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from: Ars Technica

AT&T threatens to take its ball and go home over Connecticut TV rules

By Nate Anderson | Published: October 16, 2007 - 01:11PM CT

Despite the presence of a new Connecticut law setting up statewide video franchises for new entrants, the Connecticut Department of Public Utility Control (DPUC) yesterday rejected AT&T's bid for such a license. AT&T, which refuses to take out traditional video franchises with local communities (as cable companies have done across the country) is now threatening to pull its U-Verse out of Connecticut, fire 300 Connecticut workers, and redirect over $300 million of investment money to nearby states.

A federal judge in Connecticut ruled in July that AT&T is essentially a cable operator under federal rules. In large part, that's because there's little discernible difference to consumers between the services. Both cable companies and telcos now offer voice, video, and data over their lines.

The new law setting up the statewide franchise went into effect on October 1, and set up two classes of video operators in the state: cable companies and the new "video service providers." AT&T argues that it is a video service provider; DPUC says that because a judge has called the company is a cable provider, it cannot issue a video service provider license.

At least 18 states now have statewide video licenses. Companies like AT&T and Verizon that want to deploy new video services in those states can generally secure a license to offer service in the entire state, instead of negotiating build-out requirements, local public-access channel (PEG) agreements, and cash payments with each municipality.

For obvious reasons, such laws have been aggressively supported by companies like AT&T, which wants to roll out its U-Verse IPTV service quickly, and only to areas that are easisst for it to reach. The company has already secured several statewide licenses. It is also seeking new licenses in states like Illinois, where it helped to push through a recent franchise law. The brouhaha in Connecticut may indicate that picking up such a license may take more than a rubber stamp, even in states where such laws have been passed.

In a press release, AT&T claimed that "the governor gave our state's consumer's video competition, and the DPUC has taken it away." This isn't really accurate—AT&T is certainly allowed to compete with the cable companies, it simply needs to secure traditional video franchises—but one sees what they mean.

AT&T's traditional argument has been that such licenses take too much time to acquire and would cost the company too much money. If local franchises are required, the company says that it would simply prefer not to build at all, and how would that benefit anyone?

Cable companies have been fighting statewide franchises on the grounds of fairness, saying that any incumbents need to compete on the same terms as cable. An AT&T spokesman tells Ars, though, that this is a purely selfish argument. "When the process is reversed," he says, "with cable as the new entrant for services like telephone, they don't have to follow the same rules that we have as a telco."

With U-Verse already deployed to thousands of homes in the state, AT&T may be forced to switch off service and stop its network upgrades until the situation is resolved. The company has filed an appeal of the ruling.