FCC Brings Video Debate to Texas

KELLER, Texas -- Are small town politics killing your television?

That's the question being carved up here, as the Federal Communications Commission (FCC) released its 12th annual report to Congress on video competition at the Keller Pointe Community Center today.

In a crowded room, the Commission entertained a plethora of views on the controversy surrounding video franchises and the documents that give a company official permission to provide video services to a specific municipality.

Even though phone company video deployments are well underway in posh neighborhoods nationwide, whether or not a federal or nationwide franchising system should be employed is a hot one as it could potentially make it easier for companies of all sorts -- phone companies, Internet companies, utilities, dress shops, etc. -- to be video service providers and compete for consumer entertainment dollars.

To do that now, a company has to meet with the city government of each location where it wants to provide service -- a process the phone companies say is "tedious and unnecessary."

Funnily enough, all the companies and parties in attendance -- including representatives of Verizon Communications Inc. (NYSE: VZ), AT&T Inc. (NYSE: T), and Charter Communications Inc. (Nasdaq: CHTR) want more video competition for American consumers, though that competition invariably risks watching one's profits evaporate over time.

But what no one could agree on is: What should the FCC do first in order to encourage video competition without swinging the rules too far in favor of the incumbent video providers?

Fort Worth Mayor Michael Moncrief touted Texas Senate Bill 5 as a model the rest of the nation could use when handing out video franchises. (See Even Video Is Big in Texas.) Moncrief says Senate Bill 5 "was cussed and discussed" by all sides so as to allow for quick market entry without cheating cities of their franchise fees, rights of way revenues, and "social obligations," such as public access TV channels.

Texas was the first state to allow a state-issued video franchise, which allows video providers to cover more territory with one regulatory hurdle. But Senate Bill 5 also allows new entrants to selectively build services to just the neighborhoods they want to reach as opposed to everyone in a given city or town, and that's become a burr in some people's saddles.

Verizon's Senior Vice President, Video Solutions, Marilyn O'Connell, isn't one of those people. (See Verizon Sets TV Precedent.) She cheered a state or federal franchising system because "our experience so far has shown us that the local franchising process is a major barrier to entering the video market on a wide scale."

AT&T had the most hard-to-follow point of view in the discussion, claiming it is exempt from franchise agreements. Even so, the RBOC wants the local franchising system scrapped in favor of a national policy.

The company believes it is exempt from local franchise agreements because its proposed service is IP-based. (See SBC Eyes Alamo City for Video.) "AT&T is not building a cable system," said Lea Ann Champion, the company's senior executive VP of IP operations.

Still, "to build these networks, we have to engage with cities routinely" Champion said. During that process, Champion mentioned that AT&T has received flack from local officials who won't grant the RBOC the rights of way it needs to build out its network unless it agrees to a local video franchise.

In favor of local franchising was Lori Panzino-Tillery, the division chief of franchise programs for San Bernardino County, Calif., who blamed the phone companies for the franchising process taking so long, stating that they are asking for too many exceptions to the rules. "Providing certain potential franchisers with advantages that their competitors don't enjoy is not competition; it's favoritism," she said.

The cable side of the discussion was represented ably by Daniel Brenner, senior VP for law and regulatory policy for the National Cable & Telecommunications Association (NCTA) and Joi Philpott, corporate VP of government affairs and franchising relations for Charter.

Brenner offered the view that the local franchising system was working in that it could allow video competition while making sure local communities weren't getting the shaft. He pointed to Keller, Verizon's first FiOS city, as a prime example. "This is a community that managed to introduce a video competitor without any changes to federal or state law," Brenner said.

Philpott took a shot at Verizon saying that it was direct broadcast satellite (DBS) companies' market entry that forced Charter to lower prices -- not Verizon's FiOS. "DBS has a 26 percent penentration into Charter's national footprint."

Brenner thought the FCC should pay more attention to pre-existing phone monopolies and not focus so intently on who's dominating the video landscape: "The future of video competition will be all about the bundle. And in examining competition there I urge a focus on the one part of the bundle that is still dominated by an incumbent provider -- wireline phone service."

Chairman Martin, however, backed Brenner down when he pointed out through questioning that a CLEC doesn't have to provide phone service to every home just the incumbent phone company.

"So, do you think that's a fair approach, or an arbitrary and unfair approach that they don't have to serve everyone?" Martin asked. His point: Just because phone companies are big corporations with deep pockets, they're still the video services equivalent of CLECs and shouldn't be forced to build services to every home.

While Martin ran the meeting with an iron fist in a velvet glove, it was Commissioner Michael Copps who stated the obvious more plainly than any of the assembled dignitaries, save Mayor Moncrief. As he noted that cable prices continue to rise -- and there aren't that many alternatives for most consumers to turn to, Copps groused: "I know two things. First, consumers are feeling the pain and paying the cost and not liking it. And, secondly, we need to better understand what’s going on here."

When noting the many conflicting reports about whether local franchising is a barrier to video competition, Copps said the panel, in the months to come, needs to prove their respective cases. "I want to know what the specifics are and where the problems have been," he said.

The scary thing about Copps' request is that the phone companies -- so eager to prove that considering a national video franchise system is valid -- might actually ante up. (See FCC Brings Video Debate to Texas.) As those in attendance cleared the room, an observer chimed in, "...and I'll bet his email box'll be full tomorrow."

— Phil Harvey, News Editor, Light Reading