California Won’t Act on Verizon Yet

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Apparently deferring to the wishes of local regulators and other interested parties, legislators in California have moved into a joint state Assembly/Senate committee two bills that could ease Verizon Communications Inc.’s push into video, an action likely to delay debate on a bill until the fall.

The move indicated the intent of legislators to create broad new telecommunications policy that removes barriers to entry, while retaining a fair playing field for vendors.

Verizon hopes the two chambers can reach a consensus this session, Pacific Region president Tim McCallion said. But he added that if a broader bill bogs down, he hopes lawmakers will consider a narrower bill that addresses specific competitive issues and allows the telco to proceed with its cable plans.

BROADBAND JOBS

Verizon is interested in quickly bringing video to California consumers, he said, adding that the telco has already brought hundreds of jobs to the state in anticipation of the launch of its broadband products.

“We want to roll out video unfettered by accidents of history. We really want legislation this year,” he said.

To date, Verizon has one California cable franchise, its first, in Beaumont, a desert town east of Los Angeles. A state bill, or lack thereof, would not affect the company’s plan to launch video in that city before the end of this year.

McCallion declined to state how many other California towns are engaged in franchise negotiations with the company.

Cable operators argue that local telco broadband franchises should line up with existing cable franchises, but according to McCallion, Beaumont demonstrates there are already instances in the state where incumbent operators don’t serve an entire town. Due to Beaumont’s growth, it is currently served by two non-competing incumbent operators: Time Warner Cable and Adelphia Communications Corp.

Earlier this year, Verizon drafted a bill, carried by Assemblyman Hector De La Torre (D-South Gate), that would relieve Verizon of a state requirement to serve the same franchise area as a cable incumbent. Verizon instead would only have to serve where it already has telephone plant.

McCallion said the assemblyman understands the impact of current state policy. De La Torre’s home base, South Gate, is served equally by Verizon and SBC Communications Inc. Under current policy, Verizon would not be able to offer services in South Gate because it does not have plant throughout the town.

De La Torre’s bill was followed by an assembly proposal by Lloyd Levine (D-Van Nuys) designed to create a broader telecommunications policy update for the state. Levine has been meeting with Verizon, state cable representatives, local officials and power companies to learn more about the issues.

Just before the holiday weekend, the Senate Energy, Utilities and Commerce committee voted both bills out, on 10-0 votes. But instead of sending them to the chamber for a floor vote, the committee directed they be sent to a yet-to-be formed interim conference committee, presumably to come up with a single policy bill.

Levine’s draft states the legislature’s goals. Current telecommunications laws are 50 years old and don’t account for technological change. The bill supports widespread access to services, while asserting that fair competition demands a level playing field.

State policy should protect universal service and public, educational and government channels, and consumers must be allowed to buy basic services, not just bundles. Barriers should be removed while protecting local government power and its stewardship of the rights of way, according to the draft.

De La Torre’s bill is more detailed and states that current policy creates a threat to the emergence of cable competition. State policy should give local governments the flexibility to craft franchise areas that encourage competition, without the requirement that they mirror the way incumbents structured their systems.

De La Torre’s bill would bar telcos from passing the cost of their broadband infrastructure along to basic telephone service ratepayers. It would ban economic redlining and apply PEG requirements to telcos or other competitors.

The De La Torre bill would give cable incumbents 45 days after the award of a telco video franchise during which to petition local governments to relief from the terms of incumbent cable franchises to match the competitor’s terms, according to the draft.

AN IP EXCEPTION

Cities and competitors were alarmed by one section of the proposal that appeared to open the state to SBC’s planned Internet protocol-based video service. That section, said the De La Torre proposal, would not apply to any video or service delivered via IP technology not deemed a cable service under the Telecommunications Act.

But those tracking the bill said legislators clarified that the language means the state recognizes the authority of the Federal Communications Commission to define and regulate such services.

The joint committee has yet to be approved but that is expected soon.

The delay is the latest state-level setback for Verizon. A franchise reform bill was not considered this session in Virginia; reform language in a telecommunications revision package in Texas failed when time ran out on the legislative session; and a proposal in New Jersey has been delayed while lawmakers there focus on the gubernatorial election in November.

Lack of traction in state capitals will no doubt mean more pressure will be applied to pass two recently introduced federal bills designed to ease telephone entry into the cable business.

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