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Franchise Bill Moving Quickly

Apr 3, 2006  •  Post A Comment

Legislation that would make it easier for the phone companies to get into the pay TV business is moving on a fast track on Capitol Hill, with a vote by the House telecommunications subcommittee scheduled this week.

Though key House Democrats have expressed serious concerns about some provisions in the measure, Rep. Joe Barton, R-Texas, the bill’s leading sponsor, said he does not expect efforts to substantially alter the bill with legislative amendments to succeed.

In addition, Rep. Barton, chairman of the House Energy and Commerce Committee, said House Republican leaders are already planning for a May or June floor vote on a measure that will create a national video franchising process.

“I’d say the odds are 2-to-1 the president is going to sign a bill this year,” Rep. Barton said during a conference call with reporters last week.

The legislation, which Rep. Barton released publicly early last week, is particularly important for the telephone and cable TV companies because it would set new ground rules determining how phone companies roll out pay TV services.

The bill would clear the way for phone companies to roll out video operations through a national franchising process-one that would allow them to bypass the local franchising approval process that incumbent cable TV operators had to go through to launch the nation’s existing cable systems.

His measure would also allow cable TV operators to switch from local to national franchises after a phone company launches video services on their turf, or when the cable company’s local franchise expires. Another provision in the bill could require companies that offer TV under a national franchise to pay local authorities a fee of up to 6 percent of revenues, an increase from the 5 percent cable TV operators can be required to pay under local franchising agreements.

During hearings on the legislation last week, some lawmakers made clear they don’t believe a provision in the bill goes far enough to ensure that telephone and cable TV companies don’t use their power over their broadband networks to discriminate against rival content providers.

In addition, Rep. Ed Markey, D-Mass., the ranking minority member of the subcommittee, said he is especially concerned that Rep. Barton’s bill fails to include provisions requiring companies to build out their systems throughout the areas they choose to serve under a national franchise.

“By failing to include a build-out provision to ensure service-area parity between a Bell company entering a franchise area and the incumbent cable operator, the bill allows a national franchisee to use public rights of way in a community but serve only select neighborhoods within the community,” Rep. Markey said.

Rep. Markey also said Rep. Barton’s bill would permit incumbent cable TV operators to raise rates in neighborhoods in which phone companies aren’t offering video services to make up for price cuts in areas in which a phone company is rolling out a competing service.

“It is clearly a grave consumer protection flaw in the bill that needs to be addressed,” Rep. Markey said.

But Rep. Barton said his bill is “headed in the right direction.” Added House telecommunications subcommittee Chairman Rep. Fred Upton, R-Mich.: “The bill seeks to create a level playing field for all wireline video providers, given the competitive nature of the marketplace, so that consumers-and not the government-will choose the winners and losers in the marketplace.”

Some industry officials have expressed skepticism about the prospects for the bill becoming law this year.

But during his teleconference with reporters, Rep. Barton said House Republican leaders have made the bill, which has been endorsed by Rep. Bobby Rush, D-Ill., a “high-priority item.”

In a statement, House Speaker Dennis Hastert, R-Ill., praised the measure, which he said is “putting consumers first as we prevent outdated regulations from stunting the growth of new pay TV services and drive down costs by giving people more choice.”

Senate Commerce Committee Chairman Ted Stevens, R-Alaska, has said he wants to win approval for a Senate bill this year that will also address franchise reform.

“Sen. Stevens has repeatedly stated that he will get a bill this year, and that bill will include a variety of telecommunications provisions, including video franchise reform,” said Aaron Saunders, a spokesman for the Senate Commerce Committee.

To sweeten the package for cable companies, Rep. Barton deleted provisions from the bill that would have prevented cable operators from escaping their local franchising commitments until a phone company secured 15 percent of the TV subscribers in a cable operator’s market.

Also deleted was a controversial provision that would have barred cable operators from raising prices in neighborhoods where phone companies aren’t rolling out video to make up for price cuts in other neighborhoods.

In a statement, Kyle McSlarrow, president and CEO of the National Cable & Telecommunications Association, said the bill represents “considerable progress.” “Earlier drafts of the House bill focused on picking winners and losers on the basis of technology, and we are pleased that focus has now changed,” Mr. McSlarrow said. “We are pleased that the national franchising scheme proposed in the House bill seeks to ensure all providers compete on a level playing field.”

Tim McKone, AT&T’s executive VP for federal relations, said in a statement that the introduction of the bipartisan legislation shows that House Energy and Commerce Committee members are intent on doing their part to bring choice of video services to consumers.

“The bill strikes the right note of accelerating video choice for consumers while upholding the legitimate and important roles of local governments,” Mr. McKone said.