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Video services

Telcos Flog Video Franchising

The nation's largest phone company has taken the public stage to grouse that the need to obtain local permission to provide video services is slowing its entry into the video market. (See Verizon Steps Up Franchise Fight and FCC Brings Video Debate to Texas.)

In his testimony before the Senate Commerce Committee today, Verizon Communications Inc. (NYSE: VZ) CEO Ivan Seidenberg called the local franchising process "a major impediment to our rapid entry in the video marketplace -- and a big obstacle to investment in broadband."

This is rather a change from his recent statements. In January, on a corporate conference call, Seidenberg said the franchising process wouldn't stop Verizon from reaching its deployment goals.

"I don't think there's a big issue associated with timing," Seidenberg said in January when addressing Wall Street on his company's earnings conference call. "I don't think there's any story there." (See Verizon Reports Q4.) "We don't feel that there's any impediment to our rolling out FiOS during the year 2006."

Whatever the case, Verizon is making a little more noise about not being happy with the process. That process, its executives have said, is forcing it to change its deployment plans when local authorities don't agree to its franchising demands.

But, while stumping in favor of a broader franchising system, Seidenberg did reiterate that Verizon is "prepared to pay local governments the same franchise fees that cable pays." That commitment includes carrying public access channels and "preserving the authority of state and local governments to manage public rights-of-way," Seidenberg says.

AT&T Inc. (NYSE: T) CEO Ed Whitacre came right out and admitted that AT&T will miss its IPTV deployment goals if something is not changed. "If the existing franchise process is applied to AT&T’s video offerings, we would have to obtain as many as 2,000 separate local franchises," Whitacre says. "If we were somehow miraculously able to sign one franchise agreement every single business day of the year, it would still take over seven and one-half years to complete this process."

In other words, if AT&T is forced to play by the same rules that were in place when it first announced it was going into the IPTV market, the company will hit its deployment goal of reaching 18 million homes by sometime in 2013 -- when Whitacre will be 70. (See SBC Stretches Lightspeed Timeline .)

Another side of the debate was taken by Cablevision Systems Corp. (NYSE: CVC)'s COO, Tom Rutledge who accused the phone companies of not trying to get franchises and cherry-picking areas for video deployment. "In New York and New Jersey, Verizon’s fiber upgrade is focused on wealthier, suburban areas but leaves rural and urban centers virtually untouched," Rutledge said.

He also pointed out that Verizon doesn't have enough pending applications to back up its claims of local community red tape. "In our service area of more than 400 communities, Verizon has only three local franchise applications pending."

Brad Evans, CEO of Cavalier Telephone Inc. weighed in on the side of a statewide franchising system, but he, too, declared his service immune. "Copper-based IPTV providers should be exempt from any requirements for a mandatory buildout," he said. "A buildout requirement would make IPTV investments totally unfeasible."

Commerce Committee Co-Chair Sen. Daniel Inouye (D-Hawaii) didn't sound as though it matters whether a telco TV service is IP or not. "Whether a video service is called a cable service, IPTV, or is based on some other type of technology, the regime for regulating these types of services -- where the provider controls the content included in the service offering -- should be consistent," he said.

— Phil Harvey, News Editor, Light Reading

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OldPOTS 12/5/2012 | 4:05:57 AM
re: Telcos Flog Video Franchising If you go to CSPAN WEB site you can find two hour streaming video of hearings under;

Senate Commerce Cmte. Hearing on Video Franchise

OldPOTS

PS Learn the new principles of Telecom!
rjmcmahon 12/5/2012 | 4:05:57 AM
re: Telcos Flog Video Franchising Is enterring the video business something the RBOCs really want to do or is it something that is being pushed by Congress and the FCC in the name of facilities based competition and deregulation?
paolo.franzoi 12/5/2012 | 4:05:55 AM
re: Telcos Flog Video Franchising
rj,

It is something the RBOCs want to do, on their own terms.

There is a huge fight going on for the entertainment and communications dollars of the higher end of consumers. VoIP, VoD, High Speed Internet, HDTV, PPV, etc. all play for these customers. This is also an attractive segment for advertisers. Lower end neighborhoods are much less attractive - remember 60% of cable customers are still analog with no set top boxes.

Franchises generally means - cover the whole city. If the demographics are bad, there is no reason to want to build in these places. Rememeber Verizon and AT&T have said they are only upgrading 50% of their networks. If the Franchising goes away, they can apply on a state basis and build where they want.

There is a whole social issue here. Rural networks and poorer neighborhoods will not be upgraded. That will be a bone to chew in Congress.

seven
OldPOTS 12/5/2012 | 4:05:55 AM
re: Telcos Flog Video Franchising My intuition from the discussions is that this is a good excuse to slow roll the service as they discover a much larger real cost and lower than expected take rates. I heard from the same mouths how everyone wanted it, but then later pointed out how subscribers were standing on the sidelines. Could it also be that they are having to work out some bugs (MPEG4/Micro) and haven't got all the 150 channel content lined up yet?
Franchise delays make investors less anxious.

With the higher pricing models discussed on another post I can believe it takes a real sales/marketing effort. I know I haven't been able to justify making a move to less service for more $$$.

