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from: KnoxNews.com

Cable industry, local governments oppose AT&T's request for statewide franchise

By KARIN MILLER, news@knoxbusinessjournal.com
April 16, 2007

The biggest — and almost certainly the most expensive — battle on Capitol Hill this year is over an effort by telecommunications giant AT&T to enter the cable television business in Tennessee.

Dozens of the best lobbyists are representing the various interests, scathing commercials are airing throughout the state, and several Web sites have been launched in hopes of swaying public sentiment.

The fight is over AT&T's proposal to change the way cable franchises are granted.

Currently, a company seeking to provide video services in a Tennessee community negotiates an agreement with a city or county government and pays a franchise fee. AT&T wants to be able to get a statewide franchise.

The cable industry and local government officials oppose the legislation, but a dozen other states have approved similar proposals, and some form of the bill is likely to pass in Tennessee.

Taking sides on the issue are Knoxvillians Patsy Hazlewood, AT&T's assistant vice president for East Tennessee, and Rob Frost, an attorney and Knoxville city councilman.

Q: Why is the proposal being pushed at this time?

HAZLEWOOD: "The opportunity is there because of changes in technology allowing a company to provide a competitive video product in a different way — over existing telephone lines and not cable. It's the wave of the future, and the time seems to be now to do it this way.

"Because it's video over existing telecom lines, there are several reasons we need to have that franchising done at the state level rather than at the local level. One of the largest ones being if we have to do it locally, there are over 400 governments we would have to deal with, which makes it time- and cost-prohibitive.

"It's an opportunity to provide meaningful competition in a market where there is very little, if any, today. This bill would allow AT&T and other providers to come into a market, get a franchise at a state level, go into locations and give consumers choices. We've seen it time and time again — that will result in a wider array of choices and better prices.

"Also, there's an ancillary effect of this bill. There's a huge investment associated with putting this technology out there: A lot of electronics would have to be added to the network. So those are investment dollars coming into Tennessee that would be pumping up the economies of the communities across the state and also adding jobs. We project over 2,000 jobs would be the net result of this legislation in Tennessee."

FROST: "What is stopping AT&T from building under the current guidelines? The answer is absolutely, positively nothing. Their desire to enhance their bottom line to the detriment of the bulk of this state's population is what's driving this.

"In the past decade, over 500 franchises have been granted to other providers throughout the state. For big AT&T to say the present law is too hard and unfair is blatantly false. Companies miniscule compared to AT&T have successfully been able to provide services across the state."

Q: One of the major concerns is whether new providers would "cherry-pick" or provide services only in the most profitable areas. Is there a reason for that concern?

HAZLEWOOD: "We have a very strong history, both as AT&T and BellSouth, of being very good about diversity and those sorts of issues, and from our own customer experience we have good customers at all income levels. They don't buy video services just in affluent areas; they buy them in all areas. We're going to want to serve as many customers as we can as quickly as we can.''

FROST: "They're only wanting to serve the first with the most. They specifically excluded build-out requirements. That's when a company comes into a city and over a period of time they have to have the ability to serve every resident no matter their socioeconomic status.

"What's going to happen if AT&T is successful is that middle- and lower-class folks will have the payday loan, check-cashing equivalent of cable services to choose from.

"That is fundamentally unfair to the vast majority of citizens across the state. AT&T is looking for the people that spend $200 or more on their monthly bills. They're not looking for folks with basic programming. They're wanting to skim the cream off the top.

Q: The major argument for the legislation is that it would create competition among providers and result in lower prices for consumers, but opponents say that hasn't always been the case in other states. Has it?

Hazlewood cited a report last year from the Federal Communications Commission saying the average price of cable service was $43.33 without competition and $35.94 with competition.

HAZLEWOOD: "I would also point out that without competition, cable rates in Tennessee have risen since 2002 by 23 percent. With competition, we think that rise will be lowered if not cut back. At the same time, Tennesseans' median incomes only increased by 6 percent. What that says is video services are taking a bigger bite out of our pocketbooks.

"The real bottom line that people need to remember is that this bill at the end of the day is about giving consumers choices, giving consumers better prices, different kinds of packaging, different technology to deliver a product with more flexibility than existing cable technology does.''

FROST: "Competition is good, but the competition AT&T is talking about providing is to a fraction of our society. AT&T can come in right now, but they would have to provide their service to everyone. AT&T doesn't want to play by the rules that everyone else has.

"They're going to provide competition to the wealthiest of the wealthy and no one else. Government should not be in the business of allowing the creation of economic classes. This is coming from someone who traditionally votes Republican, but right is right and wrong is wrong, and this is wrong."

Q: A lot of opposition is coming from local governments. Are the concerns being addressed?

HAZLEWOOD: "There was a concern about where franchise fees were going to be paid. The bill says they will be paid directly to local government. So the cities and the county governments are still going to get those franchise fees without going through a third party like the state. They will be paid directly.''

Also, she says, the franchise fees could get larger because with new offerings available, people likely will buy more services. And property taxes likely will increase because providers will have to improve their networks, which will raise the value of their property.

Local governments will continue to control their rights-of-way, handle consumer complaints, and be able to audit the providers' books annually, she said. And providers will have to continue airing public access programming.

FROST: Under the proposed legislation that he has seen, "local governments are specifically stripped of all their authority to enforce the new law. They can have a nonbinding meeting if they want to and can come to some sort of conclusion, but (the bill) says they may not enforce or seek enforcement of any provision.

"The average Joe and Jane Citizen can start the process in Knoxville and the city can go through the motions to seek a resolution, but they can't enforce the law. So what do Joe and Jane Citizen do? They have to work with the secretary of state in Nashville, three and a half hours away. Now how reasonable is that?''

Also, he said, many local community access television officials won't be able to meet the requirements of the legislation.

And the bill would allow a provider to move such public educational and governmental programming out of basic cable packages "and lump it in with premium packages so that you have to pay more for it. That will make it even harder for people to stay in touch with their planning commissions, their city councils and their county commissions.''

Karin Miller is a freelance writer in Nashville.