Texas Bill’s Failure Good for Cable


In state action closely watched throughout the cable and financial industries, video competitors Verizon Communications and SBC Communications Inc. failed to convince legislators in SBC’s home state of Texas to eliminate local franchising for the telcos’ cable services.

A bill that included language centralizing franchise authority at the state’s Public Utilities Commission was approved by the state House May 23, but the Senate was unable to reach a compromise on the proposal before its session ended this weekend.

Analyst Craig Moffett of Sanford C. Bernstein & Co. Inc. said the fate of the bill is good news for cable operators -- especially Time Warner Cable, which will add to its already-significant presence by gaining systems in the Adelphia Communications Corp. acquisition.

It will also benefit direct-broadcast satellite vendors, especially EchoStar Communications Corp., as SBC will continue to rely on that vendor to provide video for its three-product bundle.

The proposal fomented a pitched public-relations battle between the telcos and the cable industry in the state. The incumbent operators filled their channels with public-service announcements accusing SBC of fighting to be able to “choose who gets digital technology.” For its part, SBC officials have publicly stated that the company’s video plans will “hit a brick wall” without relief from local franchising requirements.

Analysts saw Texas as the bellwether state for the telcos’ regulatory-reform plans on video because of SBC’s local presence and its historic success in deregulatory efforts both with the legislature and utility regulators.

But cable operators sought the support of local cities, which stood to lose their traditional local regulatory power. According to analysts, the local-regulatory lobby turned the tide against the telco effort.

Analysts noted that franchise deregulatory bills are pending in California and are anticipated to be introduced in Pennsylvania and New Jersey, so a telco victory on the issue is still possible.