Cable TV
Telephone companies such as Verizon and SBC, who now offer television and movies through partnerships with satellite providers, are gearing up to sell them directly over their own fiber optic networks. Changes in the regulatory policies governing permission to provide these services will have a major impact on innovation and consumer and business costs.
Local Franchise Requirements
According to Federal policy, cable TV providers, but not satellite companies, must obtain franchises in every municipality they serve. Franchise agreements generally require that providers:
- Pay rights-of-way fees including costs of digging up streets and using conduit under public roads
- Provide local channels, video equipment and studios for community use
- Extend cable to every user in the community
- Operate customer service centers in each town
- Offer a discount to seniors
Telephone Company Challenges
Some incumbent telephone companies claim they are exempt from franchise requirements. Verizon, however, has started applying for franchises in select communities. Their lawyers have appeared before local boards and negotiated contracts in towns in which they want to offer television over their own fiber. They are also lobbying intensely at state and national levels to eliminate local franchises and have uniform requirements at the state or national level.
Cable Response
Cable operators, which have invested $80 billion in infrastructure since the 1990s, claim that eliminating local franchise requirements discriminates against them and that there is already competition from satellite providers. They state that all providers should be required to make service available to all residents in each town and that all providers should be bound by the same rules. Cable companies have accused new entrants of cherry picking, targeting high-end consumers. Telephone companies claim that running facilities to each resident will result in stranded investment.
Contract Disputes
Uniform rules would save towns, cable operators and telephone companies enormous expense in negotiating contracts and establishing customer service centers in individual towns. In Massachusetts, in an effort to save money, cable companies have refused to renew franchise agreements with the same generous terms as previous agreements. They are balking at guaranteeing a local customer service center, continuance of operation of studios for local channels and monthly senior discounts of about $2. The Department of Telecommunications and Energy is expected to hold hearings to resolve contract disputes between Peabody, Framingham, Brookline and Wellesley and Comcast.
The fourth edition of my book, “The Essential Guide to Telecommunications”, a non-technical guide to wireless and wireline services is now available. I can be reached at 508-877-6089 or adodd@doddontheline.com.
Regulatory Issues
Uniform rules that protect consumers, save administrative costs and maintain franchise fees, will eliminate protracted city-by-city negotiations. This type of legislation has been introduced in multiple states and in the U.S. Senate.
Who ultimately pays?
Consumers and businesses ultimately pay for inefficient business practices. No industry can afford to support unnecessary legal fees, redundant customer service centers and costly, duplicate infrastructure instantly to every resident. Regulations that lower barriers to entry provide incentives for lower prices and innovative services.
