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from: WisBusiness.com

WisBusiness: What cable competition bill, poised for passage Tuesday, may mean for consumers

12/10/2007

By Brian E. Clark
WisBusiness.com

When the Chibardun Telephone Cooperative considered offering cable television services in Rice Lake six years ago, it backed off the plan because of a city requirement that it serve all of the 9,000-person community within 18 months.

“We couldn’t make that commitment,” said Rick Vergin, CEO of the 70-employee company.

But if the state Assembly approves legislation dubbed the cable competition bill (AB 207) on Tuesday and Gov. Jim Doyle signs it, Vergin says his company will begin offering service early next year to Rice Lake.

Adam Raschka, a spokesman for Rep. Phil Montgomery, R-Green Bay, said he expects the legislation to pass without amendments. Montgomery is the lead proponent of the Assembly bill.

“It’s been discussed at length,” Raschka said of the legislation, which ends existing deals with local governments and cable companies. Those agreements would be replaced by a state-wide franchise costing $2,000 annually.

“We are confident the Assembly will concur with the Senate version,” he said of Tuesday's planned floor session.

But critics of the legislation remain. Among them: Jim Zellmer, who runs a small real estate software firm in the Madison suburb of Fitchburg. He says the bill is flawed because it lacks consumer protections and fails to require telecommunications companies to lay fiber optic cable to homes and businesses. Zellmer and other critics also say they doubt if it will lead to more competition.

Vergin said that in addition to Rice Lake, where his company will compete with Charter Communications, he may soon offer cable service to Turtle Lake, pop. 1,500; and Cumberland, pop. 2,000.

“We’re a small company. But because of this law, we are expanding,” he said.

Vergin said he's pleased he'll only have to get one state franchise, instead of having to deal with the 33 different municipalities in his service area.

“That’s a big benefit for us and what I think the bill is all about,” he said.

Vergin said his company’s prices won’t be any lower than Charter’s. But he's convinced his firm will be able to offer better service and options to bundle cable, phone and wireless service.

He said he was opposed to proposed rules that would have required his company to serve entire communities. He also rejected suggestions telecommunications firms should be ordered to run fiber optic to homes and businesses.

“The 100 requirement would limit us,” he said. “And we are running fiber optic to new construction, but not existing buildings. I just don’t think the government should tell us what technology we should use. The market should decide that. I also think have 50 percent of any area covered is better than none.”

Barry Orton, a UW-Madison professor, said he's concerned the bill will leave parts of Wisconsin underserved.

“I know they say ‘the market will take care of it,’ but I worry that there will be some poor areas of Milwaukee or south Madison, for example, that will be ‘red-lined,’ with this new law,” he said.

Zellmer, who blogs on telecommunications and other issues at Zmetro.com, said he sees “no evidence that the dominant Wisconsin ‘telcos’ have an interest in implementing a modern, widespread fiber network to the home.

“Pervasive fiber benefits everyone - schools, government, residential and business users, but they aren’t going to build it,” argued Zellmer, who owes the predicted telecommunications victory on this legislation to a huge lobbying effort.

“Meanwhile, around the world and in other U.S. communities, fiber installation continues,” he said. “It will take decades for Wisconsin to catch up, once it starts."

According to author Bruce Kushnick's book, “$200 Billion Broadband Scandal,” – cited on Zellmer’s blog – the U.S. telecommunications companies have failed to live up to promises they would install fiber to 86 million households by 2006.

Kushnick said that agreement was part of the deal worked out in the 1996 Telecommunications Reform Act. “They asked for and were given some $200 billion in tax cuts to pay for it.

“But the Bells didn’t spend that money on fiber upgrades,” he said. “They spent it on long distance, wireless and inferior DSL services.”

Jeff Bentoff, a spokesman for AT&T – which was part of the Bell system – disputed Kushnick’s figures and said the fiber argument is irrelevant. AT&T was part of the Bell system and has strongly backed the cable legislation.

“First of all, this is not a broadband access bill; this is a video franchise bill and its main goal is to have a single uniform statewide franchising process,” said Bentoff, who also argued that the bill has adequate consumer protections.

He said his company offers a high-quality product that and doesn't need to provide fiber to homes. He also said the law has “build-out” requirements that will require companies to expand service areas.

“We are confident we have a winning technology,” he said. “If another provider wants to use fiber optic, then the marketplace will decide.”

Bentoff said 20 states have passed legislation similar to what the Assembly will consider. They include Ohio, Michigan, Indiana, California and Texas and Illinois, he said.

“Wisconsin consumers will get competition much quicker when providers only need to apply for a single state franchise instead of getting them from each of 1,860, cities, towns and villages,” he said.

Charlie Higley, executive director of the Citizens Utility Board, doesn’t fault AT&T and other companies for seeking a single state franchise. But he wishes the bill going to the Assembly were more like the law passed in Illinois.

“I think we could be doing a lot better,” he said, noting that Illinois’ version of the Public Service Commission was given oversight for cable regulation.

“In Illinois, the law lets customers disconnect after 60 days if they don’t like the service with no extra fees,” he said. “Wisconsin residents should have that protection.

“More important, in Illinois local governments can enforce the customer service standards. And companies have to file reports with the state noting complaints and saying what their response was. Our law doesn’t have those requirements.”

Higley also said he's disappointed that Wisconsin’s PSC probably won’t be involved as the regulator and that public access channels will lose funding after several years.

“In a perfect world, the PSC would deal with cable providers like it does with electricity and telephone companies,” he said. “The PSC has staff to handle these things and could enforce rules and levy fines. With the law as it is, customers will have to go to court.”

Higley said he, too, would have liked to have seen a requirement that companies build fiber optic cable.

“We’ve had promises to build it before and it didn’t come,” he said. “In the future, if not already, broadband is an essential service like telephone and electricity. We think government should require essential services.”