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From Free Press, Consumers Union, U.S. PIRG, Consumer Federation of America, March 30, 2007

Consumer and Public Interest Groups Oppose Tennessee Video Franchise Bill

Good public policy guides the market to maximize competitive deployment across the board in video and broadband. It also protects an open, thriving and nondiscriminatory marketplace for Internet content and applications.

March 16, 2007

RE: State Franchising Legislation

Dear Legislator:

We are writing today as the largest consumer and public interest organizations working on communications policy in the country. We have thousands of members in Tennessee who have a
strong interest in a bill pending in the legislature.

We strongly urge you to take a stand for consumers by supporting an open Internet, sustaining public access television, and most importantly, bringing truly competitive broadband and cable TV service to all households. We urge you to oppose the state video franchising bill, HB 1421/SB 1933. Although the video franchise bill pending before the legislature purports to benefit consumers with new competition, if enacted in its current form, it would do more harm than good. This bill does not protect consumers against discriminatory pricing nor does it guarantee that new communications technologies will be offered throughout the state, to all communities.

The purpose of the bill is laudable—to bring competition to the cable television and broadband Internet marketplace. Yet as currently drafted, it will not achieve these results. The bill falls far short of what is required to promote meaningful competition that will deliver lower prices, more competition, and higher quality of service to all consumers. We have long sought new video
competition, and it is with regret that we must oppose the pending measure. Critical pieces are missing from this bill.

A new video franchising framework must include much stronger build-out requirements and consumer protections.Without these guarantees, this bill cements the digital divide by statute. On the one hand, it allows telephone companies to cherry-pick the most profitable franchise areas in the state without requiring those companies to serve all consumers. On the other, it gives the incumbent cable operators an incentive to lower prices in competitive areas and raise them in noncompetitive ones (or simply withdraw service) where consumers have no alternatives and remain at the mercy of their monopoly cable provider. Worse yet, if a telephone company offers service to just a single household in a market, the cable incumbent would be free to engage in discriminatory pricing, raising rates even for the basic tier. As the Washington Post recently reported, this kind of limited competition has NOT resulted in price competition. On the contrary, prices have increased across the board despite the appearance of telephone companies offering cable TV. Moreover, under federal law, once a telecommunications company offers service in a community, regardless of how many or how few consumers have access to the service, local authorities lose their ability to restrain onerous price increases for basic cable service, leaving consumers without competition even more vulnerable to rake hikes from the dominant incumbent cable company.

The bill would eliminate critical consumer protections across the board. The end result will be that the most lucrative, densely populated markets in the state will have video competition, new technologies and lower prices. But less prosperous suburban and rural areas will be left out of the new networks and may well experience higher cable prices. On balance, consumers will be worse off. The unintended consequence will be systematic redlining on a statewide scale—leaving consumers with empty promises A new franchising process must sustain and support the continued viability of valuable local public services such as public access television, institutional networks, and consumer protection. There is no excuse to shortchange local communities with a state franchising process that undercuts the services that local governments have long secured for their citizens. In particular, public access to cable channels has long provided a voice for citizens, local cultural fare, and coverage of local government activities. These services should be supported, not curtailed.

Network neutrality should be a central component of any pro-competitive broadband policy in the state. The federal government has debated this critical policy and failed to come to a resolution. It is now left to the states to protect consumers and innovation. At its base, the issue of network neutrality is about who will control the Internet — consumers and producers in a
competitive marketplace, or network owners in a non-competitive marketplace. The Internet has become a positive economic and social force because of the principles of nondiscrimination that have protected the free market and which were the rules of the road until 2005. To restructure communications law without supporting fundamental protections of network neutrality would be to undermine the primary reason for the Internet’s success. Network neutrality is what keeps the market power of the few from distorting the free market for the many.

Every community—rich or poor, rural or urban—deserves the benefits of new technology and competition. Good public policy guides the market to maximize competitive deployment across the board in video and broadband. It also protects an open, thriving and nondiscriminatory marketplace for Internet content and applications.

We hope to work with lawmakers to revise this legislation to make it pro-competitive, proconsumer, and in the public interest. Absent these changes, this bill should not move forward.

Sincerely,

Ben Scott
Policy Director
Free Press

Jeannine Kenney
Senior Policy Analyst
Consumers Union

Mark Cooper
Director of Research
Consumer Federation of America

Edmund Mierzwinski
Consumer Program Director
U.S. Public Interest Research Group