Franchise War in Texas

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Texas cable operators have cranked up the lobbying machine to fight off a bill video providers claim is nothing more than state-sanctioned redlining for Verizon Communications Inc. and SBC Communications Inc.

As part of the state's telecommunications overhaul, legislation would shift authority for cable franchising from cities and towns and into state hands, assuring telcos that they would not have to build beyond the current borders of their businesses.

The measure's initial intent was to design parity in telephone taxes and fees. Once in committee, however, it was all but gutted and turned into an overhaul of cable-franchise policy.

'Bypass' Attempt

“It's now very different from the bill that was filed,” said Kathy Grant, vice president of government relations for the Texas Cable Telecommunications Association. “It's essentially an effort by the phone companies to bypass the municipalities.”

The telephone companies disagree.

“HB3179 clears the cobwebs out of the old rules in Texas and better reflects the current state of technology,” Verizon Southwest region president Steve Banta said in a statement. “The legislation will accelerate the ability for consumers to have choice for their video provider.”

The proposal has triggered an all-out over-the-air war, with commercial spots airing frequently espousing either cable or the telephone companies' point of view on the telecom reform.

The bill targets a state in which Verizon has had the most success in negotiating franchises. It now has four contracts, including a franchise for Keller, a city of 33,000 that will be its FiOS video launch market in the second half of the year.

But Verizon notes that it will not build out all of Keller: It only has telephone plant in 80% of the community. SBC serves the rest of the locality.

SBC continues to assert that it needs no cable franchises.

Lack of universal buildout rules is a key issue for cable opponents.

The TCTA cites an SBC report to investors that states the telephone company initially will target only 5% of “low-value” customers with its Project Lightspeed fiber-to-the-home plant.

The criticism is “straight from the cable playbook,” where that industry delays and resists competition at every turn, said Verizon spokesman Bill Kula.

Though his company may not build out entire communities, it is investing millions in fiber-to-the-home architecture in 14 states, or half of the states in which Verizon operates. Deployment is occurring where the telephone company can most rapidly reach the most single-family homes, he said.

The Texas bill is headed for the floor of the House, having gained approval from the House Regulated Industries Committee on April 26. In addition to assigning franchising authority to the state, the bill has some public access programming requirements, but does not require placement of those channels in the least expensive basic tier, according to cable critics.

The bill codifies existing cable-company institutional network and free connection requirements without extending them to new entrants.

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