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FCC Brings Video Debate to Texas

Phil Harvey
News Analysis
Phil Harvey
2/10/2006
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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. 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

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paolo.franzoi
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paolo.franzoi,
User Rank: Light Beer
12/5/2012 | 4:06:36 AM
re: FCC Brings Video Debate to Texas

It takes time money and more importantly the potential to require the telco to roll video to neighborhoods that they don't want to upgrade (for example South Dallas).

I know even in the IOCs getting a franchise is an issue. I remember a Next Level Customer called Paul Bunyon Tel not being able to get a franchise a few years back.

seven
paolo.franzoi
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paolo.franzoi,
User Rank: Light Beer
12/5/2012 | 4:06:36 AM
re: FCC Brings Video Debate to Texas

Phil,

Just to help clarify this for the readers. The basic position is something like this.

We are delivering an IP data service. That data service does not require a franchise. In fact, that IP data service carries video like that wonderful LRTV that so many customers rave about.

We are also making a content aggregation company. This company will sell bundles of video programming to customers. Content aggregation does not require franchising.

This is a similar debate to the whole Voice over IP thing. But AT&T is hedging its bets. It has seen the FCC impose PSTN-like regulations onto VoIP carriers. It is concerned that the FCC might impose Cable-like regulations on its service.

So, its position: "We don't have to franchise, but franchises should go away" makes some sort of Orwellian sense.

seven
DCITDave
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DCITDave,
User Rank: Light Beer
12/5/2012 | 4:06:36 AM
re: FCC Brings Video Debate to Texas
Here's what i really want to know...

Is this video franchise thing really an issue -- is it really slowing down network deployments in some places, as suggested in today's meeting?

ph

DCITDave
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DCITDave,
User Rank: Light Beer
12/5/2012 | 4:06:36 AM
re: FCC Brings Video Debate to Texas
Got it.

And it does make sense.

It's just an odd position to be in at the moment, that of saying you're exempt from franchises, then getting a state-wide franchise in Texas (just in case).

But the meeting did help clear up why they're doing what they're doing.

For gosh sakes, the lady's last name is Champion -- why would I argue with her?

ph
paolo.franzoi
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paolo.franzoi,
User Rank: Light Beer
12/5/2012 | 4:06:34 AM
re: FCC Brings Video Debate to Texas

rj,

I think it is and it isn't. Cell Phone companies have to get permits to put up towers. Phone companies need right of ways to put in equipment. There are rules around granting them through zoning and planning processes. But Cell Phone companies buy spectrum from the FCC not the cities. Franchising is more like buying spectrum.

On the other hand (and I thought you would notice this), the RBOCs fight for Video over IP to be an unfranchiseable service and that regulations need not apply. They take the opposite stance on Voice over IP. Imagine that.

seven
rjmcmahon
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rjmcmahon,
User Rank: Light Beer
12/5/2012 | 4:06:34 AM
re: FCC Brings Video Debate to Texas
The franchising issue looks like a red herring to me. The phone companies have to continue to come up with reasons that they can give to the FCC about why they aren't investing in infrastructure. It was originally the unbundling. So the FCC acquiesed on that. Now it looks like they're making up another excuse with this franchising issue. It's worth noting the same companies were able to work with local governments and deploy cellular networks.
frnkblk
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frnkblk,
User Rank: Light Beer
12/5/2012 | 4:06:29 AM
re: FCC Brings Video Debate to Texas
Yes, it is. I work for a small service provider and the town we wanted to provide IP TV demanded a franchise election, which we had to campaign for and did win, quite handily, I might add. That delayed deployment by several months b/c of town council delays, and we spent some time deliberating and negotiating, trying to avoid the cost (and risk) of an election.

The challenge was that the incumbent CATV provider was the city, and so there was a strong play of 'support local' against us 'outsiders', even though we have provided dialtone for over 50 years.

Frank
DCITDave
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DCITDave,
User Rank: Light Beer
12/5/2012 | 4:06:27 AM
re: FCC Brings Video Debate to Texas
re: "The phone companies have to continue to come up with reasons that they can give to the FCC about why they aren't investing in infrastructure."

That's why I was asking. I have spoken with a lot of people who feel that way and it seems the phone companies are giving themselves a PR black eye each time they stall for some regulatory gripe.

The only one that appears to be going full speed ahead is Verizon, but they have been one of the loudest voices in this franchise debate.

Does anyone think Verizon would deploy any quicker if the franchising issue were suddenly a federal issue?

ph
DCITDave
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DCITDave,
User Rank: Light Beer
12/5/2012 | 4:06:27 AM
re: FCC Brings Video Debate to Texas
re: " I work for a small service provider and the town we wanted to provide IP TV demanded a franchise election, which we had to campaign for and did win, quite handily, I might add. That delayed deployment by several months b/c of town council delays, and we spent some time deliberating and negotiating, trying to avoid the cost (and risk) of an election."

Frank, I'm doing more reporting on this issue -- looking at what problems both sides are having with franchises.

Can you contact me with your story?

ph
optiplayer
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optiplayer,
User Rank: Light Beer
12/5/2012 | 4:06:26 AM
re: FCC Brings Video Debate to Texas
"The franchising issue looks like a red herring to me."

I am guessing that you have never had to interact with your local bureaucrats to make an assertion like this. I will further assert that anyone who has ever had to interact with town government (building commision, conservation commission, historical commision, etc.) will sharply disagree with you. Most of people who sit on these bodies are power craving control freaks who think it is their duty to make life as difficult as possible for those folks unlucky enough to come before them.

I suspect the RBOCs would face the same or worse in each town in which they seek to provide service.
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