Verizon Proposes an End-Around in Virginia

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A Verizon Communications Inc.-backed bill has surfaced in Virginia that could provide telcos and other broadband competitors with the ability to move into the cable business by virtue of their operating authority as providers of other services.

House Bill 2534, introduced Jan. 12, would serve as a general overhaul of the state’s franchising policy, bringing it in line with federal law, said Verizon spokesman Harry Mitchell.

“Cable franchising is totally out of date, dating to the era of monopoly,” he said.

NEED FOR SPEED

Verizon has filed for municipal franchises in a handful of Virginia cities, but that process can take from six to 18 months, “depending on how snarky the cable incumbent will be,” he added. Elimination of that step will more quickly bring choice to consumers, he added.

Cable operators don’t need a second franchise to expand from the video business into telephony, he noted.

“This legislation would be consistent with that policy,” he said. “Our network is already in place, we’re using the same rights of way … Verizon should be treated the same way.”

The bill, dubbed the Video Infrastructure Development and Competition Act of 2005, would delete language from the state’s franchise code which guarantees that competitors are subjected to terms and conditions no more favorable or burdensome than that of an incumbent.

The draft already has been amended to stipulate 20-year franchises (the original version set 40-year franchises) and would guarantee renewal for another 20 years if the provider lives up to the terms of the bill. The measure would codify annual payment of a 5% franchise fee; guarantee carriage of local commercial broadcast and low-power stations as well as non-commercial educational stations, and ensure PEG channel set-asides in competitive markets and institutional-network support.

It would prevent franchise authorities from demanding bonds or bids from a provider, a charge often set by cities to cover the costs of vetting an incoming operator. It would also bar franchise renegotiation or modification.

Virginia Cable Telecommunications Association president Rich Schollmann said the bill is unnecessary, because Verizon can already obtain operating authority and has applied for local franchises.

State franchising policy is “an incredibly complex issue that you just can’t do in 45 days,” or the length of the state legislative session, he added.

The association is also concerned that this broad rewrite wouldn’t survive a constitutional challenge. “This allows other video providers to cherry-pick the most profitable locales,” he said.

Verizon is pursuing its fiber-to-the-home buildout strategy in several states, including California, Texas, Florida, Virginia, Rhode Island and Indiana. Most recently, it announced its plans to build a fiber-optic network in Fort Wayne, Ind. — its first deployment in the Great Lakes region.

But Verizon specifically said there are no immediate plans to provide cable TV service. Comcast Corp. provides cable in Fort Wayne.

The telco has yet to file any cable deregulatory bill with the state legislature, said Tim Oakes, executive director of the Indiana Cable Telecommunications Association. But the session is just getting underway, he added.

In a proactive move, his association is promoting a bill that will codify a level playing field. That bill would require franchising of telecommunications providers with each subject to terms no more onerous or beneficial than an incumbent carrier, Oakes said.

Verizon’s lobbyist has already told Oakes the telco will oppose the bill, as will SBC Communications Inc. SBC opposes any franchises for its broadband operations. However, the Indiana Association of Cities and Towns has already signed on in support of the measure.

VoIP IMPACT WEIGHED

While the cable association is pushing its own bill, it will be monitoring the telcos’ big initiative — a deregulatory bill that cable operators are concerned could have a negative impact on emerging voice-over-Internet protocol services.

Associations across the country are on alert for cable franchise alteration bills.

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