system is closed, where the system operator choses which television stations will be carried and which television stations will not be carried, then if the remaining parts of the definition match (system has customers, AND system crosses public right of way, AND system carries class 1 signals (television broadcast signals)), then the system is a cable television system and is regulated as such, and local government may regulate such company, by way of a franchise agreement, including assessing a franchise fee.

But if the system is not a closed system, then it is not a cable television system, and is not subject to regulation by federal or local government as a cable television system.

Then, television over the Internet becomes like the World Wide Web -- anyone can put up a web site, there are hundreds of millions of them. With limited exceptions, ISP customers can choose which sites they visit, and don't pay the ISP per web site to visit.

Of course, this makes a big dent in the ISP business model. The ISP would need to make their revenue from the bit transport business, not the video delivery business.

So Ivan - there is a way. It just means a different business model. Open up your network to video from around the world, and poof - no franchise fee. And wait - there's more: The cable companies can't compete with that business model - unless they get out of the cable television business too!