Video Regulation Hurdles Outlined by SBC, Verizon Officials
SBC and Verizon, taking different tacks on video sales, agreed there are regulatory hurdles to offering service in some individual communities. Officials from the firms, speaking on a D.C. Bar Assn. panel where debate became heated at times, said local franchise authority (LFA) provisions are an unfair barrier to entry. Cable and municipal lawyers disagreed, saying that LFAs want the same rules as they sought years ago from cable operators. Nevertheless, executives at SBC and Verizon both said their investors are concerned that regulation may slow down the rollout of pay TV.
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The Bells plan to add video -- and spend money -- in areas where it’s easiest to start offering service. “Adding video to our portfolio is critical, because that is a product that people want,” said Brent Olson, SBC Services asst. vp-regulatory policy. “The view of us should be as a new entrant,” he said, with a corresponding lighter regulatory touch. “We may be shifting where we are spending those dollars to the climates… where we think we can get the most return quickly,” he said. Verizon Vp-Federal Regulatory Affairs David Young pointed to the example of DBS providers, which he said weren’t required to offer public, educational and govt. channels and follow other cable rules. Without such exemptions, he said, “it would be impossible for them to compete successfully.” Telcos should likewise be treated as new entrants, not incumbent service providers, said Olson and Young.
LFAs must treat cable and Bells similarly, said attorney Gerard Lederer, who often represents municipalities. Cable operators have threatened to sue cities that award franchises on different terms to telcos, he said: “While we want competition, and we desire it in the very worst of ways, my clients are a little bit skeptical of what they are willing to give up,” he said, noting he was speaking on his “own behalf.” One of the things that cities aren’t willing to cede is buildout or similar requirements that aim to prevent redlining, he said: “We want real competition for everyone, we don’t want it for the folks who are the richest.” A cable lawyer said telcos themselves may be slowing down the franchising process. “The main delay seems to be where the new operator is trying to negotiate terms that are more favorable than what the incumbent has,” said cable attorney James Ireland: “Level the playing field and then allow for competition.”
Municipalities oppose a national franchising bill from Sen. Ensign (R-Nev.), said Lederer. “We can’t embrace any bill that does not ensure services to all consumers,” he said. The legislation to erase franchise requirements has a slim chance of passage, some say, because Senate Commerce Committee Chmn. Stevens (R-Alaska) hasn’t endorsed the bill and may develop his own telecom legislation. Simultaneously patting Olson and Young on the back, Lederer said SBC and Verizon “got what they wanted in Texas,” referring to statewide franchise rules passed there (CD Sept 8 p10). But the firms have only applied to the Tex. PUC to serve 1% of franchises, he said. N.J. may be the latest state to pass franchise reform, under a bill introduced by a state assemblyman (CD Nov 16 p4).
A concern that looms large for municipalities is maintaining right of way control. “Local government owns and holds the right of way in trust,” Lederer said. “We have laws, we have state constitutions that say we aren’t able to give away out public assets… You don’t want your mayor giving his sister in law the right to use the streets on an uncompensated basis.” The Bells pledged they'll seek permits before doing work like digging. “We're not looking for any new access to the rights of way,” said Young. “Neither of us have said that we shouldn’t be pulling permits from local government,” agreed Olson. “If you say we can’t pull fiber down H Street, then we're going down I Street,” he said, referring streets near the panel site.
Debate over which regulatory regime should be applied to Bells concerns Wall Street, the Bell executives said in response to our question. “The regulatory uncertainty is clearly something that may be affecting us,” said Olson. Investors “are worried that a regulatory environment is not necessarily conducive to doing what they want,” he said. “It is affecting us on Wall Street,” said Young. “When we announce we are spending money, it makes our investors nervous.” The concern, analysts have said, is over the total costs of telecom video spending. SBC and Verizon have said they plan to spend at least $10 billion combined -- and one analyst said total spending on fiber to the premises could reach $40 billion (CD Oct 26 p7). Stock in SBC has fallen about 6% this year; Verizon is down about 1/4.