FCC Brings Video Debate to Texas

KELLER, Texas -- Are small town politics killing your television?

That's the question being carved up here, as the Federal Communications Commission (FCC) released its 12th annual report to Congress on video competition at the Keller Pointe Community Center today.

In a crowded room, the Commission entertained a plethora of views on the controversy surrounding video franchises and the documents that give a company official permission to provide video services to a specific municipality.

Even though phone company video deployments are well underway in posh neighborhoods nationwide, whether or not a federal or nationwide franchising system should be employed is a hot one as it could potentially make it easier for companies of all sorts -- phone companies, Internet companies, utilities, dress shops, etc. -- to be video service providers and compete for consumer entertainment dollars.

To do that now, a company has to meet with the city government of each location where it wants to provide service -- a process the phone companies say is "tedious and unnecessary."

Funnily enough, all the companies and parties in attendance -- including representatives of Verizon Communications Inc. (NYSE: VZ), AT&T Inc. (NYSE: T), and Charter Communications Inc. want more video competition for American consumers, though that competition invariably risks watching one's profits evaporate over time.

But what no one could agree on is: What should the FCC do first in order to encourage video competition without swinging the rules too far in favor of the incumbent video providers?

Fort Worth Mayor Michael Moncrief touted Texas Senate Bill 5 as a model the rest of the nation could use when handing out video franchises. (See Even Video Is Big in Texas.) Moncrief says Senate Bill 5 "was cussed and discussed" by all sides so as to allow for quick market entry without cheating cities of their franchise fees, rights of way revenues, and "social obligations," such as public access TV channels.

Texas was the first state to allow a state-issued video franchise, which allows video providers to cover more territory with one regulatory hurdle. But Senate Bill 5 also allows new entrants to selectively build services to just the neighborhoods they want to reach as opposed to everyone in a given city or town, and that's become a burr in some people's saddles.

Verizon's Senior Vice President, Video Solutions, Marilyn O'Connell, isn't one of those people. (See Verizon Sets TV Precedent.) She cheered a state or federal franchising system because "our experience so far has shown us that the local franchising process is a major barrier to entering the video market on a wide scale."

AT&T had the most hard-to-follow point of view in the discussion, claiming it is exempt from franchise agreements. Even so, the RBOC wants the local franchising system scrapped in favor of a national policy.

The company believes it is exempt from local franchise agreements because its proposed service is IP-based. (See SBC Eyes Alamo City for Video.) "AT&T is not building a cable system," said Lea Ann Champion, the company's senior executive VP of IP operations.

Still, "to build these networks, we have to engage with cities routinely" Champion said. During that process, Champion mentioned that AT&T has received flack from local officials who won't grant the RBOC the rights of way it needs to build out its network unless it agrees to a local video franchise.

In favor of local franchising was Lori Panzino-Tillery, the division chief of franchise programs for San Bernardino County, Calif., who blamed the phone companies for the franchising process taking so long, stating that they are asking for too many exceptions to the rules. "Providing certain potential franchisers with advantages that their competitors don't enjoy is not competition; it's favoritism," she said.

The cable side of the discussion was represented ably by Daniel Brenner, senior VP for law and regulatory policy for the National Cable & Telecommunications Association (NCTA) and Joi Philpott, corporate VP of government affairs and franchising relations for Charter.

Brenner offered the view that the local franchising system was working in that it could allow video competition while making sure local communities weren't getting the shaft. He pointed to Keller, Verizon's first FiOS city, as a prime example. "This is a community that managed to introduce a video competitor without any changes to federal or state law," Brenner said.

Philpott took a shot at Verizon saying that it was direct broadcast satellite (DBS) companies' market entry that forced Charter to lower prices -- not Verizon's FiOS. "DBS has a 26 percent penentration into Charter's national footprint."

Brenner thought the FCC should pay more attention to pre-existing phone monopolies and not focus so intently on who's dominating the video landscape: "The future of video competition will be all about the bundle. And in examining competition there I urge a focus on the one part of the bundle that is still dominated by an incumbent provider -- wireline phone service."

Chairman Martin, however, backed Brenner down when he pointed out through questioning that a CLEC doesn't have to provide phone service to every home just the incumbent phone company.

"So, do you think that's a fair approach, or an arbitrary and unfair approach that they don't have to serve everyone?" Martin asked. His point: Just because phone companies are big corporations with deep pockets, they're still the video services equivalent of CLECs and shouldn't be forced to build services to every home.

