Telco Two-Step

8/12/2005 8:00 PM Eastern

Perhaps setting a national precedent detrimental to cable interests, the Texas Legislature has approved an omnibus telecommunications-deregulation bill that allows telephone companies to apply for a statewide franchise to deliver cable video services.

Cable operators have consistently opposed the Texas bill, arguing its terms give an unnecessary advantage to telephone companies, which could accelerate their plans to roll out video services under the measure.

Supporter Verizon Communications Inc. has been able to obtain four franchises from Texas cities through conventional means, cable operators have noted.

Similar Verizon-backed bills are expected before the California and New Jersey legislatures before the end of this year.


The Texas Senate overwhelmingly approved the bill in its special session Aug. 9. The next morning, the House approved the bill by a 144-1 voice vote.

“All Texas should be proud that our state is the first in the nation to open up the video market so that consumers can have a choice of video providers,” Verizon Southwest Region president Steve Banta said in a statement. He added, “Consumer choice and competition among video providers will result in new and innovative services and better pricing.”

Gov. Rick Perry must still sign the bill for it to become law. If he does so, it seems destined for the courts.

The Texas Cable & Telecommunications Association — which has fought versions of the bill through the legislature’s regular session and two special sessions — has called upon Perry to live up to his vow to entertain no bills from the legislature until lawmakers conclude key property-tax and education reform business. Legislators have until the close of the session (Aug. 19) to complete that work.

“The passage of this special-interest legislation seems to clearly violate the spirit of the vow of the governor,” said Tom Kinney, president of Time Warner Cable Austin and the TCTA chairman.

Though Kinney mentioned legal action in his statement, a corporate spokesman said it was premature to discuss any action that Time Warner, the state’s dominant cable incumbent, might take against the bill.


Cable lobbyists were dismayed by the rushed approvals. According to news reports, the bill was considered for just 10 minutes on the Senate floor.

During the House debate, cable lobbyists added, the chamber leadership refused to recognize Rep. Yvonne Davis (D-Dallas), who attempted to amend the bill via a cable-drafted amendment that would have strengthened the redlining prohibitions applied to new competitors.

Davis tried to address the same issue during the regular session on a similar bill, with similar results.

Opponents also assert that the bill amounts to an unconstitutional “special law” crafted to benefit one industry. For instance, the bill allows new competitors such as Verizon, which sponsored the bill, to terminate their video franchises at will, an option denied to incumbent cable operators.

The bill addresses many issues, including the authorization of Broadband Over Powerline technology in Texas, support for audio newspapers and the deregulation of rural phone rates. But it’s the video-franchising language that has launched the pitched lobbying battle.

Newcomers, such as Verizon, can now apply for a single certificate of franchise for the entire state. State utility regulators must issue the certificate within 17 days.

Other terms:

  • The new bill supersedes franchise agreements made between Verizon and the Texas cities of Keller, Wylie, Sachse and Westlake.

  • Incumbent operators are still obligated to live up to the terms of their municipal franchises until those contracts end.

  • Cities still have the right to regulate rights-of-way, but can’t make such additional demands as buildout schedules.

  • Newcomers to the telecom business must pay a 5% franchise fee, and match any funds paid by incumbent operators to support public access. They are also required to dedicate three channels for public access for communities of 50,000 residents or larger, and two channels for smaller cities.

  • Newcomers may not “redline,” or avoid buildouts in low-income neighborhoods.


Should the bill become law, “the next step in this process will almost certainly be the courts, where the substantial legal issues contained in this legislation hopefully will be resolved in a more thoughtful way, without the undue influence of hordes of SBC lobbyists trying to sway the outcome in their favor,” Kinney said in his statement.

Other opponents, including the American Association for Retired Persons, the Consumers Union, Common Cause, Save Muni Wireless, Technology for All and the Texas ISP Association, made a plea to the governor to resist passing “one-day lobby bills passed by tired, divided legislators.”

These opponents are angry that school-funding reform measures remain incomplete, and were also fearful that the bill ends the practice of protecting consumers from large hikes in basic wireline telephone rates.

Late last week, Perry spokeswoman Kathy Walt said the bill had not been officially forwarded to the governor’s office.

Perry’s staff will conduct a normal review and analysis before making a recommendation to the governor. After the special session ends, Perry has up to 20 days to decide whether to sign the bill, Walt said.

The State of State Regs
Where telco bills stand across the U.S.:
Source:Multichannel News research.
California: The bill attacks the state’s level-playing field policy that would require Verizon to match current cable-system boundaries. Moved to a newly formed committee where debate is not expected until fall.
New Jersey: Telco lobbyists determined legislators would not focus on the telecom task until after November elections. The exact bill and terms have not been publicized.
Texas:In the second special session, a broad reform bill, including authorization of state franchising, was finally approved. Awaits governor’s signature.
Virginia: A proposal early this year was tabled in committee. Legislators didn’t want to take up broad telecom reform proposal in a short session.

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