CT: Court Ruling Screws Telcos, Boosts Cable

Posted on July 27, 2007 - 9:49pm.

Note: we couldn't let the slippery logic of silicon alley slip by without a comment - below.

from: Silicon Alley

Court Ruling Screws Telcos, Boosts Cable
Dan Frommer | July 27, 2007 5:43 PM

A federal court made things a lot stickier for AT&T as it builds out its "U-verse" Internet-based television network. Reuters reports that a U.S. District Court in Connecticut has decided to lump IPTV in the same legal category as cable TV, reversing a previous decision by a state commission. This forces telcos through an expensive, obnoxious town-by-town dance to get local cable franchise licenses, the results of which rarely benefit consumers. (Nevermind that cable companies skip this kind of legal hoopla when they go after phone companies' customers with Internet phone offerings.)

It's not clear if AT&T could appeal the ruling, and we couldn't immediately reach a rep for comment. Either way, this is a big win for cable companies like Time Warner Cable and Cablevision, which love to stall telco TV installations with useless red tape. It's also a loss to consumers who must now wait indefinitely for meaningful TV competition and the (potentially) lower prices it is supposed to bring...

I covered a few of these negotiations in Smithtown, N.Y. last year, as Verizon went through the motions to sell TV in the Long Island burg. From my Forbes.com article:

It could be the setting for a sitcom. Or perhaps a dramedy. Some 70 residents of Smithtown, N.Y., have jammed themselves into the boardroom of the town hall. They are accompanied by several gray-suited lawyer types, who conspire in hushed tones. There is also a guy in a chicken costume.

Unfortunately for Verizon Communications, this is a reality show, and one it seems doomed to watch over and over again: Verizon has spent many years and billions of dollars gearing up to enter the cable television business. But before it can do that in Smithtown, it will need approval from the town's 115,000 residents. And it will have to go through the same process every time it wants to set up shop in another municipality.


July 27, 2007 at 10:45 PM

I beg to differ. Consumers benefit by local franchises because their municipalities maintain control over local right of way (notions of public space and rights dating back to the public commons). Communities also benefit through the creation of public, educational and governmental access channels (PEG) - one of the last vestiges of truly local and non-commercial media.

The problem with AT&T and CT is that in every other state AT&T has accepted the classification as a pay-cable provider and has sought state-wide franchises (to circumvent the local franchise process). The company's notion of public policy is actually in contradiction with itself. The state franchises AT&T has sought (written would be more accurate) are devastating to the public interest. Not only are local control of rights of way run over roughshod, PEG is all but eliminated. And the promise of 'competition = lower prices" and "consumer choice"? These are only alibis for the politicians bought off by AT&T lobbyists. In fact, there has been NO price wars after AT&T has offered competing services to cable - something their executives confided to Wall Street analysts long ago. What has happened is that local phone rates rise - an element of deregulation AT&T builds into these state franchise bills. Worse still, once a competing cable provider enters a market, the FCC lifts the authority of local municipalities to control basic cable rates, so prices rise across the board. This was the last vestige of regulation left after the deregulatory Telecom Act of 96.

As for Verizon - they have been only slightly more responsible than AT&T as a major telecommunications corporation. In NY state, Verizon has chosen a local franchise option rather than pursuing state-wide legislation as they have pursued in other states. The local franchise strategy for NY state has allowed Verizon to choose the more affluent communities in which to offer their services. A state-wide agreement might force Verizon to provide broadband services to less profitable rural areas and low-income communities. You can decide for yourself whether this is good corporate behavior, good public policy or equitable access to essential data service. I think not.

Communications policy in the US is a train wreck - but don't bemoan poor AT&T since they are amongst the worst offenders. They've opened their networks (and your data) to the NSA, they've bought off hundreds of federal and state politicians and they've rebuilt the corporation into a far stronger monopoly than it was before being broken up. If anything - celebrate the CT decision.