While Martin ran the meeting with an iron fist in a velvet glove, it was Commissioner Michael Copps who stated the obvious more plainly than any of the assembled dignitaries, save Mayor Moncrief. As he noted that cable prices continue to rise -- and there aren't that many alternatives for most consumers to turn to, Copps groused: "I know two things. First, consumers are feeling the pain and paying the cost and not liking it. And, secondly, we need to better understand what’s going on here."

When noting the many conflicting reports about whether local franchising is a barrier to video competition, Copps said the panel, in the months to come, needs to prove their respective cases. "I want to know what the specifics are and where the problems have been," he said.

The scary thing about Copps' request is that the phone companies -- so eager to prove that considering a national video franchise system is valid -- might actually ante up. (See FCC Brings Video Debate to Texas.) As those in attendance cleared the room, an observer chimed in, "...and I'll bet his email box'll be full tomorrow."

— Phil Harvey, News Editor, Light Reading

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DCITDave 12/5/2012 | 4:06:24 AM
re: FCC Brings Video Debate to Texas re: "Most of people who sit on these bodies are power craving control freaks who think it is their duty to make life as difficult as possible for those folks unlucky enough to come before them."

Or to put it bluntly, they're politicians. Still, I'm curious to see evidence that these local yokels really are slowing up a big company that comes to town promising TV choices and jobs and all the other good stuff that comes with RBOC domination.

Is there someone I should be calling to get a good yarn going about that?

alchemy 12/5/2012 | 4:06:20 AM
re: FCC Brings Video Debate to Texas Phil Harvey writes:
Or to put it bluntly, they're politicians. Still, I'm curious to see evidence that these local yokels really are slowing up a big company that comes to town promising TV choices and jobs and all the other good stuff that comes with RBOC domination.

Is there someone I should be calling to get a good yarn going about that?

There's another way of looking at this....

The local monopoly cable franchise contract is Santa Claus for every local community. The MSOs give away all kinds of goodies to local schools, police, fire, and town/city administration. Usually, it's a Wayne's World public access channel and small TV studio, they'll often fund staff to broadcast various city and town meetings, free internet and TV to the schools, free internet and TV to police & fire, and free internet to town/city offices. It can also include other goodies like funding parks or recreation.

If a state starts awarding statewide video francises to telcos, the MSOs are going to cry foul and pull the plug on all those goodies they give away to cities and towns. Every state rep will be getting irate calls from local government that will kill off the state granting video licenses. As Tip O'Neil said, "All politics is local."
rickaty 12/5/2012 | 4:06:19 AM
re: FCC Brings Video Debate to Texas On a related subject, my father lives in a mobile home community (55 or older requirement) in California and Verizon spent months putting in fiber. I guess this kind of location is considered desirable - mobile homes are dense and the elderly watch a lot of TV. But do they have a lot of money ?

Maybe Verizon should have asked some more questions before fibering out the whole community, Everybody in the park gets their cable subsidized as part of the rent fee and only pay $10 month for cable TV. I don't see my father switching.

mrbhagav 12/5/2012 | 4:06:19 AM
re: FCC Brings Video Debate to Texas
"All Politics is Local"

Amen. This is the absolute thruth and the bane of a competitive video provider's existence. The video franchise issue is anything but a red herring. It is in fact one of the most difficult problem that a service provider encounters when it is in an overbuild situation trying to offer triple-play. Notwithstanding the fact that the local MSO may be fleecing the town customers, there is a sense of apprehension at the local government level and Town Council about a new entrant coming in and offering all these funky new services. "Oh my god, what are we exposing our town citizens to?!!"

Remember that the Cable Committee of every town has been dealing with the MSO for decades. It is a love-hate relationship, but a relationship nevertheless. For someone to come in and threaten the balance of that relationship is fairly tricky.

The overbuilder always uses the argument with the Town elders that his service will be better and more diverse. Sure, its a competitive argument. But it comes with a price. The town now expects the overbuilder to reach those areas within the town that the MSO has ignored (for very good reason), and to provide services at a price point that has a "cap", not set by the market and competition. Talk about these and other unreasnable demands from the town that goes against the benefits of having a second or third choice for a video provider in an area. These constraints make the economics of deployment and service difficult and infeasible. The New Kid in Town soon becomes the Brat, or even worse, the Outcast.

