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from: Riedel Communications

Friday, February 29, 2008
Blind Alleys

There are people who have contributed greatly to your personal welfare that you will never hear about. One of those is Marston Bates. He studied mosquitoes in South America and his work improved the understanding of yellow fever. You gotta like a guy like that, somebody who does original and actual research. Bates didn’t take himself too seriously either. He is attributed with saying “Research is the process of going up alleys to see if they are blind.”

It seems that more people just take things as gospel without ever digging any deeper to get to the facts. I do know the more something is repeated, the truer that something becomes. And if you throw a bit of academia on that something you pretty much got yourself a coup.

Take the recent Ball State University white paper put out by the Digital Policy Institute called “An Interim Report on the Economic Impact of Telecommunications Reform in Indiana.” Luckily the report came out just in time for the opening of state legislative sessions because according to that report Indiana is now leading the nation in terms of innovative and creative telecommunications law.

Did you know that there have been over 2,200 jobs created in Indiana as a direct result of the March 2006 statewide video franchising? That’s what the report says alright, over 2,200 jobs created! Of course the citations to support that claim are from AT&T, Verizon and Comcast press releases and a newspaper report regarding other telecom companies. The largest number of these jobs are attributed to AT&T at 1,650. However, even if you take AT&T at their word and believe their press release, the real story is that at least 600 of those jobs have nothing to do with statewide video franchising, they are call center jobs for wireless business customers.

See: http://www.att.com/gen/press-room?pid=4800&cdvn=news&newsarticleid=24607

If we presuppose that the remaining 1,050 AT&T jobs were strictly created as a result of statewide video franchising and their rollout of U-Verse, we would then have to hypothesize that AT&T ain’t so great at workforce management. As of August, AT&T reported offering U-Verse to five cities in Indiana: Kokomo, Indianapolis, Anderson, Bloomington and Muncie. If we assume that AT&T now has 10% of all subscribers in those cities, or over 30,000 subscribers in Indiana, we have to conclude that AT&T has hired one new employee for roughly every 28.5 subscribers. Ergo we can now say with confidence that AT&T ain’t so great at workforce management.

See how I do that? And all without the added benefit of a professorship or an institute.

Nothing can be empirically proven when all one does is rely on press releases from the very companies one is supposedly researching or multiple citations from the very groups that lobbied for the legislation in the first place. What groups? The very same groups that have traveled from state house to state house, coast to coast, across this nation pretending they have conducted nonbiased, consumer interest research. Folks like: The American Enterprise Institute; Telecommunications Research and Action Center (TRAC); FreedomWorks; Heartland Institute; Phoenix Center; and the Reason Foundation. Throw into the mix the National Conference of State Legislators, whose policy platform is pro-statewide franchising, and you’ve got yourself quite a bucket-load of data regarding how fabulously terrific statewide video franchising is and how Indiana is such a leader in broadband deployment.

What’s true is that almost two years after the law passed, fifteen of the Certificates of Authority applicants were incumbent cable operators hoping to relieve themselves of various obligations in existing franchise agreements. Pesky stuff like capital payments for PEG or PEG channels or PEG operations. Somebody ask South Bend, Hammond, Merrillville, Mishawaka, Plymouth, Goshen and Portage about what happened to their production studios and playback facilities. Somebody ask the Indiana Utility Regulatory Commission (IURC) what the penalty should be for Comcast not making their quarterly capital payments to Fort Wayne even though the law clearly says support is supposed to remain the same.

But what about the price of cable? In Indiana, cable rates have risen from 5% to 20%, depending on tier. Even the “Interim Report” admits that there have been “mixed” results when it comes to price in states with statewide franchises, but then goes on to say that absent “federal statutory relief or regulatory constraint, reform initiatives that promote the entry of new competition would seem warranted if individual states seek a ‘market based’ solution to help moderate future price increases for consumers.” Hold up. Let me see, 17 states have passed “reform initiatives” to promote the entry of new competition, 10 of those “reform initiatives” have been in place for one to two years and I have yet to find a single instance of cable prices dropping in any of those states. However, I certainly must agree with the suggestion of the report that federal statutory relief and regulatory constraint may indeed be needed.

The term “customer service” is mentioned only once in the report and that’s a good thing as the IURC reported in its 2007 Flexibility Report that cable complaints rose 25% the first year after the legislation passed. See http://www.in.gov/iurc/RF_07.pdf. The Indianapolis Business Journal noted that the IURC is not empowered to resolve customer complaints. One community reported that even though local government contact information was removed from subscriber bills by Comcast after it received its statewide franchise, the IURC just forwarded the complaints back to the local government anyway. You can of course go to the IURC website and fill out a form and wait for the IURC to get back to you, but that’s not a comfort if your modem is out or one of AT&T’s boxes explode in your yard.

There’s the issue of why AT&T won’t carry the PEG channels in Bloomington even though they’ve been “serving” Bloomington for a year. Then again, if you followed the hearing on PEG last month you will know that AT&T’s provision of PEG is woefully inadequate and clearly not meeting the requirements of federal law. And you might also have discovered that AT&T isn’t capable of meeting Federal Emergency Alert requirements or providing closed captioning to the hearing impaired.

But hey! The “Interim Report” says things are just dandy in the Hoosier state! And they are about to get even dandier now that the Governor has appointed a former Ameritech lawyer as the IURC Utility Consumer Counselor because everybody knows how great Ameritech was at customer service.

I guess I would be remiss if I do not render friendly advice to the fine folks at Ball State University. Next time there is an urge to come up with a piece of…ahem…research…it would be good to talk to the people who are actually experiencing the realities of statewide video franchising in the state of Indiana rather than simply relying on press releases from San Antonio and bogus reports from Washington, D.C. As Bates said, research is actually going up those alleys and until you do that, you’ll never really know if they are blind.

posted by Riedel Communications