Policy

McSlarrow: NCTA Open to Rules Changes

6/10/2005 8:00 PM Eastern

Washington— The cable industry would support the overhaul of some franchising requirements, provided that Congress ensured equal treatment between cable incumbents and new entrants, National Cable & Telecommunications Association president Kyle McSlarrow said Tuesday.

His speech, delivered here, was partly intended to blunt criticism that cable is trying to slow Baby Bell entry into video at all costs.

With Internet-protocol technology fast outpacing the rules of the road, McSlarrow said it made “good sense” for Congress to review telecommunications policy and to craft a new blueprint that established a largely national scheme and that delegated truly local concerns to state and local governments.

“The existing federal framework allocates some regulatory tasks to the Federal Communications Commission, some to state government and some to local governments. It is time to take a fresh look at that division of labor in light of the new technology,” McSlarrow told the Washington Metropolitan Cable Club.

Specifically, he said Congress might want to eliminate the ability of local governments to approve franchise transfers and renewals while continuing to permit local franchising of access to rights of way “to protect health and safety.”

Any new regime, he continued, should, among other things, ensure video service to all households, protect consumer privacy and advance equal-employment opportunities.

Gerard Lavery Lederer, an attorney with Miller & Van Eaton, which has numerous municipal clients, said cable should not be allowed to treat federal law as if it were a Chinese menu, picking things it liked and discarding others.

“McSlarrow gets it right when he says, 'managing rights of way to protect health and safety’ … is … best managed by local government. But he misses the boat when he fails to realize that these are the same issues that local governments review in transfers and renewals, perhaps even more so as companies seek to cut corners to meet the illusory competitive-video environment,” Lederer said.

In a proposal aimed at satellite competition, McSlarrow indicated that DirecTV Inc. and EchoStar Communications Corp. should pay local governments the same 5% franchise fee and other taxes paid by cable. This, he added, should be done in the name of “fair competition.”

EchoStar spokesman Steve Caulk dismissed that idea.

“Every business has different expenses that are going to be unique to their way of doing business. Cable has theirs; we have ours. We shouldn’t have to pay cable expenses when we are in the satellite industry,” Caulk said.

HEATED LOBBYING

McSlarrow’s speech came as SBC Communications Inc. and Verizon Communications Inc. — the country’s two largest phone companies — continue to lobby state lawmakers to ease their entry into video by eliminating local entry barriers.

Cable has fought back, helping to kill an SBC-led effort in the Texas state legislature two weeks ago. The Bells have accused cable of insisting on franchising knowing that it delays their rollout of competitive, fiber-rich facilities.

In Chicago last Tuesday, FCC chairman Kevin Martin told a telecommunications forum that he was sympathetic to the Bells’ concerns about getting bogged down at the local level in their quest to battle cable for video subscribers.

One day earlier, Senate Commerce Committee chairman Ted Stevens (R-Alaska) indicated that he wanted to help the Bells, calling the local-franchise requirement a burden harmful to competition and consumers. Revisions could be included in legislation designed to overhaul the Telecommunications Act of 1996.

“There’s almost a universal concern about the costs and merits of state regulation or local regulation,” Stevens told the Federal Communications Bar Association. “This is really a problem, in terms of 30,000 local franchises that would be necessary for each Bell to enter the video marketplace.”

“That could be very costly and, to me, ultimately kill competition, but also, it’s going to increase the price considerably to the consumer.”

In a sense, McSlarrow’s speech could be viewed as a signal to the Bells and Stevens that cable is willing to sit down and talk about new rules, as long as parity among players was the guiding principle and market forces were elevated over economic regulation.

“The government must avoid picking winners and losers by imposing regulation based on the particular mix of technology a video provider deploys,” McSlarrow said.

Stevens also addressed the “redlining” issue, or the ability of phone companies to target affluent customers while ignoring low-income consumers — a cherry-picking strategy that cable has said the Bells should be stopped from executing.

'FIBER TO RICH’

Last month, Comcast Corp. chairman Brian Roberts called the strategy “fiber to the rich.”

“I do not want prohibit anybody or require anybody to take action. … We want to set down guidelines that can be enforced by the industry itself and the leave the FCC to its job of being the interpreter of that law and give it enforcement powers,” Stevens said.

Paul Gallant, a media analyst with Stanford Washington Research Group, gave Stevens’ remarks only a “mild positive” for SBC and Verizon, mainly because passing a sweeping telecommunications bill is controversial and time-consuming.

March