To make matters worse, the sources of video content from whom service providers obtain programming frequently ask for a franchise, and even in "standard format" (i.e., looks like a cable TV franchise). This is true even of private video aggregators who sell packages of content to smaller competitive operators. I won't name names, but anyone in this business knows who I am talking about.

It is amazing that Verizon has obtained over 300 video franchises, if it is true. Unless there is a way to obtain state-wide or region-wide franchising, the overbuild model loses scale and steam pretty quickly. This is the death knell of a competitive video business that has national ambitions. Life is too short to deal with franchising on a town-by-town basis; local politics will kill you long before you reach break even.

OldPOTS 12/5/2012 | 4:06:18 AM
re: FCC Brings Video Debate to Texas rjm
I forgot to mention that the city sees franchising all comers as a way to get REVENUE without choosing the winner. They attempted to provide VZ an equal franchise agreement, to which Comcast had some initial 'concerns' admist Texas state franchising.

OldPOTS 12/5/2012 | 4:06:18 AM
re: FCC Brings Video Debate to Texas Here is a contrarian view;

The cities have an investment in providing citizens of assurances of 'right of way' restoration and minimal impact.
VZ got my water and sprinklers. VZ wanted my assurance that I wouldn't go to the city right away.

Besides REVENUE from 'right of way' access the city also gets a lot of public service support. The city relies heavily on city council, planning commission and other televised hearings to satisfy state public notice and education.

They believe they have a citizen's interest in these services from MSOs. And they have a staff to manage and produce the access to two channels.


BTW I watch the replays when TV gets boring.
roybean 12/5/2012 | 4:06:17 AM
re: FCC Brings Video Debate to Texas I live in NH. Multiple townships have Fios data, no video currently offered by Verizon. If there was a state wide franchising license, I am guessing Verizon would love to sell me video also for the install.

State of Mass. has many townships with data, few with video.

I have Fios into my home, I should be able have choice of getting everything I want via that pipe. I am sure alot of people are not switching since Video is not offered; this cuts into Verizon profits, cuts into their ability to deploy faster / return on their investment.

MSO's do not want to see faster deployment is simple to see. They are getting a free ride into voice; Bell's should get the free ride into video.
roybean 12/5/2012 | 4:06:17 AM
re: FCC Brings Video Debate to Texas One, all the local 'perks' from the cable company that local townships receive are basically tax on the cable consumer rates in that township. Cable companies are not giving back profits that they would otherwise keep. Perks are being paid for by your monthly cable bills. I rather see 'less' perks, lower rates.

Second, if a TV video franchise is awarded state wide, the state would have more bargaining power, power in numbers, that would get an overall better deal.

Third, the people that are 'profiting' from the franchise dealings are the lawyers and politicans. This interface between all the local townships could be better handle at the state level, lower costs, fairer to the smaller townships, lower costs in the end. Look at health care; cheaper in quanity.

I want to see quicker competition, more choices, lower prices. MSO's do not.

MSO's needed to go throught the agreements beause they basically entered a monolopy agreement. Townships were basically giving a monopoly license to the MSO's. What % of consumers / townships have choices of multiple MSO's / cable companies. Close to zero. 20-30 years later, technology changes, Satellite, MSO's, possibly ASDL, Fiber, high speed internet, IPTV. Agreement procedures should change also with the times.

OldPOTS 12/5/2012 | 4:06:17 AM
re: FCC Brings Video Debate to Texas "Second, if a TV video franchise is awarded state wide, the state would have more bargaining power, power in numbers, that would get an overall better deal."

We'll in Texas, with a whole lot of subscribers (& markets), the franchises have been granted to cherry pickers and the state has NOT leveraged their numbers to get consessions. All you get is a State limited subsidized service as compared to MSOs. The politicians get the money, campaign funds. But I don't like my bill going up regularly with MSOs & satelite.

chip_mate 12/5/2012 | 4:06:16 AM
re: FCC Brings Video Debate to Texas Fios TV would be nice if it were priced lower than satellite or cable.
Problem is monthly 'rental fee' for the dvr's. Satellite charges around $4/month for the dvr. For a dual disk dvr, Verizon is asking $13/month.
13 x 2 = $26/month in dvr fees alone! That pushes Verizon Fios TV about $5 over satellite and cable.
Too bad they don't understand pricing.
Verizon did the same thing with Voicewing VoIP. They priced it $10 more/month than vonage, etc.

What is my incentive to pay $5 more/month for Fios TV?

Any answers?

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