Debate Continues Over Calif. Franchise Bill

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A California bill that will revise franchising for new providers is “focused and minimally disruptive,” according to Verizon Communications, which is backing the bill.

But for other speakers at the first work session on franchise policy, the bill, AB903, which will eliminate the level-playing-field provision in the state law, is the wrong way to revise public policy. The state’s policy demands that nonincumbents build out plant to serve the same franchise area as the incumbent.

The proposed bill doesn’t go far enough, SureWest Communications senior vice president and chief operating officer Fred Arcuri said. Although the longtime telephone company has developed a triple-play business under the current state rules, the level playing field should be repealed entirely, he argued.

“It greatly limits competition,” he told the California Senate Energy, Utilities and Communications Commission Tuesday. If the level-playing-field policy played out among private businesses, he added, he doubted that it would pass muster under antitrust laws.

Any new state policy needs to recognize that no franchises should be needed for new entrants that are streaming transmissions over the Internet, he said. That content does not meet the standard of cable programming.

SBC Communications Inc.’s representative reiterated his company policy that its service does not require a franchise. SBC -- in partnership with Microsoft Corp. and EchoStar Communications Corp., among others -- will provide an Internet-protocol, video-on-demand-type service dubbed “Homezone,” noted Stephen Welch, senior executive VP of policy and planning.

SBC anticipates that a Federal Communications Commission ruling, sought by the company and anticipated in May, will rule that such services are enhanced data transmissions, not cable-television service.

He didn’t state a start date for California IP-video services. Verizon’s cable product will be launched first in Texas, probably in the third quarter. Verizon has one California cable franchise, in Beaumont, but it continues to negotiate for more, said Tom McCallion, regional president.

In a conciliatory gesture to local officials, which issue franchises and benefit from franchise-fee revenue, Welch said SBC officials would be willing to talk with regulators to discuss remedies for revenue loss.

Telephone and cable lobbyists in other states are closely watching the California legislative process. Other Verizon-backed bills are possible in other states, according to capital buzz, and cable operators are monitoring the process to determine both proactive and reactive strategies.

Dennis Mangers, president of the California Cable & Telecommunications Association, warned the lawmakers away from accepting assertions by the telephone companies that their products are different legally from cable TV and exempt from current policies.

“Let’s clear up any ambiguities right now: State and federal law cover what the telcos are doing. I guarantee it,” Mangers said.

City officials, too, testified that the proposed telco video offerings are cable TV.

“Whether delivered on coax, bits of fiber or a wax string, cable TV is cable TV,” said Lori Panzino, division chief of franchise programs for the San Bernardino County Franchise Authority.

That said, local regulators said the franchise-build-out demands of cable incumbents are an “illogical attempt by the cable industry to extend the intent of the nondiscrimination provisions (of state policy) and keep competitors away,” she added. The state level-playing-field policy should be eliminated in favor of a balanced, neutral regulatory policy.

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