Cable Fires Back in Texas

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The Texas Cable & Telecommunications Association has filed suit in federal court challenging the state’s newly signed telecommunications-reform act, which cable incumbents labeled "discriminatory" and harmful to consumers.

The suit, filed Thursday in U.S. District Court for the Western District of Texas, named Gov. Rick Perry, who signed the bill into law Tuesday, and members of the state Public Utilities Commission, including chairman Paul Hudson, Julie Parsley and Barry Smitherman.

The suit challenged SB5, the precedent-setting reform bill that, among other things, authorized statewide cable franchises for telephone companies, deregulated some of their rates and authorized deployment of broadband services using power lines.

The new act violates the U.S. and Texas state constitutions; violates the federal Communications Act and state prohibitions on exclusive franchises; and violates the federal duty to guard against redlining, according to the lawsuit.

The latter charge relates to public statements by telephone-company officials that they will market their new video services primarily to "high-value" customers, which analysts interpreted to mean consumers who spend $100 or more on communications services from the video provider.

"We have confidence that an impartial court will base its decision on facts and ultimately rule in the best interests of Texans and of fair competition," said TCTA chairman Tom Kinney, who is also president of Time Warner Cable's Austin division.

Time Warner has the most to lose in this fight. With an estimated 1.5 million customers in the state, it is Texas' dominant operator. Its penetration will grow further with the addition of some 500,000 customers it stands to inherit through system swaps with Comcast Corp. related to the acquisition of Adelphia Communications Corp. by Comcast and Time Warner Inc.

The lawsuit did not name as defendants either SBC Communications Inc. or Verizon Communications Inc., the companies that most zealously promoted the bill and that stand to gain the most from its implementation.

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