Save Access

from: Sacramento Bee

Cable bill's picture is fuzzy

By Jim Sanders -- Bee Capitol Bureau

Published 12:01 am PDT Sunday, July 16, 2006

Propelled by powerful lawmakers and big-money corporations, California is on the verge of drastically changing the state's cable television industry, but here's a warning from critics of the 20-page proposal: Read the fine print. The legislation, one of the year's most fiercely contested measures, would allow AT&T and Verizon to obtain a statewide franchise to compete in the huge home entertainment market by offering a "triple play" of phone, video and Internet service.

A massive advertising campaign has trumpeted the potential benefits of Assembly Bill 2987: more choice, greater competition, potentially lower prices and increased pressure to fast-track deployment of state-of-the-art technology.

"There's an amazing opportunity here from a consumer perspective," said Timothy J. McCallion, Verizon regional president.

"We're starting with a customer base of zero, and we're only going to win customers if we bring a better product, at a better value, with better service," said Ken McNeely, president of AT&T California.

But opponents of AB 2987 say the bill, which eliminates the need to sign separate pacts with cities and counties, could backfire on Californians and result in:

• More benefits to affluent neighborhoods than to low-income or rural areas.

• Less financial security for public-access channels that broadcast community events.

• Creation of a costly new state program to administer and enforce the new franchises.

"The bill would really be devastating, not just to cities, but to schools and consumers," said Paul Valle-Riestra, Walnut Creek senior assistant city attorney.

Pushed by Assembly Speaker Fabian Núñez, AB 2987 would brighten the financial prospects of California's two largest phone companies, both major political players.

But Núñez said his goal is public benefit, not political, and that he hopes to spur the kind of innovation and cost-cutting found in the cellular phone industry.

"Monopolies are never good, particularly in the area of consumer products," Núñez said. "You don't just buy your refrigerator from GE."

Supporters say AB 2987, which is in the Senate after passing the Assembly, would spark multibillion-dollar broadband investments that would create vital jobs and boost the economy.

Congress is wrestling with similar legislation to create national cable franchises.

A key problem, however, is how to integrate newcomers into an industry where existing cable providers tend to be locked into long-term contracts with costly commitments to local governments that were negotiated years ago, when cable monopolies were common.

Depending on local leaders' ability to twist arms, some of the current commitments are unconventional, such as pledges to provide mobile broadcasting studios or contribute to nonprofit causes.

The League of California Cities and the California State Association of Counties say AB 2987 would produce winners and losers.

"It's not about competition vs. no competition," Valle-Riestra said. "It's about saving money on the backs of consumers and communities."

Modeled loosely after existing local contracts, AB 2987 would require new cable providers to pay local government a franchise fee of 5 percent of their gross revenue, plus a fee of up to 1 percent for public, education and government -- known as PEG -- channels.

Cities and counties would continue to handle customer service enforcement and oversee access to public rights-of-way.

Controversy rages, nonetheless, as lawmakers try to balance competing interests.

Amending the bill to address one concern often has sparked another.

Responding to objections by existing cable firms, for example, Núñez agreed to amend AB 2987 to allow cancellation of local franchise agreements when AT&T or Verizon launches service in a community.

Cities and counties cried foul.

"For the state to be able to break a franchise that has been agreed upon by two parties is, for us, unacceptable," said Anthony Thomas of the League of California Cities.

Abrogation also would allow existing cable firms to abandon financial, customer service, facility or public-access channel commitments that exceed those of AB 2987, Thomas said.

In Sacramento, for example, cable firms are contributing to completion of a comprehensive institutional network -- or I-Net -- that links school campuses.

Sacramento's I-Net can be used for educational purposes ranging from accessing a library of 50,000 videos to conducting an interactive videoconference in which students ask questions of a Holocaust survivor.

Other communities use their I-Net to connect various government offices or databases.

AB 2987 would not require AT&T, Verizon -- or existing providers that abrogate their contracts -- to contribute to I-Nets.

Cities and counties could bankroll I-Nets by diverting a portion of their cable fees under AB 2987, but doing so could leave less money for PEG channels, critics claim.

Ron Cooper, who helps oversee Sacramento community programming, said PEG channels also could be hurt by AB 2987's failure to guarantee a minimum level of funding for small communities or to allow the 1 percent PEG fee to be used for operating expenses.

"That impacts all of us," Cooper said. "It's like building libraries and not hiring librarians."

State Sen. Joe Simitian, D-Palo Alto, has volunteered to seek solutions to the PEG dispute, saying, "We don't want to end up with a bill that only supports the lowest common denominator in terms of the PEG channels."

Unlike many local franchises, AB 2987 does not require competing firms to provide cities or counties with a system for pre-empting cable programs to broadcast messages about local emergencies, or to bankroll Internet services for schools, libraries and other public buildings.

Perhaps the greatest fear, however, has been that Núñez's legislation could result in "cherry picking" of communities to serve, perhaps shortchanging low-income or rural communities.

AB 2987 does not require Verizon and AT&T ever to offer broadband throughout their service area, but recent amendments require them to cover 40 percent and 50 percent, respectively, of their franchise area within five years.

New amendments also ban the companies from serving only affluent families. Within three years, low-income families must make up 25 percent of the households offered cable, and within five years, they must make up 30 percent.

McCallion, of Verizon, called the low-income clause an "unprecedented commitment."

Jean Hurst, of the California State Association of Counties, counters that
the build-out requirements contain escape clauses, do not go far enough and could be met by concentrating service in one dense region, such as Los Angeles.

State Sen. Kevin Murray, a Culver City Democrat who helped craft the build-out thresholds, said the heart of local government opposition to AB 2987 lies in a single word: power.

"The cities are upset that they lose power," he said. "(But) their original franchising authority was granted to them by the state, so this has always been a state issue."

Núñez said he's willing to consider local concerns, but not to derail AB 2987.

"I think if we made anything clear in the last hearing, it's that this is a train -- and nothing's going to stop it," he said.