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California Authorizes Statewide Cable TV Franchises

Telcos Roll Over Cities, Consumers, Cable Systems

By Martin H. Bosworth
ConsumerAffairs.com

October 3, 2006

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California Governor Arnold Schwarzenegger has delivered a welcome present to major telecom companies by signing legislation that eliminates the need for television providers to negotiate franchises with every town.

Under the "Digital Infrastructure and Cable Competition Act," providers of television service, be they telecommunications or cable companies, can negotiate franchises on the state level without having to go through the existing regulatory process in each municipality.

Telecom companies hailed the move as a way to jumpstart competition for consumer dollars.

Other states have passed similar legislation but because of its size, California is a particularly pretty plum for the telecom companies.

The bill "sets a new standard for accelerating cable-TV competition...customers can expect new choices, greater value and improved service in terms of video providers," Verizon West regional president Tim McCallion.

The new law means that AT&T and Verizon can push ahead with their rollouts of high-speed fiber-to-the-home Internet offerings, such as AT&T's Project Homezone and Verizon's FiOS without having to apply for licenses and fees in each town ... and without meeting all the community-service and consumer-protection provisions previously required.

"Increased competition will translate into better service and lower prices for everyone," said Gov. Schwarzenegger. "This bill will add another significant player into the cable television marketplace and help speed the spread of new and innovative technologies across the state."

Consumer activists and local officials are concerned about the favored treatment being shown to telecommunication companies, not to mention the loss of franchise revenue that municipalities would have otherwise received.

Although the new legislation enables cable companies to negotiate statewide franchises as well, cable spokesmen complained that telecom companies were getting an unfair shake through bypassing the franchising requirements that cable companies had to fulfill, often after months and even years of negotiations.

The bill easily passed the California General Assembly after heavy lobbying by Verizon and other telecoms. It was widely viewed as a "test balloon" for federal laws revising national franchise rights as part of the new telecommunications legislation in the House and the Senate.

In the Congress, House Commerce Committee chairman Joe Barton (R-TX) crafted provisions in the legislation granting national status to "video franchises," be they telecom or cable companies.

Although Barton's version of the legislation passed the House, a similar bill has stalled in the Senate due to protests over the principle of "net neutrality," the right of Internet users and content providers to access the Internet backbone on an equitable basis.

Where The Money Is

Critics also complaint that the new franchising legislation will free companies to "cherry pick" neighborhoods where they will roll out high-priced offerings, while ignoring low-and-middle-class communities.

Under traditional cable regulation, providers are required to provide service to every corner of the community, not just wealthier areas.

Verizon recently released statistics of its FiOS rollout. Although the high-speed Internet service is mostly confined to lucrative urban and exurban areas, the company still projected it would pass one million subscribers by the second quarter of 2007.

Both the telecom and cable companies are revving up their "triple play bundles," which combine phone, Internet, and TV service for consumers. Funding the rollout of such high-priced services led the corporations to propose "tiered pricing" models for services, where higher-paying clients could get faster Internet service and prioritized access to bandwith.

Consumer groups, content providers and technology advocates opposed the move on the principle of "net neutrality." By prioritizing Internet traffic according to who pays more, they argued, anyone who doesn't pay up will be consigned to the "slow lane" of Internet access and degraded service.

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