from: Brewed Fresh Daily [1]

Cleveland City Councilman Matt Zone’s testimony to the Ohio Senate on SB117

Councilman Zone emailed a copy of his testimony:

Good Afternoon Mr. Chairman and members of the Senate Energy and Public Utilities Committee. My name is Matt Zone and I am a Councilmember of the City of Cleveland and Chair of the Public Utilities Committee. I appreciate the opportunity to speak today and to express the strong opposition of the City of Cleveland to Senate Bill 117.

I would first like to say that the City of Cleveland welcomes new entrants to provide competitive advanced cable and broadband services. We look forward to the benefits that competition in delivering these services will bring to all of our residents. But the rush to bring the benefits of these new services must be tempered with careful analysis and balancing of the different interests involved. SB 117, as introduced, would serve the best interests of new video providers and incumbent cable operators at the expense of local governments that, in many cases, are best suited to protect the interests of the public.

Although the City of Cleveland has many objections to SB 117, I will limit myself today to just a couple of critical issues for the City of Cleveland.

First and foremost, S.B. 117 represents a direct assault on the City of Cleveland traditional Home Rule authority as embodied in Art. XVIII, §3 and §7 of the Ohio Constitution.

One of the most important exercises of the City’s Home Rule authority is the right and duty to manage the use of its public rights-of-way. This is particularly important today – and in the future – as the public rights-of-way become increasingly crowded with utility infrastructure to provide traditional as well as new and competitive services to the City’s residents. While the City welcomes the delivery of these new services it is imperative that the City retain its power to oversee and regulate how that infrastructure is deployed in its rights-of-way.

Under current federal cable franchising law and Ohio Revised Code Chapter 4939, cable and video service providers – like all other utilities – are subject to the City’s regulatory power and must obtain the City’s consent to use the public rights-of-way. SB 117 turns this system on its head. Not only does SB 117 abolish the current federal franchising system, but under SB 117 a video service provider is not required to obtain the City’s consent to use the public right-of-way at all. SB 117 transforms Revised Code Chapter 4939’s consent requirement into a “notice” requirement, by deeming the City’s consent granted 31 days after a video service provider files a completed application to use the right-of-way. Under S.B. 117, the City has no authority to deny its consent, even for reasons related to a video service provider’s legal, technical and managerial qualifications — or the lack thereof.

Considering that AT&T plans to install metal boxes that are 4 feet tall and more than 4 feet wide throughout Ohio cities’ rights-of-way, is it any wonder that it seeks legislative authority, by way of SB 117, to circumvent home rule regulatory powers? The City of Cleveland strongly objects to this blatant infringement on its authority to protect the public by properly managing those who stand to gain substantial revenues by using the City’s rights-of-way.

The City of Cleveland also strongly objects to SB 117’s lack of requirement that new entrants provide competitive video and broadband service to most, if not all, City residents. If competition that would bring lower prices and more choices is important for some Ohioans, it is equally important to all Ohioans — regardless of their income. SB 117 permits a new service provider to “cherry-pick” the neighborhoods and communities it chooses to serve, leaving the City with no authority to protect the interests of its residents who are left behind.

One of the most significant aspects of the traditional local franchising system is the City’s right to impose reasonable requirements that a cable operator “build-out” its system so that all City residents receive access to advanced communications services and entertainment products. This authority has extended from the initial construction of cable systems to the more recent upgrade of existing, but outdated systems. For example, in the agreement approving the transfer of the Cleveland cable television franchise from Cablevision to Adelphia in 2000, the City required Adelphia to upgrade its entire cable system within the City, in phases across a nearly three-year period, in return for the City’s approval of the transfer. Adelphia satisfied this upgrade obligation and as a result, all City residents have access to digital cable and high speed cable modem internet access services.

S.B. 117 strips the City of its authority to ensure that all its residents enjoy the benefits of competition in cable television and other advanced communications services, by not requiring that video service providers build out their systems throughout the City. The Bill contains only very minimal requirements concerning any obligations upon a video service provider to build out its system so as to require that service be universally available within a community and represents a dramatic change in long-standing public policy permitting the imposition of build-out requirements.

Again, the City of Cleveland absolutely welcomes new providers of cable television and other advanced telecommunications services. The City would have no intention of imposing an unreasonable build-out schedule on any new entrant. However, the City does believe that it would be appropriate to engage any new entrant in a forthright discussion of the entrant’s business plan, financial capability and timetable for full-city deployment, possibly incorporating appropriate markers of success and market penetration into an agreement with the City, and certainly extending across several years. The City certainly wants any new provider to be successful, and imposing unreasonable build-out requirements — or any other unreasonable franchise requirements for that matter —threatens the prospects for that success. But SB 117’s remedy to this hypothetical threat is overbroad and unnecessary and would strip the City any authority to ensure that all its residents benefit from competition.

The City of Cleveland is deeply committed to closing the digital divide and increasing the broadband services available to all City residents. S.B. 117 directly contradicts these important efforts and would have a destabilizing effect on the City of Cleveland’s neighborhoods and communities for decades to come.

Finally, perhaps one of the most baffling provisions of SB 117, is the incumbent opt-out provision that would permit Time Warner to simply walk away from its negotiated cable contract with the City – even if competitive video service never comes to the City of Cleveland.

In striking a balance between business and municipal interests, the federal Cable Act recognizes that every city in America is different and that cable franchising needs to be done at the local community level. In fact, under the federal Cable Act, the City is charged with determining its community’s unique cable related needs and interests and negotiating with the cable operator for a franchise that attempts to meet those needs. The City’s franchise with North Coast Cable, later transferred to Cablevision, Adelphia and now Time Warner, was carefully negotiated to meet the needs of the City of Cleveland’s residents.

While some adjustment in the law may be required if new entrants are permitted to enter the market under a significantly different set of rules, nothing can possibly justify permitting an incumbent cable operator to walk away from its contractual obligations simply because AT&T may, at some future time, begin offering service somewhere in Ohio.

Furthermore, the incumbent opt-out provision is a patent violation of the United States Constitution and the Ohio Constitution. Article I, Section 10 of the U.S. Constitution provides that “No state shall . . . pass any . . . law impairing the obligation of contracts.” Article II, Section 28 of the Ohio Constitution states that “The general assembly shall have no power to pass . . . laws impairing the obligation of contracts . . . .” While the federal government may have this power, the State of Ohio does not.

Certainly AT&T and other new entrants stand to benefit substantially from SB 117’s deregulation, but with the added incumbent opt-out provision it’s no surprise that Ohio’s incumbent cable operators are not objecting to SB 117.

On behalf of the City of Cleveland, I urge you to pull this damaging bill. If the Senate feels that it is necessary to do something to increase the level of competition in cable services and the extent of broadband availability in Ohio, we ask that you not rush and that you study the matter carefully — and we offer to work with you on these important issues.

Thank you for the opportunity to speak with you. I would be happy to answer any questions or to discuss further.