Hanging up on the competition

Albuquerque Mayor Martin Chavez says video franchise legislation backed by phone companies will benefit corporations, not consumers.

4 min read
Like many elected officials, the nation's mayors have taken a renewed interest in telecommunications as the so-called video reform legislation, sponsored by Rep. Joe Barton, R-Texas, and urged by the nation's telephone companies, is considered in the U.S. Congress. And no wonder. The legislation will likely determine the extent to which our constituents will ever benefit from broadband competition.

The nation's mayors generally tend to agree on three central principles that should govern any reform legislation: It should promote competition; it should make sure that consumers, not special interests, benefit; and it should ensure that the market and not the government will pick and choose winners.

To hear the telephone companies tell it, video franchising reform legislation is the linchpin for meaningful competition in the cable industry. But this premise is dubious: In nearly every market, consumers have three or more choices of cable and satellite providers.

In fact, recently reported FCC data show that cable prices--measured on a per-channel basis--have actually declined, as cable operators, facing the heat of competition, have added 61 percent more programming channels to their expanded tier. And contrary to the phone companies' claims otherwise, the Bell telephone entry into the cable market in places like Keller, Texas, has had virtually no impact on cable prices--prices had already started to decline due to existing competition.

Rather than removing real barriers to entry, the telephone companies really want legislation to end the role of local government in protecting consumers.

In 1996, Congress deregulated the telephone companies to allow them to compete for video, and the record shows that the telephone companies have little trouble complying with the current law and securing local franchise agreements rapidly wherever they seek to enter markets. In fact, the phone companies have negotiated franchises in less than 30 days in communities across the country--from Massapequa Park in New York to Beaumont, Calif. Small operators, with fewer than 200 customers, are thriving under the existing rules.

Rather than removing real barriers to entry, the telephone companies really want legislation to end the role of local government in protecting consumers, and to repeal the existing antidiscrimination rules that require all cable operators--big and small--to provide the latest digital broadband services to every neighborhood in their footprint.

Legislators should take pause. The telephone companies are the biggest telecom companies in the world and have been built with massive government subsidies and ratepayer-guaranteed rates of return. Every time they get so-called regulatory relief, prices rise, competition suffers and promises about deploying broadband networks are broken. Now they want Congress to give them a permission slip to exclude many, if not most, of those ratepayers from upgrades to their publicly subsidized networks.

The alleged barriers are really trumped up stalking horses intended to sneak through a repeal of the law that would otherwise ensure that all neighborhoods benefit from broadband competition.

Indeed, this is not abstract speculation. Verizon's publicly announced rollout of its new Fios network shows that many communities in its territories will be excluded from the upgrades. AT&T has already announced that its new IPTV service will be targeted primarily to its "high value" customers while almost totally ignoring "low valued" customers.

Existing antidiscrimination law has not been a barrier to competition; the cable industry has been able to comply with it and, as a result, has invested more than $100 billion wiring every neighborhood and school in its service territory--from rural areas to inner cities, rich communities to poor.

For Hispanic Americans--only one in eight of whom subscribes to broadband services--this nondiscrimination policy has been key to ensuring that our communities are wired. As the Minority Media and Telecommunications Council, along with 33 other major civil rights organizations, told the FCC, the idea that Congress would be willing to repeal these laws should send shock waves to everyone concerned about the already widening digital divide.

I, for one, want to see the telephone companies enter the cable television business and the cable companies enter the telephone business. Currently, the cable industry seems to be winning this battle for new customers, and it's poised to capture tens of millions of telephone customers with its new VoIP, or Internet-based, telephone services. This kind of competition between the two industries for each other's customers will only be good for consumers.

If there were serious barriers to entry into the cable industry, I would be the first to champion reform. But the alleged obstacles are really trumped up stalking horses intended to help sneak through a repeal of a law that would otherwise ensure that all neighborhoods benefit from broadband competition.

Elected officials know that public policy decisions involve trade-offs. In making those decisions, we need to ask ourselves whether the decisions will benefit consumers or large corporate interests. Video franchise legislation seeks to solve competition problems that don't really exist while repealing a system of law that's critical to equal opportunity and to our economic productivity. And that's a very unwise trade-off.