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from: Times Free Press

Dueling video
Thursday, October 11, 2007

By Jason M. Reynolds and Dave Flessner
Staff Writers

Three companies soon may be fighting to plug their wires into Chattanooga homes to provide telephone, video and Internet services through lucrative "triple play" offers that bundle two or more communications packages.

The new president of AT&T in Tennessee said Wednesday that the phone giant could offer Internet video services in two years if Tennessee lawmakers grant statewide franchising rights for such a venture. AT&T would plunge into competition with Comcast and potentially with EPB to serve Chattanooga residents.

"Our customers really don't care about why AT&T wants to get into the video business, and they really don't care about cable," said Gregg Morton, AT&T Corp.'s Tennessee president. "And they don't want to see a fight between AT&T and cable. What they want, we think, is competition and choice and better prices."

AT&T could begin serving Tennessee residents with video in mid-2009, starting in areas that now have AT&T broadband Internet service, or 85 percent of the state, Mr. Morton said. AT&T would spend an estimated $350 million to upgrade its telecommunications system and run video entertainment services via high-speed Internet lines, he said.

AT&T's renewed legislative push comes at a time when the telecommunications industry is fighting EPB's effort to offer video, telephone and broadband Internet services to electric customers. The Tennessee Cable Telecommunications Association in Nashville on Sept. 21 filed a lawsuit to block the Chattanooga-owned utility's plans.

The cable association opposed the statewide cable franchise legislation last year.

"Our fight is about everybody playing by the law, and the law protects the consumer," said Stacey B. Briggs, the association's president and executive director. "If people try to come in and change the rules midstream, then we fight."

AT&T already has the ability and financing to apply for cable franchises in each Tennessee municipality, but it wants the statewide franchise to allow it to offer video service in select areas only, Ms. Briggs said.

She said EPB's fiber-to-home plan is illegal because it would use EPB electric customers and Chattanooga taxpayers to subsidize a new business in competition with private companies. Under Tennessee law, EPB must operate its electricity and telecom divisions as independent businesses. The Chattanooga City Council and Tennessee comptroller gave approval for EPB's business plan.

EPB has until late October to respond to the telecommunications association's lawsuit, said Danna Bailey Cannon, EPB vice president of marketing. The board of directors is scheduled to vote on a $219 million bond issue financing in November to pay for installing fiber-optic lines for both the electric system and the proposed telecommunications system, she said. On Oct. 19 the board will vote on a resolution connected to the bond issue, she said.

Three players, triple play

The $219 million loan would be the largest bond issue in Chattanooga history and would finance the nation's largest municipally owned telecommunications system.

EPB would offer local and long-distance calling, about 200 video channels and 100 megabytes-per-second Internet speed via fiber-optics. The first electric customers could receive telecom service in fall 2008, according to EPB. Prices have not been set, but EPB officials said they should be 10 percent to 15 percent below those of competitors now in the market.

Officials with EPB estimate it will need about 35 percent of its residential customers to sign up for its telecommunications services to break even. EPB Telecom will require customers to sign up for at least two of its major services.

Comcast already offers triple-play service, according to the company. Comcast's telephone service includes unlimited long distance, voice mail, caller ID, three-way calling and forwarding, and is compatible with home alarm systems. The basic cable package has 66 channels, and the Internet speed is 6-8 megabytes per second.

U-verse, AT&T's fledgling video service in other states, has about 100,000 customers but is quickly growing at the rate of 8,000 per week, Mr. Morton said. In some markets, customers can package video, Internet and landline phon

e service for $99, but costs vary by location, he said.

AT&T's television service is Internet based and includes 25 high-definition channels, Mr. Morton said. The system beams one channel at a time into a customer's television, versus cable which sends all channels at once, he said, making for a faster cable speed. U-verse allows for several channels to be digitally recorded at once.

Staff Photo by Ashlie White

Gregg Morton, President of AT&T Tennessee, speaks to an Editorial Board at The Chattanooga Times Free Press on Wednesday afternoon.

It would take AT&T about three years to upgrade its telecom network in Tennessee if the General Assembly approves the statewide franchise, Mr. Morton said. About 2,000 jobs would be created in the state, he said.

The network would be built of a combination of fiber-optics and cable wires and use digital compression to boost the data storage capacity, he said. The future speed would be from 24-25 megabytes per second, although the company is testing a DSL system with a speed of 48-50 megabytes per second, Mr. Morton said.

Before the statewide franchise legislation died last legislative session, the wording would have allowed cities to retain their franchise fees and control of the cable rights-of-way, Mr. Morton said.

Local control is the way to handle cable franchising, and statewide franchising is a "veiled attempt to eliminate competition and reinstate monopoly," Chattanooga Mayor Ron Littlefield said. "I offered them the opportunity to come here even though the power board (EPB) has its own plan. Neither AT&T nor Comcast are above monopolizing the market if they can."

EPB supports the city in opposing the proposed statewide franchise fee, Ms. Cannon said.

"But we welcome all competition," she said.

AT&T, meanwhile, wants a level playing field since cable companies that offer phone service have a statewide phone franchise, Mr. Morton said.

"If we've got a statewide framework for cable to get into telephone, then why shouldn't there be a statewide framework for telephone to get into cable?" Mr. Morton said.

E-mail Dave Flessner at dflessner@timesfreepress.com

E-mail Jason M. Reynolds at jreynolds@timesfreepress.com

BY THE NUMBERS

* $350 million: Estimated AT&T investment in upgrading Tennessee infrastructure

* 2,000: Estimated number of jobs that would be created by statewide cable franchise

* 24-25: Megabytes per second AT&T video speed

Source: AT&T