FCC Turns Focus to Video Franchising Rules

The Federal Communications Commission (FCC) won’t be voting on the AT&T-BellSouth merger this week at its monthly open meeting, but the agency will consider another issue near and dear to the telephone giants: video franchising rules.

Once the centerpiece of the failed telecom reform legislation in Congress, AT&T and Verizon now want the FCC to streamline the process for companies to enter the local video market. Both companies are betting billions on their new fiber networks delivering video, voice and broadband.

Wednesday morning, the FCC will consider directing local franchising authorities to “not unreasonably” refuse to award competitive pay television franchises to those wanting to challenge incumbent cable companies. The cable giants are already offering their customers video, voice and broadband.

In a filing this week with the FCC, the U.S. Telecom Association, the telecom trade group that counts the incumbent Bells among its members, urged the FCC to move quickly to provide consumers with an alternative wireline video provider.

Without FCC action, the trade group wrote, “Cable incumbents may be able to extend their still overwhelmingly dominate position in video into [the] new generation of offerings, aided by their seamless transition into voice through unregulated VoIP offerings.”

Not only will FCC action lead to more competition and lower prices in the pay television market, the telcos contend, it will also help speed the national broadband rollout, a fact noted by FCC Chairman Kevin Martin in a speech earlier this month.

“The ability to deploy broadband networks rapidly and the ability to offer video to consumers are linked intrinsically,” Martin said. “The Commission has noted that telephone company entry into the video marketplace has the potential to advance both the goals of broadband deployment and video competition.”

According to the Phoenix Center, a Washington consumer think tank, a network unable to deliver video is a network in trouble. “Quite simply, the ability to sell video services over these fiber networks may be a crucial factor in getting those fiber networks deployed,” the think tank said in a recent white paper.

To deploy their new networks, Verizon and AT&T must deal with more than 30,000 local jurisdictions and Martin said the FCC’s own research shows that the local franchising process can pose an unreasonable barrier to entry.

“There are steps that we can take, however, to address some aspects of the franchising process that have proven most problematic for new entrants, for example, local franchise authority inaction, franchise fee issues and unreasonable build-out requirements,” Martin said.

With national video franchising dead for the time being in Congress, telcos are focusing on state legislatures to provide some relief. According to U.S. Telecom President CEO Walter B. McCormick, Jr., nine state legislatures have already taken action to create statewide video franchising.

“Wireless, satellite and Internet-based technologies are free of franchising requirements,” McCormick told the Practicing Law Institute earlier this week. “But because we want to [invest]…in the advanced network infrastructure needed to really speed delivery of broadband services, we must first get permission from more than 30,000 local franchising authorities across the nation.”

In markets where Verizon and AT&T have cracked the local video market, Martin said FCC number show prices have fallen. According to the agency’s annual pricing survey, where no competition exists, the average monthly price for cable programming was $43.33 in January of 2005. Where telco competition exists, the average price declined to $35.94.

Satellite television? The FCC data shows only a one cent difference in markets where satellite providers and cable companies directly compete.

“As phone and Internet prices come down amid genuine competition, cable television bills have nearly doubled over the past 10 years, rising at three times the rate of inflation,” McCormick said. “The one exception? Where cable companies have a terrestrial video competitor, prices are on average 15 per cent lower. Throw in a rival company delivering the full triple play of voice, video and Internet and prices for cable’s most popular bundled services plunge as much as 40 per cent.”

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