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SBC on TV Franchise Regs: We're Immune

SBC Communications Inc. (NYSE: SBC) suffered a home-field defeat over the weekend when the Texas legislature failed to pass a law allowing statewide television franchises, but the San Antonio-based RBOC says rollout of its IPTV service will continue as planned.

Texas bill HB 3179, which would have allowed operators like SBC to avoid the costly and time-consuming work of obtaining the franchises one municipality at a time, met its end in a joint committee late Saturday just hours before the end of the 79th Legislative Session.

SBC does not see the franchising issue as pivotal to IPTV success in Texas (see SBC Touts IPTV Services). “We have said all along that the market will eventually decide,” SBC spokesperson Gene Acuna says. “SBC intends to reach 18 million households by the end of 2007 and that hasn’t changed.”

SBC has until recently distanced itself from the franchising debate, saying its IPTV offering is an “Internet service” and not subject to franchising laws.

But the RBOC mobilized a small army of lobbyists in recent weeks to help push the Texas legislation through, even sending CEO Ed Whitacre to the state capitol last week at the 11th hour for talks with senators.

While SBC keeps its game face on, the defeat of the statewide TV franchise in Texas is raising the visibility of the issue among analysts and shareholders (see SBC Sees IPTV Interference).

Jefferies & Co. Inc. analyst George Notter sounded the alarm on Project Lightspeed in a brief released Monday, citing regulatory threats as just one of a number of issues causing delays in the rollout.

“We believe the television franchise process creates significant risk of further delays in Project Lightspeed,” Notter worries. “Like many other precedents in telecom regulation, this regulatory debate could rage on for several years on a state-by-state level, at the FCC, and in the court systems...”

Take it from somebody who knows: Verizon Communications Inc. (NYSE: VZ) says it takes longer to get a franchise in a Texas city than it does to plant the fiber there (see Verizon Sets TV Precedent). “On average it has taken between six and 18 months from the time we initiated talks to the time the franchise was awarded,” says Verizon spokesman Bill Kula. “It takes only seven months to just over a year to build out the fiber.”

Verizon has completed the fiber plants for eight cities in the suburbs of Dallas and Fort Worth and is currently dropping fiber in 17 more (see Verizon Attacks Video's 'Biggest Barrier' and Verizon Rolls Out Its Fiber).

SBC intends to offer Texas households high-speed broadband, IPTV and IP voice, and wireless products as part of its Project Lightspeed initiative, but has not announced when the services will actually be turned on, Acuna says (see SBC: IPTV's Day Has Come).

Acuna says SBC became involved because the statewide franchising language was originally just a small part of HB 3179. “The bill started as a way to help communities do something about the falling number of access lines in the state,” he says. “The cities wanted to talk about ways to stem the tide.

“But then cable entered the picture and took a very self-serving approach to the whole thing; they had wanted legislation saying that all competitors must build out their network before being awarded a franchise."

The state’s cable companies, led by Time Warner Cable, Comcast Corp. (Nasdaq: CMCSA, CMCSK), and Charter Communications (Nasdaq: CHTR), also mobilized its lobbyists and ran numerous TV and print ads during the weeks leading up to a showdown on HB 3179. The cable industry ads charged that statewide franchises only provide a way for the telcos to target “high value” customers while excluding lower income and minority families. SBC says it is exactly those groups that tend to gravitate toward premium services like IPTV.

Hyperbole aside, the Texas cable companies simply want to hold off new telco entrants to the television marketplace for as long as possible, Verizon’s Kula says, and the defeat of HB 3179 probably bought them two more years. The cable companies acknowledge the eventual entry of telco TV players but don’t want them to get a free pass on franchising.

“At the end of the day, SBC and Verizon will bring their new services to Texas, but they will not be able to do so at the expense of contractual agreements in place between local entities and cable companies who have already invested billions of dollars in Texas under the existing rules,” Texas Cable and Telecommunications Association president Dale Laine said in a statement Monday.

Others believe SBC’s stake in HB 3179 was a way to avoid the dangerous endgame of court challenges when it actually turns on IPTV to its first Texas households. “For SBC, this is something that they were willing to do to eliminate litigation in the future,” says Tray Trainor, chief of staff and counsel to Representative Phil King, the bill’s sponsor.

The Texas legislature will not reconvene until January 2007, and observers are saying the IPTV franchising battleground may now move to New Jersey. Statewide franchising legislation could be introduced there in the next few weeks, and Verizon lobbyists are already on the ground in Trenton.

