SBC on TV Franchise Regs: We're Immune
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