Stateline Story

Telecom vs. Cable Battle Moves to States

A multimillion-dollar fight over who gets to deliver movies, sports and news to TV screens in homes across America is spilling into state capitols.
 
The nation's biggest telephone companies, such as AT&T Inc. and Verizon Communications Inc., already sell voice lines and Internet connections. Now, in some cities, they're using newly updated fiber-optic networks to compete with cable companies by delivering TV programming. But to get into consumers' homes more quickly, the phone companies want to bypass the city-by-city approval process cable companies have followed for decades and seek statewide agreements instead.
 
The aggressive push, which began in Texas two years ago, has upset city and county officials, who say licensing video providers on a city-by-city basis ensures that all neighborhoods - even poor and remote ones - get served.
 
For the most part, cable companies side with local governments, because they were forced to build their networks to reach less profitable areas in exchange for getting local monopolies. They're afraid the telecoms will be allowed to pick off their most profitable customers without competing in less lucrative neighborhoods.
 
At the very least, the cable companies want the same rules to apply to them and their competitors.
 
New laws to establish statewide franchises for TV programming are already on the books in 11 states, and the governors of Iowa, Florida and Georgia have bills awaiting their signature. Lawmakers in another 15 states proposed legislation on the same topic this year.
 
The telecoms are lobbying Congress and the Federal Communications Commission, too. But a rewrite of federal law stalled last year in Congress, and the FCC continues to wrestle with the question of how to regulate video delivered over the Internet. So state capitols are now key battlegrounds in the fight, which has been marked by full-page ads in national newspapers and billboards and, of course, plenty of TV commercials.
 
According to news reports, cable companies flew a dozen Illinois legislators to a
Las Vegas convention in early May, and phone companies in Florida hired 88 lobbyists to press their cause, more than one for every two legislators in Tallahassee.
 
Both sides have spread around campaign contributions to legislators and state officials, but the phone companies, which are also utilities with other regulatory issues before states, have given far more. AT&T, its employees and its corporate predecessors SBC and BellSouth have spent more than $6.7 million on donations to state office-seekers since the beginning of 2006, according to the National Institute on Money in State Politics . Verizon gave more than $3.2 million. By contrast, cable-provider Comcast Corp. spent more than $1.5 million, and Time Warner Inc. doled out more than $819,000.
 
Without changes in the law, local governments in most states decide the terms for letting in a video provider, usually a cable company. The municipalities can impose franchise fees, regulate the availability of public-access channels and require coverage of poor or spread-out areas.
 
Phone companies argue that the old regulations are designed for cable companies that built their networks from scratch. The telecoms say they're different because they're overhauling their existing networks.
 
"Having a statewide process … provides a way for us to get the streamlined regulation that helps the new entrant get into the market quickly," said Jeff Brueggeman, AT&T's vice president for regulatory planning and policy. He said the quicker that phone companies can compete with cable, the sooner customers will benefit.
 
The telecommunications companies have billions of dollars at stake, as they have upgraded their old networks with fiber-optic cables that are fast enough to deliver video programming while still providing voice lines and Internet connections. Since the video is delivered to homes via the Internet, customers can not only catch their favorite shows on their TVs at home, they can also can record TVprograms remotely from their work computers or hand-held devices.
 
Cable companies provide TV, phone and Internet service to homes through coaxial cables.

Their opposition to changes in state laws is not absolute. They, too, could benefit from fewer local regulations, but they insist that all carriers - phone companies and cable providers - be treated equally. In some states, starting with Texas, the cable companies have secured the right to obtain statewide franchises just like the phone companies.
 
"Whether franchise reform is at a national or state level, our priorities in any legislative or regulatory action remain the same: a level playing field, strong protections to ensure that new competitors cannot discriminate by refusing to compete in all neighborhoods and retaining local authority over rights of way," said Comcast spokeswoman Sena Fitzmaurice.
 
The local authorities heading up opposition to the state proposals, however, say they're better able to keep an eye on video providers than state regulators are.
 
Phone companies "are seeking special consideration and subsidies, and they are winning them statehouse by statehouse," said Libby Beaty, executive director of National Association of Telecommunications Officers and Advisors (NATOA) , a group of local regulators.
 
Beaty disputed arguments by phone companies that competition among video providers will motivate companies to offer higher-quality service, arguing that customers haven't received better broadband service despite competition in that market .
 
Still, she said, local regulators welcome the new technology.
 
"It's what we need for economic development. It's what we need for our communities. It's what we need for the health and welfare of our children. We just demand that they do it in a manner consistent with the needs of the community," she said.