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Franchise Bills Dominate State Debates

For the second consecutive year, franchise-reform bills continue to nearly monopolize the time and lobbying muscle of the state cable trade associations. But a few of those groups are also trying to be proactive, addressing such problems as the soaring pole-attachment rates charged by in-state telephone providers.

Missouri, Pennsylvania and other states are also working to proactively codify the notion that voice-over-Internet Protocol services are not subject to state regulation.

Verizon Communications, AT&T and Qwest Communications International have promoted their competitive agendas through reform bills in states including Washington, Georgia, Illinois, Iowa, Florida, Minnesota, Massachusetts, Connecticut, Ohio, Tennessee and Wisconsin.

NO JOY IN WASHINGTON

Qwest was unsuccessful in several states. Washington ended its legislative session April 22 after gaining no traction on a franchise bill there.

Ron Main, executive director of the Broadband Association of Washington, said that at one point the telephone company approached the cable industry to compromise on a statewide plan. “We didn’t see any point in that,” Main said, especially in the face of the lobbying strength of municipal opponents.

Verizon, which is pursuing municipal franchises, and AT&T “stayed on the sidelines” of the debate, Main said.

Changes in franchising methodology appear dead in the Land of 10,000 Lakes for this year, according to Mike Martin, executive director of the Minnesota Cable Communications Association. A Qwest-backed bill there faced a “very skeptical subcommittee” early in the legislative session, according to Martin. AT&T officials testified that they had no plans to deploy in the state, and Qwest officials indicated it would be four years before they might attempt to launch video services in Minnesota.

“They took the urgency out of their own testimony,” Martin said of Qwest.

Now the issue is likely to be the subject of summer workshops where, in Martin’s opinion, stakeholders can bring in a lot more information than was allowed in a single subcommittee hearing.

Another possible study issue: a review of municipal fiber-optic network plans. Some officials have suggested that broadband be accessible statewide by 2015 at a speed of at least 1 Gigabit per second to homes, Martin said.

The reform issue in Colorado was resolved in January, where another Qwest bill, faced with stiff opposition from incumbent cable operators and municipal officials, failed to make it out of committee.

TELCOS WIN IN MO.

The earliest victory for phone companies this session was in Missouri. Gov. Matt Blunt late last month signed a bill that puts franchises under the purview of the state Public Service Commission.

But that bill was stripped of an amendment sought by cable operators — one that would keep regulation of VoIP services out of the PSC’s hands.

Utility regulators in Missouri note that VoIP calls have a fixed initiation point in the state, unlike products like Vonage, which allow calls to be initiated wherever broadband access can be obtained.

Because the initiation point of cable VoIP calls will always originate from Missouri, the PSC asserts that IP-phone providers should apply for a certificate to operate in the state. Time Warner Cable voluntarily got a certificate, but Comcast has battled the commission.

Since the amendment was dropped, the cable industry has floated state House and Senate bills to prevent the PSC from regulating VoIP like “old-fashioned telephone services,” according to Missouri Cable Telecommunications Association president Greg Harrison.

The Missouri Senate’s version is out of committee, but Harrison expressed pessimism over the future of the bills. The state is grappling with weighty education and agricultural issues, he said, adding, “I’m not optimistic we will see floor time.”

KANSAS VoIP BILL DIES

Another VoIP-targeted bill died this session in Kansas. Dan Murray, contract lobbyist for the Kansas Cable Telecommunications Association, said a bill proposed in the Senate would have required VoIP providers to pay into the state’s universal-service fund.

Murray said the bill was pursued by Embarq, a spinoff of wireless provider Sprint Nextel based in Kansas. That company’s rationale: like services should be treated alike when in comes to taxes.

Currently, Cox Communications and Time Warner Cable voluntarily pay into the fund while asserting that the right to regulate actually belongs to the Federal Communications Commission. That bill passed the state Senate before it was killed in the house, Murray said.

The Kansas Corporations Commission has an open docket on the status of VoIP, he said.

Phone companies and incumbent cable operators in Pennsylvania want to jointly pursue a bill codifying that VoIP is not subject to state regulation, said Dan Tunnell, president of the Broadband Cable Association of Pennsylvania.

Tunnell’s trade group is concerned about some of the pronouncements coming from the state’s Public Utilities Commission, indicating a belief that VoIP providers need as certification competitive local-exchange carriers (CLECs) in order to serve customers.

Pennsylvania regulators are also considering a new product classification: data local-exchange carriers, or DLECs. Tunnell said no definition in state law provides for such a product, and cable operators fear regulators could use such a classification to assert regulatory authority over Internet services.

