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from: The Courant

Phone TV Conflict Blurry
Officials Try To Defend Choice By Denying it

By MARK PETERS

Courant Staff Writer

October 21, 2007

TV viewers might find it difficult to choose a side in the fight over cable competition in Connecticut.

Should they choose the side of government officials who say they are representing consumers by encouraging TV-service competition as long as everyone in the state can benefit?

That position effectively eliminated a choice between AT&T's new U-verse service and cable TV for as many as 150,000 consumers last week in areas where U-verse was going to become available. Regulators told AT&T it had to stop expanding U-verse and apply for a franchise.

Or should consumers take AT&T's side? Starting 10 months ago, the telephone giant began giving some consumers a competitive option to the decades-old monopoly of local cable TV franchises. U-verse delivers television programming over telephone lines.

But AT&T is beholden first and foremost to shareholders, which is part of the reason the company doesn't want to be required to offer TV service to every home in its franchise area.

The legal, technical and business arguments about the new service can be perplexing for consumers. The confusion was evident last Thursday as union workers for AT&T rallied in downtown Hartford to support their employer's position in the battle. A few commuters waiting nearby for their evening bus were trying to figure out what the protesters were shouting about.

"I thought the phone company only had Internet, and obviously, phone service," said Sharon Griffin-Joseph, watching for both the rally and her bus.

But inside the telecommunications industry, the fight is fierce over how new types of TV service should be regulated.

The issue in Connecticut revolves primarily around what's known as a universal service requirement. That regulation would require AT&T to provide TV service to all customers in its franchise area, which could be the whole state.

For years, the state has been divided into cable franchise areas, and each cable company is required to offer service throughout its franchise area.

AT&T has said that if it is forced to adhere to the universal service requirement, it will drop its more than 7,000 U-verse customers in the state and proceed with the service elsewhere.

Attorney General Richard Blumenthal, government regulators and cable companies say universal service must be a requirement, or all consumers won't get the lower rates and other benefits expected to come with more competition.

At stake is an additional option for consumers who have endured years of rising rates for cable TV and the only other available choice, satellite TV.

The Federal Communications Commission, in a study of prices for TV service, found that cable rates rose nationally by 93 percent between 1995 and 2005. In areas where effective competition exists, prices charged by cable companies were 17 percent lower, the same study found.

For now, unless they have the benefit of clairvoyance, Connecticut consumers will simply have to decide which side offers the most persuasive argument about what might happen in the future.

In the most recent skirmish last week, AT&T lost a crucial battle before the state Department of Public Utility Control. The DPUC ruled Monday that AT&T had to stop signing up new U-verse customers until it followed the same franchise rules as cable companies, including the universal service requirement.

Thomas W. Hazlett, a professor of law and economics at George Mason University and former chief economist of the FCC, said the DPUC's decision won't help consumers.

He said challengers to cable won't come into markets if they're required to meet the universal service requirement. And, he asked, why would the government want to stand in the way of increased competition and lower prices for at least some consumers?

"You can't get 100 percent," Hazlett said. "If you can't, get 10 percent or 20 percent."

AT&T points out that universal service requirements weren't imposed on cable companies when they began offering telephone service to compete with AT&T's predecessor companies, SBC Communications and Southern New England Telecommunications Corp.

Also, the state has seen this situation before. In the mid-1990s, SNET introduced its Personal Vision product to compete with cable companies, but shut it down in part because of what AT&T now says was a universal service requirement.

But Blumenthal and other consumer advocates have a different view.

Competition won't benefit everyone and won't last unless AT&T - or others - have to serve all customers, said Blumenthal and William Vallee, a lawyer with the state Office of Consumer Counsel, which represents cable ratepayers.

They said the fear is that competition will develop only in those areas where AT&T finds it profitable to offer service. That would leave rural areas and, possibly, the poorest section of cities with no competitive choices, Blumenthal said.

He said that without statewide competition, areas without competitive choices would see prices increase more rapidly while customer service declines.

The attorney general also predicted that after a period of years, AT&T could become a new monopoly because of the advantage it would have of being able to pick and choose customers. It ultimately would replace cable TV and re-create the problem that competition is supposed to fix.

"The government will be giving its stamp of approval to essentially a different form of monopolistic power," Blumenthal said.

The two sides are due in court this week as AT&T challenges the DPUC's most recent decision.

Contact Mark Peters at mrpeters@courant.com.