BITS Bill Bites on Video Franchise

Soon-to-be-introduced telecom legislation will almost certainly contain a nationwide video franchise for telephone companies entering the video business in the U.S., multiple sources in Washington say. (See New Telecom Bill Draws Raves.)

The nationwide franchise is the centerpiece of the House Commerce Committee's BITS (Broadband Internet Transmission Services) legislation, which is being completed by committee staffers this week. If passed, it could help accelerate telco IPTV plans.

The bill has been the subject of massive attention and speculation in recent weeks as many feel it is Congress’s best chance to make fundamental changes to the 1996 Telecom Act this session.

Sources say it will be put on the fast track after being released in the committee as soon as next week.

A law creating a national video franchise would be a big break for the telcos, which are just now beginning their push into the video business. Such a franchise would relieve them from the hassle and cost of obtaining video franchise agreements on a city-by-city basis. The telco lobby in Washington has spent millions in lobbying dollars pushing for the national franchise. (See Senate Commerce Committee Holds Hearing on Video Franchising.)

A source says the Commerce Committee’s five ranking members -- Reps. Joe Barton, John Dingell, Fred Upton, Edward Markey, and Chip Pickering -- came to an agreement on the main points of the BITS bill two weeks ago. Since then the representatives’ staffs have been busily trying to complete the bill, and the work has continued into this week, says Committee spokesman Terry Lane.

Aside from the national franchise, the bill is said to contain major pricing clauses designed to aid the telcos’ entry into video.

Sources say the bill contains special pricing rules for telcos until they reach a 15 percent market share in a given video market. Until that time, cable companies serving those markets would be bound by existing local franchise agreements.

Under the rule, a telco could offer special low rates in neighborhoods where it wants to sell video, while the cable companies would be held to a uniform price point across the entire community.

The nationwide franchise and the pricing rules have already met with a wave of opposition.

The cable guys see them as simply anticompetitive. The National Cable & Telecommunications Association (NCTA) last week held a preemptive press conference to make public the contents of the bill and voice its dissatisfaction.

“We are taking a huge step backward by giving the Bell monopoly a special break,” said NCTA president Kyle McSlarrow said. “It raises the question of why the Bells deserve to be treated like startups.”

The telcos believe the rules clear the way for more competition in video. “Its all about choice and competition,” says Verizon Communications Inc. (NYSE: VZ) spokesman David Fish. “We are insurgents in the video market, and cable is the insurgent in the phone market.”

Somewhat more sympathetic to cable is a clause in the Barton bill requiring the telcos to pay a 6 percent franchising fee to cities, while the cable guys continue to pay only 5 percent.

The Commerce Committee released two “discussion drafts” of the BITS bill last fall, which were the subject of Committee hearings. Sources say the scope of the bill has been narrowed to address but a few main issues -- the video franchise chief among them -- to increase the chances of the bill’s passage this session.

The bill will more than likely be officially introduced in the committee and not be the subject of another hearing, Lane says. The legislation, once completed, will immediately begin moving toward a vote in the Committee.

— Mark Sullivan, Reporter, Light Reading

OldPOTS 12/5/2012 | 4:01:00 AM
re: BITS Bill Bites on Video Franchise fg,

Did they forget about satellite competition?

Is the satellite subscription % included in the 15%?
"Sources say the bill contains special pricing rules for telcos until they reach a 15 percent market share in a given video market."

I do realize this is an attempt to treat the Bells like startups, thanks to telco lawyers/lobyist.

Mark Sullivan 12/5/2012 | 4:00:56 AM
re: BITS Bill Bites on Video Franchise Our understanding -- and again nobody has seen the actual bill yet -- is that the 15 percent rule applies only to the telcos' homegrown video services, not satellite service that they resell. -M
materialgirl 12/5/2012 | 4:00:55 AM
re: BITS Bill Bites on Video Franchise Does this mean that cable cos are free from price or muni regulation until they get 15% of the voice market?
rjmcmahon 12/5/2012 | 4:00:54 AM
re: BITS Bill Bites on Video Franchise VZ and CBS announced a deal.


CBS Corp. said it has landed a new distribution agreement with Verizon Communications in what is seen as a milestone deal for the TV broadcaster to charge fees for retransmitting local channels. CBS declined to disclose any financial terms, but a source familiar with discussions said the deal fulfills the company's promise to charge television service providers for retransmitting its broadcast signal in markets where CBS owns a TV station.
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