In State Capitols, Broadband's Key

11/30/2003 7:00 PM Eastern

If there was any doubt that broadband has matured as a cable product, one need only look at the agendas of the state legislatures these days.

"Video is quiet. It's all about broadband these days," said Brad Tracy, executive director of the Indiana Cable Telecommunications Association.

The interest in broadband means that state-level cable lobbyists have been spread increasingly thin. One can't be satisfied browsing for the word "cable" or "television" in bills. One must track anything to do with telecommunications, especially if a bill's backer is an incumbent telephone company, lobbyists said.

VoIP A Key

Public utilities and services commissions have been added to the mix as well, as cable trade associations must track regulatory changes that could curb the rollout of voice-over-Internet protocol (VoIP) telephony services.

The latter product is still unclassified for regulatory purposes, although the Federal Communications Commission is looking at that issue. But lobbyists say they can't wait for national policy — they must be vigilant that state telecommunications-reform omnibus bills do not become vehicles for amendments that contain VoIP curbs or common-carrier definitions.

For example, Texas executives are already examining proposals for the 2005 session. In 1995, the state wrote its own competitive telephone safeguards, which were later duplicated by federal policy.

The local rules are due to sunset in two years. The state wants to continue those local rules now, in case Texas disagrees with the FCC's ultimate regulatory findings in its triennial review.

The run-up to the sunset date will be the biggest legislative session in a long time, said Kathy Grant, director of government relations for the Texas Cable Telecommunications Association. The lawmakers have everything on their docket, from how to treat VoIP to rebalancing traditional telecommunications rates.

Failure to protect cable's new telephone business would first affect Time Warner Cable, which has already sought approval for its VoIP business in the state. That PSC docket was strung out six weeks longer than the normal vetting process, Grant noted — a sign of regulators' confusion over the classification of VoIP.

Florida may be the first state to protect the nascent VoIP business. This year, the legislature passed provisions to protect emerging technologies, such as cable-delivered telephony, from state or local regulation, with the exception of possible access charges, said Florida Cable Telecommunications Association president Steve Wilkerson.

The state policy also has predatory pricing protections, he added.

Pennsylvania's state policy, which deregulated Verizon Communications Inc.'s Yellow Pages and non-core products such as call forwarding and call waiting, also sunsets this coming year.

Multiple bills are in process now to address the sunset, but perhaps the strongest one, amended by the House consumer affairs committee, has already passed a House floor vote. The cable industry has yet to decide whether it will support the entire bill, but HB 30 has two provisions to delight MSOs.

One amendment, inserted by committee members over Verizon's objections, specifically exempts VoIP from state regulation.

The amendment was very carefully worded to prevent VoIP from classification as a common carrier, information service or any other troublesome definition, said Pennsylvania Cable & Telecommunications Association president Dan Tunnell.

"We worked very hard on the language [of the telecommunications reform bill] to make sure it had no definitions of VoIP," he said. "This fills the bill."

The bill would also provide a "slight" tax break to MSOs on the telephony side of their business.

The Pennsylvania bill could become a double win for the association, if it can pass the Senate with its current amendments. A second cable-supported amendment would prevent municipalities from using tax money to compete with commercial broadband interests.

That provision is similar to a bill floated last year. The measure — which wasn't introduced by the cable industry, but had its support —would have banned municipalities from virtually all commercial ventures, such as health-club operations. But the telecom-reform amendment is more focused, introducing a ban only on broadband competition.

The anti-municipal broadband fight was inspired by the competitive situation in rural Kutztown, Pa., where the city built a plant to deliver bundled services to consumers there even though the local incumbent provider, Service Electric Corp., had upgraded its system to deliver the same products.

Telecom reform must make its way through the state Senate by the end of this year, when current state policy is set to sunset. But it will be a hard fight to keep the municipal ban in place.

Lobbyists for cities have already tried unsuccessfully to strip the amendment from the bill, according to Tunnell.

Anti-Theft Measures

Attempts to keep the broadband pipe safe led to the loudest controversy last year. A bill, drafted by the Broadband Internet Security Taskforce, was introduced in several states. The bill was designed to extend anti-theft protections to cable's new products, such as high-speed data, and increase penalties for large-scale pirates so the punishment would be commensurate with the crime.

In past years, the bill passed quietly in Pennsylvania and Illinois. In the 2003 session, it was approved in Pennsylvania and Florida, but hit a snag in such other states as Virginia and Colorado when organizations, including the Consumer Electronics Association, began lobbying against it, calling the bill too broad.

Even after sponsors tweaked the language to make the bills more clear that Internet users had to intentionally commit felonious acts in order to violate the law, opposition continued. The protests stalled the bills' progress.

