Texas Cable Sues Over State Franchises

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The ink had hardly dried on a new telcom law--governer Rick Perry had signed it Wednesday--when the Texas Cable & Telecommunications Association (TCTA) filed suit against it.

The law encourages broadband competition by allowing new entrants to get statewide video franchises rather than have to seek them from individual cities and towns, as cable has been required to do.

Verizon and SBC have pushed for such legislation on both the national and local levels, arguing that it will speed their competition to cable and satellite.

The cable industry doesn’t see it that way, arguing that sparing the telcos the regulatory hoops cable has had to jump through is unfair and that whatever regulatory breaks the phone companies are given should apply to cable too.

In its suit, TCTA argued that not holding the Bells to the same franchise process is disciminatory and will allow red-lining--"dividing communities into the 'haves' and 'have nots' of advanced technologies by not serving areas with lower return on investment.
The new law "clearly gives new providers entering the market an advantage over existing cable operators because the new entrants are not held to the same regulations," TCTA said.
The legislation would pave the way for SBC and Verizon to apply for statewide franchises to deliver cable-like video franchises. It also allows power companies to offer broadband over powerlines.

James M. Epperson, Jr., SBC's SVP, state legislative and political affairs, saw the suit as an attempt to quell competition: "Consumers in Texas and across the country can now see the lengths to which the cable industry will go to squelch competition and guarantee their annual price hikes," he said. "Despite near unanimous support for the law from the Texas legislature and its being signed into law by the governor, cable is pulling out the stops in an attempt to derail the legislature's intent to bring Texas consumers a choice. Having been unchecked in their ability to raise rates by 40% since 2000, cable has every incentive to try to stop the competition this law was intended to bring."

At least two bills have been introduced in Congress to make it easier for telcos to launch video competition to cable, including one that would give cable its playing field.

The first, introduced by Sens. Jay Rockefeller and Gordon Smith, gives any phone company currently operating the right to add video without obtaining an additional franchise, though it would be subject to essentially the same franchising obligations as the cable system in the market it is entering.

More sweeping and controversial legislation was introduced last month by Sen. John Ensign.
It would eliminate the need for cable, telephone company, or any other pay-TV provider to obtain local or state franchises. Existing cable franchises also would be eliminated under his bill, which he said is designed to "update the nation’s telecommunications laws and increase choices for consumers."

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