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from: Blogging Broadband

Book Report Raises Questions About Texas’ SB5

Those keeping score know that the Texas legislature really started the state-mandated video franchise train down the tracks. SB5 was passed in Texas at the end of 2005. It was a natural place for the phone companies to get the ball rolling, as SBC, now the new AT&T, called Texas home. Since SB5 passed, a likely-unprecedented wave of states adopted some form of “shall issue” video franchising — all of it aimed at helping the phone companies get into the cable business.

The idea of creating competition for cable companies was worthwhile. But now that a little time has passed, some are starting to look at whether this chain of state laws has really served the intended purpose. One of the more comprehensive reviews has been assembled by Dr. Connie Ledoux Book (Ph.D.) of Elon University. During the fall of 2006 and spring of 2007, students in Elon’s Broadcasting and the Public Interest began to assemble information about the impact of SB5 in Texas. According to Dr. Book’s draft summary of the work:

The project started with a simple question: Has SB5 created competition that resulted in lower cable costs for customers in Texas? What should be a simple yes or no response is actually quite complex and after weighing the variable addressed in this paper, one could argue the following:

SB5 has created competitive markets in more affluent, wealthier areas of Texas. These residents benefit from having choice between cable providers and the hope that a competitive environment will bring about better customer service and pricing benefits. However, none of the newly established pricing plans ultimately save these Texans more money on a monthly basis (although they may receive more services). At the same time this competitive cable scenario exists for a few communities in Texas, the passage of SB5 has resulted in every Texan subsidizing competition for the few through telecom taxes and regulatory fees.

This work, unfortunately, confirms many of the fears raised by those who originally opposed state-wide franchising bills — among them, that the pace at which competition develops is dependant on market forces, not regulatory treatment; that the wealthy will be the primary beneficiaries of any competition that does eventually develop; that the benefits of competition manifest themselves in things other than substantially lower cable prices; and that the potential for phone customers to unwittingly pay for their phone company’s foray into video is real.

Many thanks to Dr. Book for sharing her draft report — if you’d like to see a copy, you can download it here.