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from: Miami Herald

Phone-cable bill is on the line
What began as a consumer-friendly proposal tacked to the cable-video franchising bill to keep basic local phone rates from rising could ultimately end up sinking the legislation.

BY MONICA HATCHER
mhatcher@MiamiHerald.com

TALLAHASSEE
After the Consumer Choice Act failed to pass the Legislature last year, local phone companies hoping to break into the cable-television business figured they'd improve the cable-franchise bill's chances this year by throwing in a bonus for consumers.

AT&T, Verizon and Embarq agreed to give consumers a roughly $150 million break by forgoing a rate hike planned for later this year. But there's a catch: Skipping the rate hike means they have to renege on $150 million in fee reductions promised to other phone companies who use their networks, namely wireless and long distance carriers.

Those carriers are now striking back. And the perk for consumers, which in part helped the Consumer Choice Act pass the House last month, could be its undoing in the Senate.

Sprint/Nextel has asked lawmakers to amend the bill requiring the local phone service providers to deliver the reductions in the intrastate access fees they promised. Sprint said it wants to pass these savings down to customers in the form of lower in-state long distance rates and use the rest to invest in its wireless networks.

But some supporters of the Consumer Choice Act say the amendment, being considered today by a Senate committee, will likely spell death for the cable-franchise bill.

The act allows phone companies to avoid licensing by more than 450 local governments by getting a single, statewide license in Tallahassee. Supporters say allowing phone companies into the cable business would bring consumers more choice, lower prices and better service. Detractors worry about the loss of local control and the possibility that new providers could leapfrog low-income and rural communities in favor of servicing more lucrative neighborhoods.

This is the second year the multibillion dollar cable and telecom industries have duked it out in Tallahassee over the issue, spending millions in lobbying efforts and ad campaigns.

The bill sailed through the House but, in the Senate, has been bogged down with amendments.

The current stumbling block is a proposal that would freeze the last year of a rate rebalancing law passed in 2003. That law required local phone companies -- AT&T (formerly BellSouth), Verizon and Sprint, which is now Embarq -- to lower the rates it charges long-distance and wireless companies for use of their networks.

The 2003 law also allowed the companies to offset the reductions by raising rates for basic local phone service.

The Sprint amendment would keep the rate reductions on the long-distance and wireless providers required under current laws without letting the local carriers recoup the losses with further rate hikes.

Mike Twomey, executive director of Florida Utility Watch, said the amendment essentially puts a $150 million price tag on the Consumer Choice Act. ''It's a poison pill,'' he said. ``There's no way they're going to pay that. They'll kill the bill before they do that.''

Don Sadler, a spokesman for AT&T, said his company would, indeed, be forced to ``review the legislation in its entirety.''

'The Senate would take $150 million out of the incumbent carriers' pockets without giving them the opportunity to rebalance that with a rate increase,'' Sadler said.

Twomey says Sprint has another motive besides saving its customers money. He said Sprint is trying to kill the bill to protect the monopoly interest of Comcast, the state's largest cable company and Sprint's business partner in providing bundled cellular, Internet and other services in some test markets.

Last month, Doug Ashton, an analyst at FTN Midwest Securities, said the partnership had given Comcast enough experience to pursue a purchase of Sprint, which runs the country's third-largest wireless company.

John Taylor, a Sprint spokesman, denied Twomey's allegation.

''The bill that went out of the House broke a promise to the people of Florida to lower their long-distance bills by $150 million. We think that cut should stay on schedule,'' Taylor said.

Neither company would comment on merger possibilities. Comcast referred other questions to an industry group leading the fight against the bill.

Steve Wilkerson, president of the Florida Cable Telecommunications Association, said he was unaware of any backdoor attempts by Comcast to sink the bill.

''The first time I heard about the amendment was from Sprint,'' Wilkerson said.

He said his group opposes the bill but is focusing on other provisions, like making sure the phone companies cover low-income neighborhoods and carry mandated community access channels.

Taylor said his company only took exception to the bill's repeal of the long-distance rate cuts because it would allow the local phone companies to raise those intrastate access rates, which are already grossly unfair and disadvantage them competitively. ''Florida is the only state in the country where the bill has been amended so it has an impact on local, long-distance and wireless customers, and we don't understand why that took place,'' Taylor said.

Wilkerson said the rate freeze was a simple attempt by AT&T to put ''lipstick on a pig'' since raising rates on basic phone service doesn't make sense competitively anymore.

''They get a PR benefit out of it, and they get a freeze on the intrastate access going down anymore, so it's a win-win for them,'' Wilkerson said.

Not everyone thinks the Sprint amendment is a bad idea.

Brad Ashwell, a spokesman for Florida PIRG, a consumer research and advocacy group, said his organization would not support the current cable-video franchising bill, but saw the amendment as a positive element in the legislation.

''It's the only potential piece of the bill that is guaranteed to lower rates for consumers,'' Ashwell said.