Connecticut Taking a Closer Look

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In what could be a groundbreaking move, utility regulators in Connecticut are attempting to determine if they have the authority to regulate SBC Communications Inc.’s planned Internet-delivered video service.

“No one else is doing this inquiry” in the 13 states served by the telco, said company spokesman Dave Pacholczyk.

SBC has announced plans to launch an IP-based video service, Project LightSpeed, which will pass 18 million homes in those 13 states. The company is investing $5 billion in fiber-to-the-node technology to bring an on-demand type service to those customers.

As regulators have looked at franchising issues for potential competitors to incumbent cable operators, SBC officials have stressed that its planned product is not a cable service and therefore does not need a franchise.

STATE SEEKS ANSWERS

But the Connecticut Department of Public Utility Control opened a docket this summer, asking for details on the planned video-product offerings of both SBC and Verizon Communications Inc. to determine if it indeed can regulate the new providers.

Verizon is offering a more traditional wireline video service and has acknowledged the need for franchises. Its legislative tactic has been to seek changes to state law to allow for a statewide franchise. Such a change would allow it to deploy its competitive product more quickly, Verizon officials have said.

But that’s not an issue in Connecticut, where operators already can apply for a statewide “certificate of public necessity.”

Indeed, a precursor of SBC’s video operation, Southern New England Telephone’s ill-fated PersonalVision video project, was granted statewide operating authority.

The DPUC is supported in its inquiry by the state’s attorney general, Richard Blumenthal, and state Consumer Counsel Mary J. Healey.

NO CABLE FANS

Blumenthal, in written comments to the DPUC, said state regulators should support competition because “cable television rates have skyrocketed with no end in sight” because of lack of strong regulatory authority or competition.

“Cable’s monopoly grip on consumers is a disaster,” he added.

But the attorney general also faulted SBC’s initial filing on the docket, saying it left “critical facts unknown.”

Blumenthal wants specifics on SBC’s planned packaging and marketing, including whether the product will be sold by subscription or offered pay as you go; data on where the service will be offered and the buildout time table; and more details about equipment in public rights-of-way and consumer homes.

He also urged state regulators to seek universal-service support; financially backed public, educational and government channels; and an assurance that products will be offered outside of bundles.

Healy echoed support for those requirements, and added support for consumer privacy protections and emergency broadcast carriage obligations.

The consumer counsel expressed concern over SBC statements that the company will provide Project LightSpeed to “high-value” customers. (Analysts have concluded that high-value customers are subscribers who spend $110 or more a month on SBC products, according to information in the filings. SBC will focus 90% of its efforts on these consumers).

“My office’s mission is to advocate for all Connecticut utility consumers and accordingly, we will act to ensure nondiscriminatory rollout of SBC’s IPTV services,” she wrote to the DPUC.

In response to specific questions from the DPUC, SBC reiterated its view that it will not provide a cable service, as defined in federal law. LightSpeed will be a switched, point-to-point, two-way service. The Cable Act cable definition of cable service is “one way,” the company stressed.

Further, Congress provided exemptions from cable regulations for services that allow customers to “store, transform, manipulate or process” content, SBC attorneys wrote. SBC’s product will qualify the company as a multichannel-video programming distributor, subject to rules regulating signal leakage and wiring.

SBC might volunteer public-service applications, such as parental controls and disability access and content-rights protection, but other than that, the company anticipates no formal interaction with regulators, not even informational filings, company attorneys wrote.

The telco’s filings provided information on its plans to deliver video service to the 36 million customers that will not have access to LightSpeed.

'HomeZone’ CONCEPT

SBC discussed launching a product called HomeZone, blending content from EchoStar Communications Corp.’s Dish Network with digital subscriber line broadband networks.

A set-top box being developed by 2Wire, a Silicon Valley firm, will integrate the DBS and DSL features, according to SBC filings.

The New England Cable Telecommunications Association, Charter Communications Inc., Cox Communications Inc., and Cablevision Systems Corp. are all parties to the docket. The incumbents argue that federal and state statutes require regulation of video programming, no matter which platform is used for delivery.

The DPUC has no discretion to allow telephone companies to operate without full compliance with the regulations applied to incumbent operators, the companies argue.

Also, in this docket, regulators should determine the timing of franchising, incumbents said. The latter was in issue in New York, where operators, joined by some communities, argued to state regulators that Verizon should have already applied for franchises, as it is already building a cable system in public rights-of-way. They failed to sway New York regulators.

Cablevision attorney Paul Corey added that state customer protection will be important, due to reports by analysts that testing of LightSpeed technology has revealed “points of failure” in early tests of IP video technology.

SBC WANTS 'SYMMETRY’

SBC countered by noting that cable-affiliated telephone operations, such as those of Cablevision, enjoy “limited regulation” to allow them to break into the telephone business with their voice-over-Internet-protocol product. SBC suggests “regulatory symmetry” in regulators’ treatment of telcos entering the cable business.

The questions from the DPUC are so IP-focused that on Aug. 23, Verizon asked to be dismissed from the proceedings. That company noted it plans to file for an operating certificate, as it will meet the definition of the cable product, its attorneys said.

The DPUC has not acted on the request, and NECTA opposes Verizon’s dismissal.

The trade association wants Verizon to remain involved so regulators can address the issue of franchise timing. Incumbents argue that if Verizon is building upgraded fiber-to-the-premises plant to provide video services, they should have a franchise during that buildout, and not when it’s completed.

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