Operators in Wisconsin would also like to take up a telephone-related bill. There is a “peculiarity in state law,” according to Tom Moore, executive director of the Wisconsin Cable Communications Association, that lets small local telephone companies challenge newcomers who wish to launch competing services and need access to poles and other infrastructure.

The newcomer can challenge the incumbent at the Public Utilities Commission, but each challenge costs about $100,000 per case, the executive said. That represents a significant barrier to entry, Moore said.

But in this session, as last year, the Wisconsin association is focusing attention, and assets, on the franchise reform bill moving through the state legislature. Last year, the association approved doubling membership dues to fund the fight against the bill. Through this year, members in Wisconsin pay 6 cents per subscriber, per month to fund lobbying efforts.

The association used the war chest to hire eight added lobbyists, a public-relations firm and more legal aid.

Tom Hanson, a lobbyist for the group, said the expenditure has paid for itself.

The proposal before the Wisconsin legislature this year would allow incumbent operators to opt into state regulation, and it has a “better definition” of gross revenues than last year’s iteration.

Redefining “gross revenues” might actually cost some cable incumbents money, while the proposal is at least revenue-neutral for others, Hanson said.

Despite heavy opposition from the municipal lobby, Hanson predicted the bill has a “better than even” chance of passing.

As the bill passed out of legislative committee, the WCCA was neutral on the proposal.

POLE PURSUIT IN ARK.

Alleged anti-competitive behavior by small utilities in Arkansas prompted that state’s lawmakers to introduce a bill assigning authority over pole-attachment agreements with non-investor-owned utilities to the state’s Public Service Commission.

Len Pitcock, executive director of the Arkansas Cable Telecommunications Association, said some of the state’s cable systems have faced pole-attachment rate demands from providers such as electrical cooperatives that are three times the national average of $6.63 per pole, per year.

“We worked with the [investor-owned] telephone industry,” Pitcock said. “They deal with some of the same problems” and there are at times “significant conflicts” between owners, who want just compensation for their owners for use of the poles, and those who attach to them.

The legislation had to be carefully crafted, as the Federal Communications Commission has authority over the pole-attachment rates investor-owned utilities may charge.

The Arkansas association has a pole-attachment dispute pending before an administrative law judge against power provider Entergy Corp. Pitcock said it’s still a year or two away from resolution.

Cable operators did not want the Arkansas bill to affect that litigation.

The new Arkansas bill gives the PSC jurisdiction over rates, terms and conditions of pole attachment agreements.

New Hampshire is also considering a proposal that would empower the Public Utilities Commission to regulate poles, rates, terms and conditions. That measure was approved by the state Senate and is pending in the House there.

Georgia operators, too, need some pole-attachment relief, according to Nancy Horne, president of the Cable Television Association of Georgia. Her association has floated a bill, SB105, that would grant relief on pole-attachment rates.

“It’s in committee but frankly, we haven’t had time for it,” she said. The association was focused on the language of the franchise-reform bill approved earlier this month by the legislature.

That bill gives new providers in Georgia the option to seek a franchise from the Secretary of State’s office, or to negotiate locally. Either way, franchise authorities have 45 days to act on an application. That bill takes effect Jan. 1, 2008.

FRANCHISING TOP ISSUE

Overall, the franchise-reform debate remains the lightning rod for controversy in many states.

In Florida, it’s a horse race between competing versions of a reform bill with an added timing factor to the drama. The legislature will adjourn by the end of this month. The Senate version was recently approved by one committee there, with language opposed by the telephone industry.

It would require buildout to half of the low-income homes in a provider’s service area within five years.

Another hot battleground state is Illinois, where municipal leaders have put up a noisy fight against the telco-backed bill there.

Besides objecting to the loss of local power, municipal lobbyists are concerned about bill language they say gives new providers the power of eminent domain, or the legal authority to take private property for a public purpose.

The relevant bill currently states that no property owner, condo association, leasing agent or other entity can block a provider’s access to real estate. A deadline for the third committee reading on the bill was extended to April 30.

OTHER EFFORTS

  • Connecticut is considering a bill that would allow planned municipal networks to apply for state capital improvement funds if they build networks capable of delivering 384 kilobits of speed or higher. That state is also considering a requirement that direct-broadcast satellite providers hire at least one employee, based in the state, to handle customer service matters.
  • Maine might strengthen requirements for notification operators must make to inform consumers of their refund rights in case of service outages. The definition of a rebate-triggering outage is still under debate; an early draft called for automatic rebates after two hours. Current law requires phone rebates after 24 hours without service.
  • Massachusetts legislators, in addition to franchise reform, are mulling a mandatory 25% discount on basic cable for residents 65 years or older; and could ban the practice of billing for cable one month in advance of the actual consumption of services.