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from: Nashville City Paper

AT&T, cable industry ready to face off

By John Rodgers, jrodgers@nashvillecitypaper.com
February 08, 2007

AT&T and the state’s cable industry are set for a battle at the state Capitol concerning television franchising rights, and if AT&T is successful, Comcast could have a major competitor in Nashville.

Lobbyists from many organizations including AT&T, the cable industry and local governments are gearing up for the expected battle, which may be one of the biggest business issues of the current legislative session.

AT&T, formerly known as BellSouth, wants to get into the television, or “video services,” business, which would utilize the infrastructure their current phone lines provide.

The telecommunications giant will push changing state law to allow companies “willing to compete with the monopoly cable TV providers” to get a statewide franchise to provide cable television services themselves, Kenneth Blackburn, AT&T’s vice president of external affairs in Nashville, said.

Right now, companies such as Comcast in Davidson County contract with Metro to use the public rights-of-way to offer cable television service. They pay Metro a franchising fee.

AT&T argues that providing a statewide franchise would allow them to compete with the cable companies that are currently contracted locally, such as Comcast in Nashville, and offer a benefit to consumers.

“When you encourage more players to enter the market, they compete with each other, bringing more benefits to consumers,” Blackburn said.

But the cable industry says that’s an “unfair” business advantage because it allows AT&T to go through a single entity, the state of Tennessee, instead of contracting with individual local governments, a process the cable industry has already partaken.

Plus, it allows AT&T the opportunity to catch-up.

Stacey Briggs, the executive director of the Tennessee Cable Telecommunications Association, said the company formerly known as BellSouth has had the option to apply for a contract through local governments to provide cable service since 1996, but they didn’t pursue it.

Meanwhile, the cable industry in Tennessee has invested $1 billion in infrastructure since 1996, she said.

“They chose - and made a bad business decision we believe - not to invest and instead are trying to shortcut the process, change the process and bypass local governments and getting one franchise issued by the state,” Briggs said. “And I guess the question really has to be asked is why? Why would you do that?”

AT&T’s Blackburn said the process of getting local franchising rights from different municipalities is an “impediment to competitive entry.”

“It’s slow and it’s costly and it’s fraught with numerous local political perils and litigation risks,” Blackburn said.

The cable industry’s Briggs, as well as local government organizations like the Tennessee Municipal League, said they think the answer to why AT&T wants to get a statewide franchise is that they “don’t want to serve the public.”

“They really want to cherry pick the marketplace,” Briggs said. “They only want to serve the customers, the high-end customers, that they want to serve.”

AT&T’s Blackburn said that’s not the intent and the contention that the telecommunications company wants to provide its video service to only high-income customers is a “myth that’s being spread by other people.”

“Our intent is to offer the service to all of our customers, regardless of where they live, no matter what side of town it is or what their economic status is,” Blackburn said.

In addition, the Tennessee Municipal League (TML), which represents cities across the state, said they want those municipalities to be able to control their local public rights of way as well as collect franchise fees, which they do in conjunction with contracted cable companies.

“(AT&T is) basically trying to take a shortcut and it’s at the expense of local governments,” Carole Graves, TML’s communication’s director, said.

Blackburn said the notion that allowing AT&T to get a statewide franchise would hurt local governments “isn’t accurate.”

He said public rights of way wouldn’t be affected because phone lines in which the video service technology would run on are already in place. In addition, he said local governments would be paid a franchise fee for allowing a company with a state franchise to provide video service to their area.

Briggs said the industry pays $40 million annually to local governments in franchise fees to provide the cable service.