Telcos Close In on TX Video Win

Texas legislation will make it easier for phone companies and other competitors to offer TV services

August 10, 2005

3 Min Read
Telcos Close In on TX Video Win

Sometime in the next 20 days, the nation's largest phone companies may get a Texas-sized boost to their video plans.

The Texas House and Senate have now passed legislation allowing video service providers to get one video franchise for the entire state, a move that will dramatically cut the time and money needed for a big phone company to offer TV services in more than one Texas city. The legislation, known as Senate Bill 5, was designed to boost the efforts of new entrants like SBC Communications Inc. (NYSE: SBC) and Verizon Communications Inc. (NYSE: VZ) -- companies that previously had to obtain franchises in every one-horse town in which they wanted to offer service (see Martin: FCC to Classify IP Video).

Texas Governor Rick Perry now has 20 days to sign the bill into law, and his previous public statements indicate he probably won't take that long (see Picture Fuzzy for Video Franchise Bills).

An older version of the bill failed to pass during the legislature’s regular session, despite the fact that the telephone companies loosed an army of lobbyists on Austin to push the legislation through. SBC alone had 124 lobbyists involved, a cable industry source tells Light Reading.

But in the special session, the franchise bill has moved along smoothly and passed by unanimous vote in the Texas Senate on Wednesday morning, after passing the Texas House on Tuesday night by a razor-thin margin of 144-1.

“There were a lot of lobbyists and they just got it done,” Kathy Grant of the Texas Cable & Telecommunications Association says.

During the regular session, cable industry forces successfully mobilized Texas localities by warning that the new legislation took away their power to control the quality and price of video service (see SBC Sees IPTV Interference).

But the phone companies saw that a statewide video franchise law was needed if they were to have the best chance of success in competing with cable companies. “It will render moot individual franchise agreements and will bring in a more rapid form of video franchising,” Verizon spokesman Bill Kula says.

If the statewide franchise bill becomes law, Verizon would be one of the main beneficiaries. The RBOC is now busily rolling out a cable-like video service. And, to date, it has secured eight video franchises in Texas, Virginia, and California. The RBOC says it is now in negotiations in 200 more localities to obtain franchises (see Verizon Sets TV Precedent).

Another major beneficiary would be SBC, the San Antonio-based RBOC betting a chunk of its future on its IPTV offering. SBC has publicly claimed exemption from the franchise rules, while behind the scenes has pushed hard for state-wide franchising legislation (see SBC on TV Franchise Regs: We're Immune).

Sensing defeat in the legislature, the Texas Consumers Union made an 11th-hour plea to the governor and the legislature last night:

“We know you're outnumbered; there are more registered telephone industry lobbyists than members of the House of Representatives... But this session was called to reform school finance and lower property taxes, not to appease lobbyists demanding special interest legislation simply to increase their profits,” the letter stated.

— Mark Sullivan, Reporter, Light Reading

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