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Virginia Eases Way for Telcos

Virginia has joined Texas as the second state to pass legislation easing the entry for cable competitors. While not a statewide franchise like Texas, Virginia is essentially guaranteeing a franchise anyplace in the state where a new entrant agrees to meet certain specific franchise terms.

Verizon says the Virginia House and Senate have both passed legislation that makes it easier for telco video services, like Verizon's FiOS, to roll out video service in the state. Essentially the idea is to agree to a set list of access and provision requirements without having to go through the time-consuming local franchise process.

The FCC and Congress have made easing the roll-out of broadband a priority.

If signed by the governor--one of his aides helped negotiate the final compromise bill, according to Verizon--the legislation would become effective July 1.

Unlike the Texas bill, which created a statewide franchising regime, the Virginia franchises remain under the control of the municipalities, according to Verizon spokesman Harry Mitchell. Verizon had pushed for a statewide franchise, but was foreclose that route by the Virgininia Constitution, which establishes municipalities' control over their rights of way. Verizon would still prefer the state franchise route.

Instead, in a sort of must-carry take on the franchise process, new video entrants can opt for either a standard franchise process, or after 45 days of negotiations without a deal, officially opt for a so-called "ordinance" franchise.

So long as the video service provider agrees to the terms of that franchise, which include service build-out requirements as well as fee and channel commitments similar to incumbent cable operators, the new provider may begin offering video service within 75 days and the municipality must accommodate it.

Mitchell said the company still thinks the build-out requirements-100% of a pre-established coverage area within three years, for instance--are a barrier to entry, saying neither side got everything it wanted.

Still, Verizon got a faster track to entry, and essentially a guaranteed franchise wherever it agrees to requirements for access and service provision, franchise fees, and customer service as set forth in the bill.

Verizon also got a three-year out clause. That means that if it finds after three years it cannot make a business out of the franchise, it can get out of the deal--a provision it has gotten in most other markets. But there is a compromise there, too.

If it does exit, it cannot re-enter for the balance of the unexpired franchise, which would be a dozen years in most cases.
There is no three-year out clause in its Fairfax franchise, but that is grandfathered, said Mitchell.
“With this compromise legislation, Verizon will be able to accelerate investment in our fiber-optic network in Virginia, more quickly adding an awesome FiOS TV component to our reliable voice phone service and blazing-fast FiOS Internet Service," said Verizon Virginia President Robert W. Woltz Jr.

“We will have more to say about our investment plans in Virginia in coming days," said Woltz, "but it’s safe to say that – as this legislation becomes law – those plans will reflect the progressive business environment in the Commonwealth."

Verizon, the most aggressive telco video provider to date, has launched a franchise in the Virginia suburb of Herndon, Va., having secured a franchise to overbuild the market last July. Cox has the cable franchise there.

FiOS expanded its Virginia presence with a franchise deal with Fairfax County, the suburb that surrounds the separately incorporated Herndon.

Verizon had been working to secure franchises in over 200 Virginia municipalities but was also seeking some help from the Virginia legislature.

Telcos argue that not having to seek individual franchises will allow it to more quickly provide more competition in the multichannel video market, one of the Bush administration's, the FCC's and Congress's stated priorities.

Cable argues that if the franchising process is to be streamlined or short-cut, the same advantages should apply to cable.

Verizon's FiOS TV debuted in Keller, Tex., Sept. 22. Verizon. Texas' Public Utility Commission last month approved that state's first statewide franchise for telco video service. Verizon had filed for franchises in 21 communities under the state's franchise law.