Policy

State Franchises Mean Service Call of Duty

5/18/2007 8:00 PM Eastern

As state lawmakers across the nation race to pass legislation taking control of video franchising oversight, state regulators are grappling with the additional responsibility and costs associated with that responsibility. Meanwhile, many city administrators say they’re trying to solve customer service problems regardless of whether they have official control or not.

“Last year the FCC held one of its town hall meetings in Keller, Texas, and one of our PUCT [Public Service Commission of Texas] commissioners stood up and told the FCC that even though they were supposed to take complaints from consumers about video service by new providers, they didn’t have the authority or the staff to do it,” said Margaret Somereve, assistant to the director of public works in Farmers Branch, Texas, and president of the state’s chapter of the National Association of Telecommunications Officers and Administrators. “So the cities are now dealing with them instead.”

She said her office has no certified oversight of telephone complaints, but “if someone has a complaint about phone service, they usually call us. We have a contact at AT&T who we can talk to to solve the problem,” Somereve said. “We are hoping that when AT&T launches U-verse here, the same situation will exist. We know we can’t tell people to call the PUC with a video complaint because we know nothing will happen. We will just try to solve it ourselves.”

So far, 11 states have passed statewide franchising agreements and more than a dozen states are currently considering similar bills. AT&T launched U-verse TV service in the Dallas market in March and the city hasn’t gotten many complaints about the company yet, said Nikolaus Fehrenbach, manager of regulatory affairs and utility franchising for Dallas.

“Most of the calls have been from people asking why I’m prohibiting the telco’s entry into the market,” he said. “I’m not doing that, but many people don’t understand that. When we do get complaints — which we usually do when someone is digging up streets and new services are introduced — we will try to work with the company even if we don’t have formal oversight. We’ll still try to help citizens with complaints.”

Video providers with state-issued franchises in Texas are supposed to adhere to FCC standards, according to Texas PUC spokesman Terry Hadley, but only until there is more than one video provider in a market. At that point, all customer-service requirements are null and void.

Moreover, the PUC only gathers the complaints and forwards them to the video providers. It has no jurisdiction to enforce the standards with fines or penalties. A consumer’s only recourse is to file a complaint with the FCC or call the city. Between Jan. 1, 2006, when the bill went into effect, and March 31, 2007, the PUC had received 320 complaints about video service providers, Hadley said.

CONFUSING TRANSITION

In Michigan, city regulators are trying to maneuver their way through what some are calling a confusing transition period. The Michigan Public Utilities Commission crafted a standardized franchise contract by January, as stipulated by the law passed in December, said Judy Palnau, a spokesman for the MPUC.

The commission is currently drafting a suggested process for handling disputes. That document is expected to be submitted to the state legislature by June. At that point, the legislature will vote to ratify or change the process and the PUC can begin to handle complaints.

In the interim, city officials are trying to handle complaints as they arise, said Kathy Sherman, cable manager for the city of Southfield, Mich., and president of the Michigan chapter of NATOA.

“It’s hard to know exactly what or when complaints for AT&T’s service will come,” Sherman said. “But they’re telling us that installations are taking anywhere between four and 10 hours. As a consumer, I would complain about that. I just can’t, in good conscience, tell my constituents to call the PUC right now if they have a complaint and most of my colleagues are currently agreeing to handle complaints locally as well. I can solve them quicker and easier right now.”

In the meantime, AT&T has filed a formal complaint against Southfield, Mich., for denying its franchise proposal. The state’s franchise law had the PUC craft a standardized form to be used by local franchising authorities in all negotiations going forward. AT&T’s filing claims Southfield incorrectly called the contract incomplete even though it submitted the contract using the PUC’s standardized franchise form. Sherman claims the telco hasn’t laid out what it plans to offer and has failed to communicate with city officials since submitting its initial application.

Palnau said the PUC commissioners will meet with Southfield regulators on May 8 to resolve the issue.

ADDED EXPENSES

In Wisconsin, where legislators are considering a statewide video franchising law, opponents noted how expensive it will be for state regulators to oversee cable and video franchises.

The state already has a cable subscribers’ bill of rights giving customers the right to have prompt repairs, rebates after service outages and plenty of notice before changes of service or disconnections, said University of Wisconsin professor Barry Orton. The law is enforced by the Department of Agriculture, Trade and Consumer Protection. The first version of the new statewide franchise bill erased all those rights, Orton said.

The bill’s opponents are now pushing to have those customer-service standards put back into a revised bill. Moreover, the new version may also include direct-broadcast satellite services, something Orton likes even if he’s against the proposed law in general.

Orton said the state hasn’t really looked at how much it will actually cost to regulate franchises at the state level. State staffers have estimated the law will cost about $550,000 a year to handle complaints. He argued that is low, especially if DBS is added to the list of companies in the bill, and said the number will likely be closer to $1 million a year if complaints are actually handled properly, which he doubts.

“The idea behind this bill is that it should be a pure marketplace thing,” Orton said. “But when you get two companies in a town, you still get raises in rates and you can still have lousy service.”

Michael Grover, Cox Communications director of government affairs, said regulators in states with statewide franchises believe competition will solve a lot of customer service problems, but no matter where a complaint arises — at the local or state level — Cox is more than happy to work with regulators to solve problems.

“Most regulations, be they local or state, require video providers to adhere to FCC customer service regulations,” he said. “We go well beyond those regulations with our own customer service standards so we make sure customers have a positive experience with us and are well taken care of. It doesn’t matter to us whether we are overseen by local regulators or a state agency. We still have the same high standards internally.”

He added, “If someone isn’t happy and they complain to a regulatory body, we try to resolve it quickly on our own or with whatever regulatory body that is contacted by the customer.”

POWER TO FINE

In Florida, Gov. Charlie Crist is expected to sign a statewide franchise bill that gives the attorney general’s office authority to assess fines to video providers if it finds a company is denying service on the basis of race or income. The state’s Department of Agriculture and Consumer Services will oversee customer complaints.

The department should have no trouble handling complaints because “that is one of our principal functions and we think we do a credible job of mediating disputes,” said department spokesman Terry McElroy.

The department’s consumer-services division employs fewer than 50 people and no additional staff will be hired to handle cable complaints, but McElroy is confident the combination of the DACS’s record of solving disputes coupled with the increased competition between video providers will keep consumers happy.

“The fact is cable companies will have more competition should this law become effective and the last thing [incumbent] cable companies will want to do is not satisfy customers’ concerns,” McElroy said. “Competition will force cable companies to be more responsive.”

Video providers that operate under state franchises will be expected to adhere to the FCC’s customer service standards, according to Florida Cable & Telecommunications Association executive director Steve Wilkerson.

The bill does have a provision that would enable local authorities to continue overseeing customer-service standards. But it’s too soon to determine which cities will keep their oversight power and which will turn it over to the state.

“I do think the customer service oversight issue at the state level will continue to evolve,” Wilkerson said. “We thought there would be more concern about customer service voiced by cities than there was. I am not sure there will be enough resources available at the state level to handle that issue. Of course, the argument is that competition will take care of customer service issues altogether. If there is competition, the level of customer service will rise. But just how quickly that happens or whether it is true remains to be seen."

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