In Colorado, Gov. Bill Owens vetoed the measure.

Security strategists were quiet on their piracy-bill plans for this year. The state association in Louisiana will pursue improved piracy legislation there, but not by pursuing last year's hot potato.

Louisiana Cable & Telecommunications Association executive director Cheryl McCormick said she believes the state already has a pretty strong law on the books, so operators there will pursue amendments that will update product definitions and beef up penalties.

Concern about Internet security is not just an issue within the cable industry. Some states are also making inquiries of local operators, seeking assurances that the data pipe is safe from being hijacked by terrorists.

"When you get that call from the state Office of Homeland Security, you kind of freak out," joked Indiana's Tracy.

The Illinois association will take a proactive step on that issue, floating a bill that adds cyberterrorism definitions to the criminal code. Violations will become a Class III felony, if the planned bill passes as drafted by the association there.

Universal Access

Not only do legislators want broadband to be safe, they want it to be universally available. Several associations are monitoring government efforts at universal access.

"I've been to three seminars in the last month with legislators," said Tracy, adding he gets nervous when lawmakers indicate they think government should take a more active role in universal broadband deployment. In his state, operators have already risked their own capital to upgrade networks, extending broadband availability to 90% of the state.

Tax incentives should be offered if lawmakers expect extensions into unprofitable, low-density areas, he noted.

While issues related to newer products are on many lobbyists' plates, it does not mean old the standbys — taxes and customer-service issues — have vanished from the docket. Many states are still scraping for revenues, and state associations will closely monitor budget reconciliation to make sure creative legislators don't carve out new levies, or extend the definition of current ones.

There is talk by some cities in West Virginia of extending the utility excise tax to cable, said West Virginia Cable Telecommunications Association executive director Mark Polen.

"That won't pass the smell test," he said. He's confident cable is excluded from the legal definition of a utility.

But in Oregon, lobbyists expect special legislative committees on tax reform to be established. The Oregon Cable Telecommunications Association will note the 8% to 9% tax rate already paid by its subscribers, an amount disproportionate to that borne by direct-broadcast satellite customers, executive director Mike Dewey said.

Conversely, in California, the California Cable & Telecommunications Association will drop the direct-broadcast satellite tax it has championed for the last two sessions.

Even though the state deficit is still estimated in the billions of dollars, CCTA vice president Dennis Mangers said there is not currently a good climate for new taxes. State policy requires a two-thirds vote of support by legislators for new levies, he notes.

"We'll explore other ways to get parity," he said. The association will be playing offense this session, examining the thousands of proposals anticipated to creatively solve the state's budget crisis, he said.

New Jersey was one of the few states in 2003 hit with regulation targeted at the core video product. New state-customer service standards were issued, which Karen Alexander, president of the New Jersey Cable Telecommunications Association, said are a codification of current federal standards. For instance, it is now part of state law that operators answer 90% of all calls in 30 seconds or less. And they must offer four-hour windows for scheduled service visits.

Most operators followed the federal standards anyway, so the state rules will cause few changes except an added layer of bureaucracy, she said.

Companies do need some further clarification of the policy, she said. The government and industry need to reach an agreement on what constitutes a complaint. For instance, operators would object to logging a call from a consumer who complains that cable is a monopoly. That is not an actionable call.

"If the statistics are overloaded [with every call], they won't be particularly meaningful," she said.

Some associations indicated that with statehouse budget battles looming, cable interests will quietly observe things from the background.

Others, such as the Cable Television and Communications Association of Illinois, advocate a more proactive agenda, looking for lax areas in the law and strengthening them.

Illinois association executive director Joan Etten called that a strategy that's worked in operators' favor in 2003.

For instance, the CT&C was able to get legislation passed that requires developers include the local cable company among the businesses to be notified when trenches are initially opened.

This eliminates a window of opportunity formerly enjoyed by DBS vendors, who could get into a new development and sign up customers before cable service was even available, she said.

Next year, the Illinois association will pursue a state policy seeking automatic reimbursement from cities for the cost of relocating plant. Cities are required to make reimbursements when plant is moved in such cases as when streets are realigned.

But under current law, it is up to operators to track such movements and to contact jurisdictions for the funds.

The Illinois association is also gearing up for the sunset of that state's 1995 telecom law. The association closely follows the activities of SBC, which has close ties with state lawmakers.

The buzz from the telco indicates it will pursue a rewrite from the Illinois Commerce Commission (the state's top utility regulator), and its anti-cable chairman.

"We're going to hit the Republicans in the legislature and ask for fairness," said Etten.

The CT&C is seeking out committee members who crafted the telecom reform act a decade ago, asking them to again involve themselves to ensure platform-agnostic reform.

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