— Mark Sullivan, Reporter, Light Reading

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rjmcmahon 12/5/2012 | 3:12:49 AM
re: SBC on TV Franchise Regs: We're Immune The article says,

"Verizon has completed the fiber plants for eight cities in the suburbs of Dallas and Fort Worth and is currently dropping fiber in 17 more"

Who is auditing these statements?

Anybody have pointers to coverage details (with zipcodes) and a website where one can test ordering their service? How many total homes has VZ connected with fiber and how many are left to go? What does "completed the fiber plants" mean and what are the completion milestones? What are their plans if the technology they chose proves to be substandard and needs to be upgraded long before they get an ROA?
rjmcmahon 12/5/2012 | 3:12:48 AM
re: SBC on TV Franchise Regs: We're Immune What Verizon has talked about for overbuild is homes passed. What that means is that the F1 and F2 fiber is in place and OLTs are in the Central Offices ready for customers. When customer orders come in they do the F3 cable, attach the ONT, put in the home gateway and turn on the service.

Thanks seven.

I'm trying to understand how much of the job is done when saying a home is passed versus when a home is actually connected. Do you know the approximate cost, including labor, and per subscriber, of the F1/F2/OLT phase vs. the F3/ONT phase? Relative to each other would be good enough. I'm wondering if it is in VZ public image and regulatory interests to claim a home is passed while shifting the majority of the work (and cost) to the F3/ONT phase.
paolo.franzoi 12/5/2012 | 3:12:48 AM
re: SBC on TV Franchise Regs: We're Immune
rj,

What Verizon has talked about for overbuild is homes passed. What that means is that the F1 and F2 fiber is in place and OLTs are in the Central Offices ready for customers. When customer orders come in they do the F3 cable, attach the ONT, put in the home gateway and turn on the service. They have announced service in several states including CA, TX, FL, VA, MA, NY and PA. They have stated goals of 1 million homes passed by the end of last year and somewhere between 3 and 4 million (depending on what you read where) this year. They have a total line count of somewhere around 60 million lines. They have not stated how many lines they will cover with this buildout but one would expect them to cover the NE corridor which would put the homes passed count into the 10s of millions.

As for what happens on technology issues, one can only speculate. You would imagine they believe they are doing the right thing and wouldn't have put too much into supposing they are 100% wrong.

Again, you will have to trust me on this. Outside of the Raynet build that Nynex did, in Q1 Verizon passed and attached more homes to FTTH than the total that all other companies have ever done in the US combined.

seven
OldPOTS 12/5/2012 | 3:12:47 AM
re: SBC on TV Franchise Regs: We're Immune First, SBC and VZ say they will work the FCC and the Rep. Barton's redo of Telcom Bill.

Second, besides saving time by not having to do a franchise per city, the city misses out on a 5% franchise fee on revenue. Now after watching the drilling/tunneling for cable fiber that was done in my neighborhood a few years ago, the city gets to do a lot of road repairs and earns it's money.

Now the city franchise is primarily limited to city right of ways, and does not include pricing or channel/entertainment control. Under the Cable Bill, Comcast has more than 15% competition from satelite so the franchise is limited.

And rj, the bill was origianally done to maintain the Texas PUC authority over the Telcos.

OldPOTS
OldPOTS 12/5/2012 | 3:12:47 AM
re: SBC on TV Franchise Regs: We're Immune rj; try http://www.verizonfios.com/

In Garland TX (Larger than Telcom areas Plano & Richardson but next door),
VZ is working from it's existing COs where there is plenty of ONT room and facilities. They have done the 'F1 & F2' fiber to the area in about 3-4 months. This takes a lot of drilling/tunneling under intersections, streets and driveways for seversl miles and this labor and equipment is the expense.

Upon orders Contracters install F3 from the curb to the house. VZ estimates the fiber to the house and any CAT5 cables and ONT install & test to take a few (5-8)hours. ONTs are a few hundred dollars, so most of the cost is again in labor (outsource it all).

Now they only currently offer Internet connectivity through Micro MSN. Also they require you move your phone service to the ONT. Both these bother me. So even though I am a bleading edger, I will wait and see how my neighbors like it (I am also a live chicken with scars).

Also those prices don't compete or are similar to Comcast. But SBC is reducing it's DSL to $20/m

Also it looks like they may offer Video over the FTTP BPON broadcast channel. That is why the Franchise Regs/Decisions are important and VZ will probably let SBC test IPTV rules first with all their lawyers.

