source: Light Reading [1]

MAY 03, 2006

The Senate's version of telecom reform legislation, released Monday, takes a decidedly localized approach to video franchise reform. And that's not necessarily a bad thing, say the nation's largest phone companies.

With the House looking poised to pass its version of telecom reform legislation -- Rep. Barton's COPE bill -- the Senate has been motivated to finish and introduce its own version. (See Video Franchise Gains Steam in DC and Full House Commerce Committee Markup of Franchise Reform Legislation Expected Next Week.)

That bill, called the "Communications, Choice, and Broadband Deployment Act of 2006" was introduced Monday by Senate Commerce Committee chairman Ted Stevens (R-Alaska). Committee co-chairman Daniel Inouye (D-Hawaii) co-sponsored the bill.

The Senate's version of a national video franchise leaves much more power in the hands of local franchising authorities.

For example, the bill preserves the ability of local franchise authorities to negotiate rights-of-way agreements with video operators. The bill keeps in place the right of state or local franchise authorities to assess up to 5 percent of an operator's gross video revenues as franchise fees.

Notably, the Senate bill establishes rules preventing video operators from "redlining," or offering services only in certain (affluent) neighborhoods. (See AT&T to Launch Lightspeed Next Month.) These rules are set at a national level, adjudicated by a state commission, and monitored by local franchising authorities, the bill reads. By comparison, the redlining rules prescribed by the House bill are vague and non-binding.

The localized franchising rules in the new Senate bill are more like the existing franchising rules under which the cable industry has operated for decades. "The bill moves in the direction of enabling all providers to compete on a level playing field in both video and voice services, which the cable industry strongly supports," National Cable & Telecommunications Association (NCTA) CEO Kyle McSlarrow said in a statement issued Tuesday.

Still, the Senate bill would likely make the Bells' entry into the video business easier than current franchising law. The bill proposes a streamlined application form that is the same for every community, which would relieve some of the administrative headache and expense of entering new markets.

The Bells also like the expedited franchise approval process which would be put in place by the Senate bill. The bill states cities would have a 30-day time limit in which to approve or deny franchise applications.

"We applaud the lawmakers for their leadership in reforming an outdated system that prevents consumers from realizing the benefits of competition for video services," said AT&T Inc. (NYSE: T - message board) VP of Federal Relations Tim McKone in a statement. (See AT&T Readies Lightspeed in North Texas.)

Assuming that both the House version and the Senate version of the video franchise legislation pass, the two bills would be combined in a conference committee before going to the President's desk. From now until then, a political tug of war will take place to determine if new video franchise laws will look more like the Senate's (localized) version or the House's (nationalized) version.

The Bells favor a nationalized version, but they're not necessarily putting down the localized bill (on the record).

"We've said from day one that the problem isn't the municipality, the problem is the time consuming process, and the Senate bill puts in place a process where delay is not a factor," says AT&T spokesman Mike Balmoris of the 30-day shot clock aspect of the Senate bill."

"We like any legislation that provides clarity for us to enter the video market and takes away the barriers to entry," Balmoris says. (See Telcos Flog Video Franchising.)

The NCTA also did some fence-sitting when asked which bill it favored. “I don’t think we would characterize one or the other as what’s best for our members,” says NCTA spokesman Brian Dietz. “We’ve advocated for a level playing field that treats all providers equally in any kind of change that is enacted, and both bills do address that.”

The newly-introduced Senate bill also addresses Universal Service Fund (USF) reform, unlicensed wireless spectrum and municipal broadband networks.

On the increasingly contentious net neutrality issue, the bill would require only that FCC to "study" the issue each year for the next five years. "We are very pleased that the bill avoids new regulation of the Internet," the NCTA's McSlarrow said.

On that issue, at least, the Bells and cable guys can agree.

— Mark Sullivan, Reporter, Light Reading