SBC, Verizon, Challenge Cable at Supercomm

The wireline industry is starting to reemerge after years of downturn, but the govt. still has far to go in easing the regulatory load it puts on telecom carriers, wireline executives with that industry’s superheavyweights said. In recent years, the Bells won several key regulatory battles, especially via the Triennial Review Order. But the start of Supercomm here Mon. found executives in a fighting mood, warning that regulation continues to threaten their business interests - especially in the escalating fight between telecom and cable over franchise fees for telecom video offerings.

Cable operators feel threatened by Project Lightspeed, SBC’s new generation network buildout, which will let it offer video service, Miller said. “That’s why they're pulling out all the stops to delay our entry and to limit our technology platform, all to the detriment of consumers,” he said. “That brings us back to video competition policy. Should policymakers facilitate new competition. . . or should they jump in and manage the video market, regulating cable prices?”

Cable operators are allowed to offer voice service without facing legacy telecom regulation, Miller noted. “Just as cable and other new entrants to voice and data markets don’t bear the obligations of incumbent telecom providers new entrant video providers should not face legacy franchise and buildout requirements of incumbent cable companies,” he said.

Cable regulations were imposed on carriers in an era before competition, Miller said. “It should be noted, by the way, that we [ILECs] already have franchises, already pay substantial municipal taxes,” he said. “Cable companies are citing redlining as a reason that policymakers should insist on franchising agreements and buildout rules. Obviously, where we build we will offer services to all.”

The ability to offer video is a central premise of Verizon’s broadband rollout, Tauke said. “But in order for us to be able to get the video up and running we need a change in policy on the franchising issue,” he said. “In order for us to provide video services throughout the territory in which we offer wireline services we would need about 10,000 franchises. If we got one every business day… it would take roughly 40 years to get through that process.”

Imposing franchise rules on telecom operators makes little sense, Tauke said. “This is a process that was built for companies that did not have the authority to deploy networks and got exclusivity in the video markets once they deployed the networks and offered the services,” he said. “This should not apply to those who have a franchise, already have the authority to deploy and are bringing a competitive offering into the community.”

Phone incumbents scored major victories through the TRO, but that order passed by one vote -- from now- departed Chmn. Michael Powell -- and the U.S. remains “far behind” much of the world in broadband competition, Tauke said. “The bottom line is this: The old world rules simply aren’t keeping up -- aren’t keeping up with the needs and demands and desires of consumers, aren’t keeping up with the rest of the world,” Tauke said.

The telecom industry’s death has been exaggerated, said Herschel Abbott, BellSouth vp-govt. relations. But regulation remains a threat, he added. “Competition is working and the need for regulation is gone… The time is now to deregulate,” Abbott said. “There is no need for regulation of wholesale price or retail prices when you have competition abounding.” He said. “There is no need for regulation of service quality, especially when the competition is not regulated for service quality.”