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from: Chicago Business

Lawmakers: Bill would spur TV provider competition

Feb. 23, 2007
By Brandon Glenn

(Crain’s) — Two state legislators have proposed changes to laws that they say would spur competition among pay-television service providers.

AT&T Inc. has pushed hard for the changes as it seeks to roll out its new television service in the state, but current providers object to the proposal, saying it would enable new providers to offer service only to wealthy customers, giving them an unfair advantage.

Currently, television providers must negotiate agreements with individual towns and offer service to all consumers in those communities.

The proposal would allow providers to negotiate one agreement with the Illinois Commerce Commission that would give them the right to offer service anywhere in the state. It would not require them to offer service to all the state’s consumers.

State Rep. Jim Brosnahan, D-Evergreen Park, and state Sen. James Clayborne, D-Belleville, have sponsored the legislation in the Illinois House. Rep. Brosnahan, who chairs the House Telecommunications Committee, said he hopes to hold hearings on the bill in committees in the “next couple weeks.”

Sen. Clayborne did not return a call seeking comment.

Nine states, including Indiana and Michigan, have already passed similar laws, according to the National Cable and Telecommunications Assn. Generally, the association supports “video franchise reform” only if companies are required to provide service to all customers “on an equitable and nondiscriminatory basis,” according to its Web site. The association does not take a position on laws within individual states.

Gary Mack, a spokesman for the Cable Television and Communications Assn. of Illinois, called the statewide franchising proposal “absolutely terrible.”

“Consumers are getting the shaft under their proposal,” he said.

Mr. Mack said AT&T would “cherry-pick” only the most lucrative customers.

Rep. Brosnahan said the bill would require providers to serve 20% of the state within three years. Upon reaching 30% market penetration in a given area, they would then have two years to ratchet that number up to 40%, he said. At least 25% of service coverage would have to be in low-income areas, he said.

“I’d hope eventually there would be 100% build-out,” Rep. Brosnahan said. “I hope the market dictates that.”

An AT&T spokesman said the company would not commit to offering the service to the entire state. “We feel mandatory build-out requirements are not effective,” he said, because “huge amounts of capital must be spent without the guarantee of winning a single customer.”

AT&T would use its existing phone and high-speed Internet network to provide the service.

Rep. Brosnahan said AT&T was “certainly involved in drafting the legislation,” though he stressed the bill wasn’t written solely for AT&T’s benefit.

He said he hoped other television providers, such as Verizon, would enter the Illinois market.

A Verizon spokesman said the company supports Rep. Brosnahan’s bill but currently has no plans to enter the television market in Illinois. Verizon offers television service in parts of 10 states, he said.

AT&T Illinois President Paul La Schiazza, during a recent interview with Crain’s, strongly advocated easing the state’s franchising laws. Calling the current city-by-city negotiating process “onerous,” Mr. La Schiazza said the laws are “a barrier to entry” in the cable and video market.

“The days of needing to regulate products, services, prices and conditions are over,” he said. “Consumer choices are what regulate this business.”

He wasn’t available to comment on the bill Friday.

AT&T wants to begin offering its Internet-based “U-verse” television package to Illinois consumers by the end of the year. If video franchising laws are changed to require only one statewide agreement, it would make rolling out the service much easier for the company. U-verse is already available in some parts of Indiana.

In 18 months of negotiations, AT&T currently has secured agreements with just three Illinois cities, Bellwood, North Chicago and Wayne, to provide its television service, a spokesman said. The company is in talks with “dozens and dozens” of cities, he said.

Mr. La Schiazza has said AT&T plans to begin offering its television service in Illinois before the end of 2007. The company’s spokesman said it would continue to pursue “all options” to roll out its service if the legislation eventually fails.