FCC to investigate video franchise rules

By Marguerite Reardon
Staff Writer, CNET News.com

Published: November 3, 2005, 12:01 PM PST

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The Federal Communications Commission said Thursday that it will investigate whether municipalities are unreasonably delaying the availability of new video services offered by telephone companies that want to compete with cable operators.

The FCC unanimously voted to launch the inquiry by adopting a Notice of Proposed Rulemaking that seeks input on how to ensure that local franchising authorities do not unreasonably refuse to award cable franchises to competitive entrants. The FCC will review the cable franchising process with an eye toward removing excessive roadblocks to competitive choice for consumers.

Franchise requirements traditionally have applied to cable operators. But now, phone companies are spending billions of dollars to build high-speed networks that deliver video, voice and broadband Internet connections. So the telecommunications giants, including SBC Communications and Verizon Communications, have sought the franchise agreements needed to offer paid television service in their regions.

Phone companies have complained that the video-franchising process is too time-consuming and delays customer choice in the market. In most parts of the country, a new video entrant must negotiate contracts with every municipality and town in the state before offering service. Obtaining the franchising agreements can take 12 to 18 months.

Telephone companies claim that some communities make unreasonable demands, such as asking new entrants for multimillion-dollar grants or to buy local street lights from the power company and then turn them over to the community. And when agreements have been reached, phone companies say incumbent cable companies have often opposed the entry through public hearings, state public utility commission proceedings and lawsuits against elected officials.

"Today's action by the FCC will expose how the cable companies use the franchising process to keep competitors out of the market," James Smith, an SBC senior vice president in charge of FCC affairs, said in a statement. "Without that competition, consumers face continual annual price hikes from the dominant cable companies, now up 40 percent over the past five years."

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Earlier this year, Texas passed a law allowing new entrants to apply for statewide franchises. Verizon applied and was granted one, which applies to all its regions in Texas. SBC has applied for a statewide Texas license as well. California, New Jersey, and others have begun considering similar laws.

The National Cable & Telecommunications Association said it sees the FCC's proposed rule-making process as a good opportunity to treat services from telephone companies and cable operators the same way.

"We are pleased that the FCC's examination of local cable franchising will include existing operators as well as new entrants, which is consistent with our philosophy that communications regulation should treat like services alike," said Kyle McSlarrow, president and CEO of the NCTA. "We welcome the opportunity that this notice provides to comment on issues regarding the franchising process that are important to cable operators."

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