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Telco, Cable Worlds Apart on Franchises

The Cable industry says that the local franchising process is no impediment to competition from new video and broadband service providers, while the telcos argue that it is a giant barrier to entry.

In comments to the FCC on the question of whether franchising authorities are unreasonably refusing to award competitive franchises, Verizon, arguably the most active telco in the video space, says that "the overwhelming weight of evidence" in the FCC's current proceeding "confirms that the local franchising process remains the single largest barrier to video competition and increased broadband deployment."

By contrast, cable industry sees "no factual basis" for for regulation rooted in a theory of obstructionist localities. " A review of the voluminous record in this proceeding reveals not a single instance in which any franchising authority has denied a single application for a competitive franchise in recent memory. Not one."

Verizon argues that delay is also a barrier, saying that in the vast majority of cases the franchising process "drags on" for 15 monhts "or more." Plus, they say, the LFA's (local franchising authorities), often extract "unreasonable build-out requirements or "unlawful concessions."

The Bush administration, the FCC, and Congress are essentially on the same page that some video franchise reform is needed to help spur price and service competition to cable and the roll-out of broadband service. Even the cable industry agrees on reform, so long as it is fair to both sides.The FCC has been considering how to streamline the franchising process to speed the roll-out of broadband.

As in its push for legislation, the telephone industry is looking for a national franchising process that would allow it to bypass the local franchising negotiations.

The telcos potentially have two avenues for national franchise regulatory relief. The FCC could decide to exercise its authority under the 1992 Cable Act if it concluded LFA's were being unreasonable in their demands and unduly delaying the process, or Congress could mandate a national franchising scheme as part of its planned rewrite of the 1996 Telecommunications Act.

The House Commerce Committee March 30 is considering a bill that would establish such a national franchise, with cable and new competitors alike able to secure a 10-year, automatically renewing national franchise so long as they agreed to basic terms on franchise fees, public access channels and more.