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Lawyers: Video Franchise Law Won't Make It

Attorneys representing Cisco Systems Inc. (Nasdaq: CSCO), Vonage Holdings Corp. (NYSE: VG), AT&T Inc. (NYSE: T), and the Center for Democracy and Technology say the issue of network neutrality has all but spiked a new telecom bill -- and the likelihood that we'll see a national video franchise system rolled out this year.

At a forum sponsored by the Northern California Chapter of the Federal Communications Bar Association in San Francisco Wednesday night, lawyers said the Communications, Choice, and Broadband Deployment Act of 2006 (a.k.a., the Stevens bill), which calls for a national video franchise, probably won't make it out of the Senate in 2006.

“The popular wisdom in Washington is that the Stevens bill will not pass this year,” says Vonage director of government affairs Chris Murray. “They’ve got only another week to get something done before they leave for the elections. Then there could be a lame duck session.” (See Support Picture Still Fuzzy on New Video Bills.)

The House already passed its version of a telecom reform bill, the Communications Opportunity, Promotion, and Enhancement Act of 2006 (COPE), which is sponsored by Joe Barton (R-Texas) and includes a nationwide video franchise. But the Senate’s version of the bill, sponsored by the aged but influential Senate Commerce Committee chairman Ted Stevens (R-Alaska), has run aground in the Judiciary Committee, and time is running out this session.

Vonage’s Murray says some 360 amendments were proposed to the Stevens bill in Committee. Some of those amendments were proposed by parties intentionally trying to make the telecom bill appear “controversial,” Murray notes.

“For many of us it’s just been really frustrating,” says Jeff Brueggeman, AT&T VP of regulatory planning and policy in Washington. Brueggeman says he and his collegues didn't see the net neutrality log-jam coming. “We thought the cable lobby would be our chief adversary in this fight, but they ended up being relatively quiet on the issue." (See AT&T Hits Homezone.)

Brueggeman says his frustration is tempered somewhat by progress at the state level for statewide video franchises. In California, such legislation was passed by the state assembly and needs only the Governator’s signature to pass into law. Ahnold has until September 30 to sign the bill -- called the Digital Infrastructure and Video Choice Act -- and is expected to do so.

California would be the eighth state in the U.S. to create a statewide video franchise. The others are Texas, Indiana, North Carolina, South Carolina, Kansas, Virginia, and New Jersey.

The creation of a national video franchise would be a big break for telcos, which are now just beginning their push into the video business. Such a franchise would relieve telcos of the hassle and cost of obtaining local video franchises on a city-by-city basis. And it would allow them to pick and choose where they want to deploy video services, without having to haggle with power-drunk local politicians. (See AT&T to Launch Lightspeed Next Month.)

The telco TV players, mainly AT&T and Verizon Communications Inc. (NYSE: VZ), are working hard at the state level to push statewide franchises into law, in advance of their widening video service deployments. AT&T has launched its U-verse video service in San Antonio, and plans to offer it in 15 to 20 markets by the end of the year.

Verizon is now in seven states with video service, and expects to be in two or three more by the end of the year.

Brueggeman tellsLight Reading that as AT&T’s U-verse IPTV service spreads throughout the country, pressure will increase on state governments to pass statewide video franchises: “They will be looking over to neighboring states and seeing new video service being deployed, and they’ll be asking, ‘Why don’t we have that?' ”

Cisco’s director of worldwide government affairs, Jeff Campbell, says if a significant number of states have a video franchise law by next year, the impetus for passing new federal telecom legislation -- including network neutrality -- will diminish. “It’s ironic; the likelihood that they’re [neutrality advocates] going to get anything on this is probably going away,” Campbell says. “States are going to go forward with video franchise legislation.” Murray told Light Reading after the session that a slight chance exists that the communication bill will be tucked into a large spending bill at the eleventh hour this session. “Stevens always has a few tricks up his sleeve,” Murray says.

The attorneys on the panel agreed that many people have many definitions of network neutrality, and that Washington’s definition is very different than that understood by people outside the Capital.

The net neutrality issue centers on the common carriage responsibilities of broadband providers in an age when more real-time IP services are emerging and carriers are having to invest greater amounts of money to update their networks. An informal, opinionated primer on the subject can be found here. (See AT&T VP: 100-Gig by 2010.)

Some believe new laws are needed requiring broadband services providers (the telcos and the cable MSOs) to reserve an equal -- or at least a reasonable -- amount of bandwidth for competing Internet-based services provided by the likes of Vonage and Google. (See Google Says No to QOS Fees.)

The bottom line on network neutrality legislation: Because of confusion over the meaning of the term, and the lack of real examples of so-called Internet censorship, lawmakers will opt for a “wait-and-see” approach to the issue.

“The public debate and the legislative debate are polar opposites,” says Jim Dempsey, policy director at the Center for Democracy and Technology. A Verizon poll released Wednesday found that most consumers do not understand the meaning of the term. (See AT&T's Whitacre: 'Nobody Gets a Free Ride'.)

— Mark Sullivan, Reporter, Light Reading

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