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from: Callahan's Cleveland Diary

Telco bill to end local cable franchising shows up in General Assembly

When this was passed by Michigan’s Republican legislature and signed by Governor Granholm, a Democrat, in December, I wrote: “The Michigan law is very likely to provide the template for similar legislation in the Ohio General Assembly early next year.”

And here it is, right on schedule.

Introduced quietly on Thursday in the shadow of the Governor’s budget rollout, Ohio Senate Bill 117 closely resembles its Michigan sibling, HB 6456… as it should, because it has the same parent, AT&T, and the same goal, which is to eliminate the last traces of local community power over private corporations’ use of public rights of way to deliver video and broadband services.

I also wrote:

HB 6456’s provisions overturning existing local franchise protections were added to get Michigan’s cable industry to drop its opposition to statewide franchising, which it sees as a competitive maneuver by AT&T and Verizon. The telcos have exactly the same goals in Ohio, and the cable industry has the same objections, so there’s every reason to expect them to propose the same deal.

I’m told that Ohio’s cable TV trade association has already informed the Governor’s office of its non-opposition to the Ohio version.

What will happen if SB 117 becomes law?

Yes, AT&T will accelerate its rollout of its version of broadband video service in more “high value” (dense, middle to upper income) markets where it already offers DSL service. Those communities will have no say in the matter (e.g. over all those boxes popping up on tree lawns) but they will get to collect a 5% franchise tax. This will be seen by some local officials as the Second Coming.

Meanwhile, existing cable providers will stop talking to local governments, having no further reason to do so. Where franchises expire (as is now the case with Time Warner in Cleveland), the cable companies will go to the state Commerce Director for pro forma approval of new ones — standard ten year terms, no more citywide service obligations, no more demands for special services to municipal and school facilities, no more requirements to support community media access and technology programs, no negotiation of any kind. Where a franchise remains in effect, the cable company can walk away whenever it chooses, and “no provision of that franchise or agreement is enforceable” by the community. (You may want to file this for future reference under Sacredness Of Contracts.)

Has your cable company agreed to pay a fee to support “PEG” (public, educational and government) access television facilities, as in Cincinnati? That agreement will be unenforceable. (Incidentally, this is a major comedown from the Michigan law, which allows cities to preserve their existing public access support fees, or impose new ones up to 1% of cable revenue.)

Has your cable company agreed to offer digital cable service — which is necessary for broadband Internet access — to households in every neighborhood, no matter how poor? That agreement will be unenforceable. (”Nothing in sections 1332.21 to 1332.35 of the Revised Code shall require a video service provider to provide access to video service within the entire video service area.”)

Has your cable company agreed to provide free or discount service to municipal buildings, schools, libraries, and nonprofits? Or senior citizen discounts? That agreement will be unenforceable.

Has your cable company agreed in past franchise negotiations to provide special one-time grant support for community technology or minority television development, as in Cleveland in 2000? Never again. “[N]o political subdivision shall request anything of value from a video service provider for providing video service.”

Will the state, as the new franchising “authority”, be able to negotiate any of these (or other) public benefits on behalf of its communities? Absolutely not. SB 117 says the Commerce Director must approve any properly completed “video service authorization” request within twenty days of its filing, or it goes into effect anyway. “The director has no authority to regulate video service in this state, including, but not limited to, the rates, terms, or conditions of that service.”

So in effect, SB 117 doesn’t just transfer public authority over cable franchising from local governments to Columbus; it pretty much eliminates public authority altogether. There are only two exceptions, both borrowed directly from Michigan:

1) A so-called “anti-redlining” provision:

Sec. 1332.28… no video service provider shall deny access to video service to any group of potential residential subscribers in its video service area because of the race or income of the residents in the local area in which the group resides.

(B) It is an affirmative defense to a violation of division (A) of this section if the video service provider can demonstrate either of the following:

(1) Three years after the date it began providing video service in its video service area, at least twenty-five per cent of households with access to the provider’s video service are low-income households.

2) Five years after the date it began providing video service in its video service area and thereafter, at least thirty per cent of the households with access to the provider’s video service are low-income households.

SB 117 defines a “low income household” as one with annual income below $35,000. So the law immunizes a cable company from charges of “income redlining” if a third of the households in the areas it chooses to serve make less than $35,000 a year. Time Warner could abandon service in 75% of the city of Cleveland without violating this standard.

