Regulation: What's Too Much?


Cable regulators are undeterred by the close scrutiny from telecommunications providers, but find they are financially strapped by shrinking local revenues paired with unfunded local homeland-security mandates.

"The government is spending money on infrastructure improvements, but I think it's all in Iraq," quipped Arvada, Colo., Mayor Ken Fellman at the annual meeting of the National Association of Telecommunications Officers and Advisors here last week.

Regulators are left to meet all their responsibilities with local revenues, which have shrunk 3% to 5% since the Sept. 11, 2001, terrorist attacks, while expenditures have increased an average of 5%, according to a fellow panelist, attorney Nick Miller.

Finances are changing, but one thing remains the same: Information providers and regulators continue to spar over the appropriate role of government in an increasingly competitive world.

To Terry Bienstock, executive vice president and general counsel for Comcast Corp., cities have a role in managing rights-of-way and safety issues. On other issues, such as customer service, the marketplace should rule.

"If [consumers] don't like my customer service, they will go to EchoStar [Communications Corp.]," Bienstock said.

"Regulated competition doesn't work," added Steve Davis, senior vice president of government affairs with Qwest Communications International Inc., who said that local rules just make it harder for other competitors to launch.

That may be industry's message, but their comments were followed by a session on customer-service standards and enforcement. It was standing room only, as panelists advised regulators to demand raw data on telephone transactions from cable companies in order to better gauge service.

Mitsuko Herrera, an attorney with Miller & Van Eaton, also urged franchisors to monitor local operators for possible privacy violations. In 2002, operators averaged $716 per year, per subscriber in revenues, but only $216 of that was cash flow, she said. Companies are under pressure to raise the latter number and could use customers' personally identifiable information to increase profits, she added.

For instance, a company could monitor a viewer, determine the consumer watches a lot of Outdoor Life Network, and use that information to market extreme-sports content. That might be appropriate, she noted, but improper if the company sold the name to retailer Eddie Bauer, for instance.

City officials and telecommunications providers also continued to hotly debate the appropriate level of compensation for the use of rights-of-way.

Norman Curtright, senior attorney for Qwest, argued that a gross receipts tax could evenly assess all users, but only if all other taxes were removed "and that's not likely to happen." The tax rate should actual cost of the use of right-of-way, not for the benefit derived by the user for placement in the public rights of way.

Curtright's favored model, argued Dallas assistant city attorney Don Knight, is like paying an employee only the gas money he needs to get to work and not for his labor.

If Qwest supports a cost-of-delivery model, NATOA members asked, why does it charge $50 for digital subscriber line service when actual delivery costs are a fraction of that?

"Why not?" Curtright said, to the exasperation of regulators.

City officials should create regulations for excavating and restoring streets, advised former San Francisco and Los Angeles city engineer Vitaly Troyan. Otherwise, cities could replicate the experience of San Francisco in the 1990s, where utility upgrades and telecom installations caused one-third to one-half of all the city's streets to be dug up during a five-year period.

A review of San Francisco street repairs revealed that two-thirds of the trenches were improperly restored. Some workers used techniques such as "throw and go," where asphalt is dumped and compacted by a couple of passes of the truck's wheels. The city has since instituted a pavement damage fee and has developed a trenching master plan.

Regulators at the convention also got a change to confer with MSO middle management.

Upgrades and rate hikes

That gave Adelphia Communications Corp.'s franchisors a chance to meet seven of the corporation's new regional vice presidents and directors, and to ask questions about the bankrupt MSO's reorganization.

Maria Arias, vice president of law and government affairs, said operational imperatives include system upgrades, 95% of which should be completed in June 2004; revised product lineups and improved customer care. New managers arrived at the company to find Adelphia call centers lacked such common tools as interactive voice response technology, to speed call response, and franchise databases. Once databases were created, executives discovered anomalies such as commercial customers paying now-expired promotional rates, Arias said.

Those consumers were hit with $25 a month increases.

Operational improvements will not be without consumer impact, she warned.

"We need to become more profitable. I won't sugarcoat it. Our rates are going up. There's no way around it," she told regulators.

Despite the rate-hike warning, franchisers said after the meeting they appreciated the executives' candor and would wait and see if Adelphia's local performance does improve as promised.