Telcos Flog Video Franchising
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