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from: Boston Globe

Verizon suspends push for Mass. TV franchises
Firm criticizes licensing process

By Carolyn Y. Johnson, Globe Staff | April 18, 2007

After spending an average of 15 months in each of 45 communities to win approval to offer television service, Verizon Communications Inc. has had enough for now: The company says it will stop seeking new applications in Massachusetts until it finishes all pending projects.

The company says that could delay its expansion of a fiber-optic network in Massachusetts capable of delivering TV, phone, and high-speed Internet service that competes directly with cable companies. Unlike regulations in some other states, Massachusetts' telecom law requires Verizon to apply for a video operating franchise in each city or town.

In New Jersey and California, states that recently passed legislation allowing state approval, Verizon is plowing ahead with the roll out of its $23 billion national network.

"There's a cloud over Massachusetts," said Joseph Zukowski , vice president of government relations for Verizon.

Verizon's hardball strategy highlights the long-running debate over whether Massachusetts regulations giving its 351 communities enormous autonomy impede economic development by creating an additional layer of complexity that drives companies to more business-friendly states.

The Patrick administration, like the Romney administration before it, has made a priority of streamlining and accelerating business and development approval processes, both state and local .

"Here in Massachusetts, we're a high-tech state and a highly industrialized state, and Verizon's buildout has been piecemeal," said state Senator Steven Panagiotakos of Lowell , who has sponsored legislation that would allow Verizon to apply to the state for cable franchises. "One of the main reasons for that is our regulatory system in many ways dampens competition."

The Massachusetts Municipal Association and officials in many communities eager for cable television competition vehemently oppose the legislation, saying the current process works, and the legislation would leave cities and towns with little clout. Without the ability to negotiate on their own, towns would lose much of their power to acquire important funds from a telecom company for public, education, and government access. Cable companies, already up and running with video, say the legislation would give Verizon an unfair advantage since they had to go through the town-by-town process themselves.

Under the rules, Verizon is free to build its new fiber-optic network service, or FiOS. But to offer the new TV service to consumers, it must gain a community's approval. Even though Verizon has been forced to seek approval for fiber-optic television service community by community , the company has 45 franchises today.

Furthermore, some towns and cities say Verizon officials are the ones dragging out the process.

Last year, after conversations with Verizon officials, the Northborough Board of Selectmen asked the state to speed cable television licensing and sought an application from Verizon. The company never applied, and told town administrator Barry Brenner that it was putting Northborough and several other municipalities on hold.

"This course of events is very disappointing and frustrating since Verizon asked the town to initiate the licensing process, and the town responded very positively and promptly to Verizon," town administrator Barry Brenner wrote in a February memo to the Board of Selectmen.

Saugus and Fairhaven also asked the state to expedite the licensing process and invited Verizon in, but were told that they are not included in the company's current buildout plans, according to William Solomon , a municipal attorney who has advised the towns.

"The big picture is, it is not the towns holding it up; it's Verizon that has real decisions to make about where it wants to send its funds," Solomon said. "That's fine, that's understandable -- but don't pretend -- don't tell lobbyists and regulators and others that it's the cities and towns that are holding this up, because nothing could be further from the truth."

Verizon says that it has decided not to make new commitments in the state until the negotiations it has begun in 22 municipalities are complete.

To get to this point, Verizon officials have had to go through separate negotiations with volunteer cable committees, mayors, boards of selectmen, and other local officials in each municipality where they plan to offer FiOS TV.

The regulatory process has resulted in a steady, but somewhat haphazard, trickle of mostly suburbs granting franchises to Verizon. Last year the company received television franchises in 38 communities, and so far this year it has received seven.

In contrast, Verizon last month announced FiOS TV availability in 62 new communities in New Jersey, bringing the state's total to 180. In a recent filing with the state's Board of Public Utilities, the company said it was expanding its service territory from 316 to 344 communities.

In California, where Verizon received its first state-issued video franchise in March, the company published a list of 45 communities where it plans to bring service.

Verizon spokesman Phil Santoro said the uncertainty of the regulatory process in Massachusetts was jeopardizing future commitments. Since Verizon knows from experience that it could take anywhere from five to 26 months to complete negotiations to win a cable television franchise in a community, the company must decide where to spend the money to turn the service on in the first place.

"You're investing a lot of money and not knowing what's going to happen, whereas in other states it's a more certain, much more truncated time period," said Jim Stergios , executive director of the Pioneer Institute, a market-oriented think tank. "For any developer, for anybody in any business -- if you can reduce risk it means a lot to them."

Carolyn Y. Johnson can be reached at cjohnson@globe.com.