from: Chicago Tribune [1]

Cable competition sought
State bill would aid AT&T's rivalry bid

By Jon Van and Jeffrey Meitrodt
Tribune staff reporters
Published June 6, 2007

The state legislature is making a push to increase competition in the cable television market that will bring a side effect all TV watchers could appreciate: a promised cap in the number of hours spent waiting for the cable guy.

The proposal, which has broad support in Springfield, will make it easier for AT&T to go up against cable operators in Illinois because it streamlines cable franchising rules, doing away with a cumbersome system in which new TV service providers must seek town-by-town approval for laying wires.

AT&T, under competitive attack from cable operators like Comcast Corp. that are vying for telephone customers, is fighting back with plans to offer TV service. It is investing billions of dollars around the country to retrofit its lines so they can carry high-speed digital signals capable of supporting the Internet and television. AT&T's U-verse video service currently is offered in markets from Texas and California to Indiana and Michigan, but none in Illinois.

Paul La Schiazza, president of AT&T Illinois, said Tuesday that once state franchising becomes law, some Illinois communities will get U-verse video service. The time frame "will be months, not years," but he declined to state if U-verse will arrive before the end of 2007.

A year ago, AT&T announced that North Chicago had signed a deal that would enable that community to get U-verse, and, while no timetable was specified, an AT&T executive said the company hoped to offer video to up to 20 Illinois communities by the end of 2006.

But for more than a year, AT&T has encountered difficulties in some suburbs because of the company's refusal to apply for cable TV franchises. The firm contended that its video product is an information service that is a natural extension of high-speed Internet, not a traditional cable TV service.

Once statewide franchising is enacted, La Schiazza said he expects AT&T will move ahead with network upgrades needed to offer video.

AT&T's troubles rolling out U-verse haven't been limited to Illinois.

"They're running behind their early plans," said James McQuivey, a principal analyst for the technology market research firm Forrester. "In some markets they're six months behind and other places a year. But this just shows how hard it is to become a TV provider employing new technology."

Statewide franchising in Illinois was first opposed by municipalities, the cable industry and various consumer groups, but a drastic rewrite of the measure fostered by legislators and Atty. Gen. Lisa Madigan includes several requirements that neutralized opposition.

Cable operators would have to give customers a four-hour appointment window, and if a technician doesn't show up within that period, the customer automatically gets a $25 account credit. Currently, some customers have to wait 8 to 12 hours for a technician, and sometimes they never show up on the scheduled day, said Ben Weinberg, chief of the attorney general's public interest division.

To make sure AT&T and other companies that enter the cable business don't cherry-pick the richest neighborhoods, the legislation mandates that companies devote a large portion of their new systems to low-income neighborhoods. In Chicago, AT&T would be required to build at least 40 percent of its system in poorer areas, matching the city's low-income rate. Statewide, that figure will be 30 percent.

"No other state has done that," said bill sponsor Rep. James Brosnahan (D-Evergreen Park).

The House passed the bill last week and the Senate is expected to ratify it soon, though anything can happen during the legislature's overtime session.

"We are frankly thrilled by the service quality standards that are in this bill," said David Kolata, executive director of the Citizens Utility Board. "As far as we can tell, these are the strongest standards in the country."

AT&T is entering the TV business largely because cable television operators now offer phone service. In the Chicago market, Comcast Corp., the dominant cable operator, estimates it signs up 1,000 new phone customers every day. McQuivey said that is typical of what is happening across the country.

"Comcast is the largest stealer of phone customers from AT&T," McQuivey said. "Every month that AT&T is delayed from offering video is more time for the cable operator to offer customers bundles they hope will keep them from ever trying U-verse once it's available."

AT&T, which has pushed other states to lower barriers to competition in the cable TV business, said no other state has bargained as hard as Illinois.

"There are many states that have no build-out requirements," La Schiazza said. "Other states have lower build-out requirements. This process in Illinois has assured that the most customers -- including low-income customers -- will get service in the shortest period of time."

Rich Rugguerio, a Comcast spokesman, said it was "too soon" to say how the four-hour service call window would impact the company. Generally speaking, he said Comcast is confident it will do well regardless of the legislation. He said AT&T "will have to spend billions to get their network to the point where it can compete with ours."

A cable industry official questioned the toughness of the proposed legislation.

Richard Prendergast, legal counsel for the Illinois Cable Television Association, said there are a number of "back doors" that would allow AT&T and other companies to get out of the build-out requirements.

"This is a now you see it, now you don't bill," he said.

While municipalities have dropped their opposition to statewide franchising, some individuals have not.

"I hope the governor vetoes it," said Peter Collins, information technologies manager for the city of Geneva. "It has a lot of loopholes. I don't see it as a good thing." ---------- jvan@tribune.com