Save Access

from: Carlin's Comments

Statewide Video Franchises vs. Universal Service: Grasping the Total Picture

3/14/2007

Carlini’s Comments, MidwestBusiness.com’s oldest column, runs every Wednesday. Its mission is to offer the common man’s view on business and technology issues while questioning the leadership and visions of “pseudo” experts.

CHICAGO – While there are a lot of pros and cons on statewide franchise agreements for AT&T’s Project Lightspeed, what about universal service?

The controversy over HB 1500 in the State of Illinois is well-founded. Sometimes, though, people don’t grasp the total picture. As the famous line in the film “Cool Hand Luke” states: “What we have here is a failure to communicate.” There are many people who are becoming overnight pseudo experts on this issue.

It really needs to be viewed in a less emotional light and more from a pragmatic, long-term economic development perspective. While there are definitely pros and cons for moving to a statewide agreement, that agreement must be well laid out if the state wants buy-in from the municipalities.

What also should be put into the equation but isn’t is the state’s own lack of a broadband initiative. This is crippling the future of the state’s viability. Though there are some well-intentioned attempts to assemble a statewide broadband initiative in HB 1258, this bill’s approach is not amenable to local municipalities.

Some of these same municipality issues pertain to HB 1258.

The major flaw with this bill is that it can grab up any asset the state has partially funded. For example, say a municipality initiates a light-pole replacement program and gets 5 percent of it funded from the state. The state can then acquire the use of those poles for antenna mounts for a broadband network because those poles were partially funded by the state.

If the state is making money on that network, is the municipality going to share in that revenue? How is it going to be divided? Has any of this been thought out? The short answer is no. That approach is flawed and is not going to fly with the local municipalities.

The non-acceptance by municipalities on the HB 1500 video franchise bill will be repeated on HB 1258 for some of the same reasoning. You have to have participation on the decisions and directions set for use of infrastructure and rights of way. If revenues are involved, who gets what?

Need For Individual Power Over Decisions

One faction is stating that the statewide franchise agreement would pull the rug out from local municipalities. There have been articles written about some of the issues that make this agreement controversial. Here is one that focuses on Mayor Daley’s opposition:

The Metropolitan Mayors Caucus, which is an Illinois coalition of local leaders that includes [Mayor] Daley, has come out in opposition to a new bill introduced to the Illinois General Assembly that would allow cable and telecommunications companies to bypass the local video franchising process.
Fortunately for consumers, the bill does have some teeth; unfortunately, those teeth have been filed down to dull nubs.

Take the contentious issue of build-out requirements as an example. The proposed law does in fact require certain build-out provisions. Any company with more than 1 million lines that takes out a state franchise must offer service to 40 percent of people in its service area within six years.

While this is better than nothing, it pales in comparison to most municipal requirements, which generally require an even higher level of service to ensure that all residents of the town get some value out of the commonly owned rights of way.

If the mayors are worried about HB 1500, they should also be worried about HB 1258. If AT&T’s offering is not cable, then is it not subject to the Cable Franchise Act. I have always said that its service was never legally defined as cable.

Even so, let’s stop using that as an argument. AT&T’s own attorney at an Illinois hearing on March 8, 2007 said the following:

Because we are operating our telecommunications network and the service we are providing is a two-way interactive protocol, it is not a cable service.
The technology in our industry is moving so fast that when I was here two years ago testifying before you on different topics – less exciting topics – IP TV didn’t even exist.

This is next-generation, cutting-edge technology to upgrade [our] telecommunications infrastructure. Because it is ahead of regulation, there is a technical argument as to whether or not this particular service is a cable service.

We are not providing cable service. We are upgrading our telecommunications network.

According to AT&T’s attorney, the company is just upgrading its telecom infrastructure. If it is part of the telecom infrastructure as he states, aren’t they subject to the requirements of the Universal Service Fund and required to build out 100 percent especially if they are accepting funds out of the Universal Service Fund?

Are they differentiating the use of funds for “regular phone service” and Project Lightspeed? Is there even a difference any more? AT&T says they are just upgrading what is already there. Isn’t what’s already there carrying universal service? Is anyone really checking the books?