OldPOTS

paolo.franzoi 12/5/2012 | 3:12:46 AM
re: SBC on TV Franchise Regs: We're Immune
Depends on the area, so it depends. They do defer a lot of the cost (at least 1/3 in my estimation) by defering the F3 and the ONT. Of course the truck roll and the F3 plant swamps the ONT in terms of cost.

In terms of work, there is a lead time associated with getting the F1 and F2 done. This is required to get any homes connected and also makes the marketing job easier. I have not heard of any complaints in terms of order fulfillment once placed in a FIOS enabled area. It would be a good question that an analyst could ask on a conference call. Perhaps one of our fine Light Reading Journalists could get an idea of order to fulfillment timeframe.

seven


LaMichael 12/5/2012 | 3:12:44 AM
re: SBC on TV Franchise Regs: We're Immune I live in Highland Village (suburb NW of Dallas). I called Verizon and they installed 1 week later. It took 2 techs over 4 hours to install. It's been 1 month now and the service has been working without a hitch.

They have been digging up most of my area now for the past year (Lewisville, Flower Mound, Carrollton, Southlake). In Carrollton they have been damaging an average of 80 gas lines a month.
rjmcmahon 12/5/2012 | 3:12:43 AM
re: SBC on TV Franchise Regs: We're Immune I live in Highland Village (suburb NW of Dallas). I called Verizon and they installed 1 week later. It took 2 techs over 4 hours to install. It's been 1 month now and the service has been working without a hitch.

Thanks for the information. I have a few questions if you don't mind.

Are you getting television, voice and internet access all over the same fiber? Did your residence have copper or coax wired to it previously? How much peak bandwidth are you getting for internet access and at what price and terms? Can you buy internet access only?

They have been digging up most of my area now for the past year (Lewisville, Flower Mound, Carrollton, Southlake).

Do you know of any maps on the plans being made available to the public? Something like that found on the Provo site http://www.iprovo.net/

In Carrollton they have been damaging an average of 80 gas lines a month.

How do you know this? Who is keeping and publishing this type of data?

And some more (thanks for putting up with me.)

Do you care that Hong Kong Broadband is providing 1Gbs, 100Mbs and 10Mbs options to its customers, i.e. are you concerned that VZ may be locking you in to an inferior network design? Did you attend (virtually or physically) any city meetings where VZ described their plans? Do you have a web link with VOD of such meetings? What did the cable companies say about all of this?
OldPOTS 12/5/2012 | 3:12:38 AM
re: SBC on TV Franchise Regs: We're Immune rj
I forgot to say that for me VZ offers a sparce demo center in an adjoining small town Sachse (~15 mins away) where it has FIOS available today (F1 & F2 everywhere). The demo center offers PCs to demo the FIOS experience, without any technical sell.

Also VZ is covering most of the northern half of Dallas suburbs where VZ (GTE) has phone service. The exact map is proprietary for many reasons but a check of VZ/GTE phone territory (COs) will give you where they offer service. It is a lot of people.

See my post #4
Until the franchise regulations are resolved in their favor the Telcos may not rush to IPTV. But the major Telcos do have a Plan 'B' if competition demands. See 'Net Insight Offers IPTV Alternative'

OldPOTS
OldPOTS 12/5/2012 | 3:12:38 AM
re: SBC on TV Franchise Regs: We're Immune rj - Try URL;
www22.verizon.com/fiosforhome/... - fios_q1

Note that only internet is offered and phones must be moved to ATM/BPON over FIOS at same price as existing phones. But GPON may follow.
No price reduction for phone service over FTTU (Voice over Packet)!!

Then what happens to all those non-Internet (POTS) phone fees??? 2% city revenue (sales tax)!
VZ gets them as revenue?? Legislation to resolve this?

The above link goes to great details (Q&A) on service offered and a side bar has links to pricing below;
Up to 5 Mbps/2 Mbps $39.95/m
Up to 15 Mbps/2 Mbps $49.95/m
Up to 30 Mbps/5 Mbps $199.95/m (Just for rj)
Wireless 802.11g Router GÇô 4-port $64.99 ea. one time

Back to your general question, as a former proposal writer for FTTUs, the majority of the cost is in the install time of the entire system. For F1 & F2 this install cost also includes the equipment to tunnel, and as seven said this is very time consuming, measured in months. But note that this can be shared by up to 32 subscribers, avg 10 subs.

The Q&A section says to expect 4 hours (2 techs) for the home install (F1, ONT, battery backup, phone connection & software config).

BTW VZ is using layed off Airline mechanics to install homes how wired planes with fiber.

OldPOTS
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