2) A so-called “buildout” requirement:

Sec. 1332.29. (A)(1) A video service provider that both uses telecommunications facilities to provide video service and has more than one million telephone access lines in this state shall provide access to video service to at least:

(a) Twenty-five per cent of the households in its video service area within two years after the date it began providing video service in that area;

(b) Fifty per cent of the households in its video service area within five years after the date it began providing video service in that area, except that a video service provider need not meet that fifty per cent requirement until two years after at least thirty per cent of the households with access to the provider’s video service under its video service authorization subscribe to the service for six consecutive months.

This language is all about AT&T, of course. (Though Verizon might also meet the million-line threshold in Ohio, it has shown no interest in rolling out FIOS, its video-over-fiber product, in its mostly rural territory — most of which got nominal DSL access only three months ago). It’s very close to what was added to the Michigan bill to get the Communications Workers, and thus Governor Granholm, on board. It’s essentially a guarantee that once AT&T starts doing video under a state franchise, they’ll build out fairly fast, at least to their highest-value markets. But elsewhere in the bill, “service area” for a telco video provider is defined, not as an individual community, but as the company’s whole existing telephone market — so nothing in this language guarantees buildout or prevents cherry-picking within any given AT&T community.

So, to sum up:

* Cities and villages lose their long-established power to negotiate cable franchises;
* the state assumes the franchising role but with no actual authority;
* AT&T is free to roll out its video/broadband service with no serious legal/political obstacles to redlining or cherrypicking communities;
* existing cable providers get to keep their infrastructure and customers while walking away from most of their current franchise obligations, if they so choose, whenever they so choose;
* negotiated financial support for local public access (PEG) facilities from cable providers stops;
* other negotiated community benefits stop.

In return for all this “reform”, AT&T agrees to do exactly what it most wants to do — deploy its brand of video/broadband service to lots of the same Ohio households that already have (and can afford) competitive broadband access in the form of DSL and cable modem service.

Such a deal. It’s a great new day in Ohio, you betcha. I can hardly wait to hear how many “good jobs for Ohioans” this is going to create.

Now I want to stress that as far as I know, the Governor has not agreed to support this bill. Nor, so far as I know, have the Communications Workers. The story about the cable companies is that they’re affirmatively neutral. Cities and villages will, of course, oppose it ferociously… not just because of the specifics, but because it’s the next big assault on municipal home rule.

So right now the only people (other than the telcos) who publicly support SB 117 are its eight initial sponsors. But six of those eight Senators serve on the Energy and Utilities Committee, which will presumably get the bill. The E&U members include four of the Committee’s six Republican — Jacobson, Niehaus, Spada and Buehrer — and two of its three Democrats: Ray Miller of Columbus and Lance Mason, just elected from Cleveland and the southeast inner-ring suburbs. (The two other GOP sponsors are Mumper and Stivers.)

Greased to go? You bet.

It’s to be hoped that the mayors of Columbus and Cleveland will sit down soon with Sens. Miller and Mason to have a chat about home rule. But let’s face it, prying any state politician loose from something AT&T really wants is going to be tough.

And AT&T really, really wants to get local communities driven from the video/broadband bargaining table.

P.S. I should be clear about this: I have no reason to suspect Time Warner, Cox, Buckeye, ComCast and other cable incumbents of harboring any current desire to abandon the “lower-value” neighborhoods and lower-income customers they now serve. As far as I know Time Warner is making money selling cable TV and broadband services to all kinds of households in Cleveland, and wants all the customers it can get.

But things change. Time Warner is the fourth company to hold Cleveland’s sole cable franchise since 1990. It’s a subsidiary of a publicly held megacorporation with all kinds of interests and no local loyalties. Who knows what business model its parent will decide to pursue in three years, or ten? Who knows who may buy what, or what pieces may be sold off, in future realignments? Who knows whether future managers with future business models will want to maintain a bandwidth infrastructure in inner-city Cleveland, if they don’t have to in order to keep the franchise to serve customers in Edgewater and Lee-Harvard?

Remember the last time our phone company got into the cable business? It was 1995, and “our phone company” was Ameritech. Then in 2000 Ameritech became part of SBC and cable was suddenly dropped from the business model (to the surprise of a hundred Midwest cities that had agreed to franchises). Five years later SBC merged into AT&T, and now it’s back in the TV business with a vengeance. This has all happened in less than twelve years. Why would we rely on anything these people tell us about their business plans more than a year or two into the future?