OldPOTS

roybean 12/5/2012 | 4:05:55 AM
re: Telcos Flog Video Franchising So BMW & Mercedes dealers should put lots in the poor neighborhoods of Detroit, Camden, LA, and all other big cities ? I am sure that these areas would also want $200 haircut shops in place of SuperCuts. In place of 99 cent hamburgers, they should put in restaurants that charge $100 for a burger in the poor sections and require a tie and suit to dine.

Social issues, please.

So, the $200 / month high end cable services should be offered to the poor ? The Bells are servicing them with POTs, Cell. MSO's with cable. Satellite for TV. Possibly FREE broadcast TV, there is an idea to invest in, FREE TV. FREE TV will cost the poor how much ? DVD & movie rentals from Netflix, Blockbusters, local shops. MSO's have broadband there, also DSL offered, also dial up. Many cities are trying Wi-Fi.

So, we should stop advancing Fiber so that the poor people who can not afford $200 / month bills should have the opportunity to choose not to pay for something that they can not afford to begin with ?

When Fiber is deployed, what do you think that the BELLs are going to do with all that DSL network equipment that will no longer be needed in the areas where Fiber went in ? Possibly the rural and poor neighborhoods that could afford $15 / month DSL ?
DCITDave 12/5/2012 | 4:05:54 AM
re: Telcos Flog Video Franchising re: "It is something the RBOCs want to do, on their own terms"

That is certainly how it appears. Can anyone really believe that the RBOCs didn't anticipate that franchising would be an issue?

Their public statements are persuading some to think that the strategy from the beginning has included using this as a lever to (1) bail out if they need to or (2) slow investment when and where it is convenient.

Is the pursuit of GPON the same thing? Just another lever to pull when deployments start to fall behind?

Probably not. But the RBOCs are confusing the public with all this crabbing about a decades-old system that is suddenly broken.

ph

paolo.franzoi 12/5/2012 | 4:05:54 AM
re: Telcos Flog Video Franchising
roy,

There is a big difference between where car dealers are and where various types of communications services are offered. It is called equality of opportunity. I agree that there is no business reason to have to run advanced networks to these neighborhoods. On the other hand, politicians get elected by the voters. Imagine what happens when they vote to put networks in only on the good side of the tracks.

There is no case for people to run rural electricity or phone service. That is why there are things like NECA pools for high cost loop support. Without this subsidy, rural telephony would cost many times that of urban telephony. You can not like the social side of things, but the FCC is not filled with engineers and economists. The FCC is full of lawyers and politicians. As is Washington, and State Capitals.

I don't expect redeployment of the DSL gear. Most of it will be obsolete at the time and be better to be scrapped.

seven
stephencooke 12/5/2012 | 4:05:53 AM
re: Telcos Flog Video Franchising Phil:

"Probably not. But the RBOCs are confusing the public with all this crabbing about a decades-old system that is suddenly broken."

Virtually every telco that you can think of has tried video over twisted pair or even done FTTH deployments in the last 10 years or so. None have been ultimately successful. There has never been this level of complaint from telcos about franchising until they had to scramble to combat VoIP-over-cable.

We can talk about social issues and cherry-picking districts and there is a lot of truth to all of it. For example, I find it hard to believe that the Camden, LA, Council would give anyone a hard time about franchising. I am sure they would like to be able to show potential business investors that their area has multiple TV options. Plano, TX, will be another story.

The point is that big institutional investors have been more and more nervous about the potential profitability of telcos since the advent of VoIP-over-cable. Grandiose plans were announced to combat this threat but they are running into the "build it and they will come" problems that telcos have been afraid of forever. In short, take rates aren't meeting expectations so there is a truck load of stranded capital sitting out there. Franchising is a real problem but in this context it is investor marketing fluff.

Steve.
opticalwatcher 12/5/2012 | 4:05:53 AM
re: Telcos Flog Video Franchising What cable franchising used to mean:
City by city, you
1. Learn the local politics. Maybe even get someone on your side onto the city council.
2. Whenever there is politics, there is pork. So you make various deals. You cover the whole city. You offer a broadcast studio to the local high school and their own channel. Offer to broadcast the local city meetings and events (like anyone would watch). For certain cities and politicians, mabye even a few kickbacks.

It is all worth it because in the end you get a monopoly. You OWN the market.

Now there is competition: satellite, IPTV. The investments requirements are higher and the margins are lower. Yes, the system is broken.

Statewide, or even countrywide franchise agreements can include the same kinds of coverage requirements. But requiring the Telco's to fight franchise battles city-by-city is kind of ridiculous in this day and age.

OldPOTS 12/5/2012 | 4:05:52 AM
re: Telcos Flog Video Franchising It appeared to me watching the hearings LATE last night that the Senators want a general/template Franchise regulation that must be included in a city wide franchise agreement. They made it clear that they expect some local negotiations for the freebees and for Customer Service.

As was pointed out at the end; If you don't like your Service Provider that you have 11 months to go on the yearly contract, WHO do you call, the FCC??? This was a MAJOR element in my city's Comcast re-franchise discussion. They wanted a guaranteed local number and contact with measured response time reports, as previously Comcast provided a number that did not ever work!

OldPOTS
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