Consumers Sidelined as Broadband Battles Rage

By Martin H. Bosworth

December 19, 2006

Anyone who's suffered through the high prices, bad customer service, and constant technical problems typical of many local cable company knows that competition is sorely needed in the realm of home entertainment.

Big telecoms like AT&T and Verizon are greedily rushing to the rescue with offers of "triple play" services that combine phone, Internet, and television into one package -- usually at prices lower than rival offerings from cable providers, at least at first.

But the battle over broadband isn't quite as simple as introducing more competition, especially if the only two competitors are the same old local telephone and cable companies.

Indeed, the challenge to deploy new high-speed entertainment packages is bogged down in politics on every level, and while cities, states, Congress, and corporations fight it out, consumers are on the sidelines.
The Franchise

Cable companies have traditionally negotiated franchises with every municipality they want to do business in, and jump through extensive regulatory hurdles to do so.

The payoff for the cable companies has traditionally been unchallenged market dominance in their area, while the cities and counties shake money out of the cable providers to fund pet projects of every description.

The telephone companies want to change all that. They're pushing to pass national video franchising laws, enabling them to bypass existing regulations and roll out new products in a much quicker fashion.

You might call it one-stop lobbying. It was a key component of the massive updates to the Telecommunications Act that the Republican-led 109th Congress was pushing to pass before it adjourned.

But that effort stalled over the issue of "net neutrality," as technology and consumer advocates warned that telecom and cable companies would use the new franchise laws to "cherry-pick" the most affluent neighborhoods for service, leaving poorer communities with second-rate Internet and cable connections on the one hand while, on the other, using their control of the national data circuits to act as highway bandits extorting money from content providers.

At least in theory, the incoming, Democratic-majority Congress looks to have much stronger support for net neutrality as a principle, and any rewrites of telecom law will take that into account.

As a result, telecoms are shifting their negotiations directly to state governments, where they're finding much success.

California Gov. Arnold Schwarzenegger recently signed a bill that enabled Verizon to roll out new franchises across the state. The company lobbied very heavily for the bill, and is pushing for similar successes in other states looking for investment.

The telecoms, it should be remembered, have more than a century of experience lobbying state government, since local phone companies were heavily regulated at the state level prior to Congress' giving itself a bigger seat the table with the Telecommunications Act of 1996.

With many of its biggest Congressional supporters now out of power, "it doesn't appear that making another run at federal legislation is the most practical course." Verizon Vice President Tom Tauke said recently.

Commenting on the video franchise issue at the company's "Poliblog," Tauke said that, "Working through these issues in the federal legislative process requires a substantial commitment of resources," which could be better spent at the state and local levels.
Not In My Backyard

Another reason statewide video franchises are being pushed so hard is that local communities are proving troublesome. They're grown accustomed to being courted and paid handsomely by the cable companies, after all.

Beyond that, cities and towns simply want at least some say in how corporations are going to deploy their broadband projects. A chief reason is property values -- in an age where the primary means of building income for most Americans is home equity, having unsightly utility boxes dotting yards is far from popular.

Ars Technica's Nate Anderson documented the struggle between AT&T and many Chicago suburbs over the deployment of AT&T's "U-Verse" franchise.

The town of Geneva wanted to regulate installation of AT&T's boxes and get access to the company's full deployment plans for its service. AT&T promptly sued on grounds that revealing those plans might expose them to competitors.

It's a Catch-22 for companies like Verizon and AT&T. They want to market their high-end Internet TV services and superfast broadband connections to wealthy neighborhoods, but building those services requires lots of construction and redevelopment, which can lead to increasingly ugly neighborhoods and irate homeowners.
Playing Politics

Even without legislation on the national level, the federal government is not letting the battle over video franchises shift to the states without a fight.

FCC Chairman Kevin Martin, a longtime lapdog of the major telecoms, has derided local franchising agreements as an impediment to consumer choice, ignoring the old GOP dictum that local government is the closest to the people, and has lobbied for national franchise rights throughout most of his tenure.

Now Martin is pushing for the FCC to take action on the franchise question at its next meeting on Dec. 20th, the last one for 2006.

The new measures are being kept quiet by the FCC, and will remain so until after the vote, a development which has alarmed consumer rights groups and cable executives alike.

In an ironic twist, Martin's push for the FCC to act on the video franchise issue comes on the heels of the commission's failure to act on the "megamerger" of AT&T and BellSouth into the world's largest telecommunications company.

The merger, favored by Republican Martin, has been opposed by the FCC's Democratic commissioners and consumer groups that believe the consolidation of the two companies will hurt competition for broadband providers.

The merger is still expected to occur eventually, but any action on the issue will not take place until well into 2007, causing problems for Martin, whose tenure has until now largely been defined by issues of obscenity on broadcast television.

The push for video franchising laws is being viewed by insiders as a way to feather Martin's cap for future political moves.
The Level Playing Field

There's no question that cable companies such as Comcast and Time Warner currently enjoy the fruits of their near-monopoly status, leaving many consumers peeved by what they see as high pricing, bad customer service and lack of options.

But while the idea of luring high-speed competition from the likes of AT&T's U-Verse and Verizon's FiOS to neighborhoods is a good one in principle, it's not as black-and-white as the various sides would make it out to be.

Consumers aren't just served by competition, but also by vigorous enforcement of consumer regulations. Ensuring that local towns and municipalities retain some control over the service provided to their citizens is a key element, most consumer advocates agree.

"Cable competition without consumer and community protections is a license for the Baby Bells to steal," said PIRG's Ed Mierzwinski.

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