During its open monthly meeting, the Federal Communications Commission is scheduled to vote on new rules that would make it easier for phone companies to secure local video franchise agreements, which spell out requirements for everything from equipment to environmental protections.
The phone companies--namely Verizon Communications and AT&T--have spentwith fiber-optic cabling and new equipment so they can offer TV service in addition to telephony and broadband services.
But to offer TV service, operators must negotiate local franchise agreements with cities and municipalities. Phone companies have complained that the. They also complain that some local communities have made unreasonable requests before granting the agreements.
The phone companies have looked for relief from state governments, which in many cases have streamlined the process by offering statewide franchises. So far, 14 states have introduced some form of franchise reform. Texas was the, and Michigan is the most recent to take up the issue. Phone companies have also , where a proposed law for national franchise reform stalled earlier this year.
Now, the phone companies are looking to the FCC to help them in their fight. And they have found an amenable ally in FCC Chairman Kevin Martin, who is convinced that adding phone companies as competitors in the TV market will ultimately provide consumers with better programming.
While only Congress can do away with local franchises altogether, Martin believes theand strip local governments of the ability to add certain conditions to their franchise agreements.
In a speech December 6, Martin outlined his general ideas for reforming the local video franchise process. Specifically, he suggested that the FCC impose a time limit for local franchise authorities to consider new agreements, limiting that period to 90 days in some cases and up to six months in other cases. He also says he believes the FCC should have authority to determine what are reasonable or unreasonable requests made on companies to get those licenses.
"The commission has noted that telephone company entry into the video marketplace has the potential to advance both the goals of broadband deployment and video competition," he said. "The commission developed an extensive record on the franchising process. That record indicates that the process can pose an unreasonable barrier to entry."
But cable operators, telecommunications watchdog groups and some members of Congress think the FCC is using flawed data that could lead to it overstepping its authority. The FCC plans to release a report on Wednesday that looks at the average rates for cable TV service over the past 10 years. In his recent speech, Martin said that from 1995 to 2005, cable rates have risen 93 percent, from $22.37 in 1995 to $43.04 in 2005. He used this data point as an argument for changing the local franchise rules to add more competition to the market.
While rates have gone up, the National Cable & Telecommunications Association argues that cable operators have invested more than $100 billion to provide advanced, interactive services like high-definition TV, video-on-demand, high-speed Internet and digital phone service. The group also says that bundled services lead to consumer discounts for those who subscribe to more than one service. And it argues that the number of viewers and the time that people spend watching television have actually increased every year.
What's more, Verizon is entering the market at roughly the same price as cable operators. Its Fios TV service costs $42.99 per month.
A consumer advocacy group called Teletruth says the FCC should be careful in imposing what it calls "Bell-friendly" franchise rules.
"America is on the wrong broadband path," the group wrote in an e-mail. "And the FCC's analysis of the situation has been overshadowed by bad data, Bell-funded astroturf groups and a false reliance on Verizon, AT&T and the other Bell companies. History has proven that we should not trust the Bell companies with America's digital future."
Members of Congress also worry that the FCC is overstepping its authority. In a letter dated December 19 addressed to Martin, U.S. Rep. Mike Doyle (D-Penn.) urged the chairman to postpone any action on the video franchising issue.
"I am very concerned that the commission may be taking an action for which it does not have legal authority and that has not had proper congressional or public scrutiny," he said. "I share your goal of increasing competition for television services, but I believe that the proposed order may be unnecessary for achieving this goal, not to mention ineffective and unfair."
Doyle said in his letter that putting a 90-day limit on franchise negotiations between local municipalities and new entrants, such as the phone companies, which already have rights of way in communities, will actually provide a disincentive for new providers to negotiate in good faith. According to Martin's proposal, if the 90-day period is reached without an agreement, the new entrant would still be allowed to offer service.
Doyle also questioned Verizon's claims that the current franchise process has slowed its deployment of TV service. Today Verizon offers its Fios TV service to more than 1 million homes. And it plans to have more than 175,000 subscribers signed up by the end of the year, the company stated in recent FCC filings.
But Doyle claims that in his home state of Pennsylvania, Verizon has been obtaining franchises faster than it has been able to deploy its video service. So far, Verizon has agreed to initiate franchise negotiations in only four of Pennsylvania's 67 counties, all of which are suburbs of Philadelphia, he said.
While other communities outside the Philadelphia metro area have requested Verizon's Fios TV service, the company has actually refused to negotiate with some communities, because they don't meet Verizon's internal deployment schedules.
Finally, Doyle questioned the FCC's authority to impose such terms and conditions for negotiating franchise agreements. He claims that Title VI of the Communications Act is clear that the authority to award a franchise resides with local franchising authorities, not the commission. As a result, he said he believes the FCC is "walking into a legal minefield."