N.J. Moves Closer to Statewide Agreement

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Statewide franchising for new providers may soon be a reality in New Jersey, as the State Senate has already approved its version of a regulatory reform bill, with the Assembly scheduled to take up the issue May 22.

The Senate version passed on a 27-7 vote May 18. It contains some buildout requirements, but those standards remain controversial because the formula will leave most southern New Jersey communities without the competitive benefits promoted by the bill's backers.

The bill requires a new video provider, such as staunch advocate Verizon Communications Inc., to begin commercial service delivery within three years. Such providers must provide video products to at least every county seat they serve, and are required to provide service to communities with populations greater than 7,111 people per square mile. Those densely populated communities tend to be the ones closest to New York City.

Within six years, service must be available to all residents in communities where a telco has a central office.

The buildout could be broader within four years, due to a clause added to the bill before the Senate vote. That section notes that the new cable regulation does not undermine or supercede any previous orders by state authorities.

In the early 1990s, Verizon made an agreement with state utility regulators. In return for regulatory relief on landline phones, Verizon vowed to deploy fiber optics throughout its service footprint by 2010. The new bill's clause will hold the telco to that milestone.

Incumbent cable companies have argued that Verizon will be able to cherry-pick, serving only the most wealthy communities.

Also, the original proposal included a 5% (of annual revenue) franchise fee, to be paid by all cable operators, that would represent a rate increase for incumbent cable operators.

But two changes in the proposal appear to address those issues. The bill mandates fines between $50,000 and $100,000 per occurrence for operators proven to discriminate against consumers based on their income. And the bill now calls for payments in lieu of franchise fees of 2% of gross cable revenue. Municipalities may negotiate for higher rates locally.

Elsewhere last week:

• The Missouri legislature closed out its session without passing a statewide franchising proposal there.

• AT&T Inc. is trying to blunt criticism by local officials in both Michigan and California. In Michigan, towns have blasted the telco for failing to even attempt to negotiate local contracts before seeking statewide legislation to “speed up the process.” AT&T announced last week it will approach such cities as Detroit to negotiate operating agreements.

• In California, AT&T sent an e-mail blast to local mayors and council members to “clarify” the impact of a state franchising proposal there. The e-mail, from the company's senior vice presidents of external affairs, asserts that local governments won't lose control of their rights of way or to collect local revenues and that local programming will be protected.

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