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from: Detroit Free Press

Cable fight winner unclear
Competition could help consumers, maybe

BY DAWSON BELL
FREE PRESS STAFF WRITER

June 11, 2006

Dumping Michigan's community-based cable television system for franchising and regulation could touch off a price war that benefits people who watch television, use the Internet and make phone calls.

Or not.

Advocates for the change -- mostly big telecommunications firms such as AT&T and Verizon anxious to expand into television and broadband -- have unleashed an advertising blitz touting savings for consumers.

They want to end requirements that cable providers must make a franchising deal with each city or township in which they operate.

The cable industry, in league with local government, has responded with ads of its own, citing threats to community public access broadcasting and the potential that poorer communities would be left behind by the money-grubbing phone companies.

The advertising campaigns have names like "TV for Us" and "Broadband Everywhere."

In Lansing and Washington, complex legislation is pending. At the state Capitol, Rep. Jack Hoogendyk, R-Kalamazoo, sponsored a bill to transfer cable franchise authority away from cities and townships to the Secretary of State's Office.

Hoogendyk says the change could create competition, hold down prices, improve service and generate economic growth.

Joe Fivas, at the Michigan Municipal League, says the change would lead to a system of haves and have-nots, where deluxe service is available and competitively priced in high-income areas, while residents of poor and rural areas are neglected.

Fivas says the Legislature is wasting time dealing with the issue before it becomes clear what changes will come from Congress. At least 13 other states are considering or have passed changes in cable rules similar to those under consideration in Michigan, according to the Associated Press.

On Thursday, the U.S. House passed a bill to create a national franchise process. Similar legislation is pending in the Senate.

Rich Robinson, an East Lansing resident, pays nearly $100 a month for Comcast broadband and cable (with no premium channels) at home. The Internet service has gotten better, he said, but the television service includes about 60 channels he doesn't watch.

"I'm pretty satisfied with the Internet, but I feel like I'm paying an awful lot," he said. But he's unsure whether dumping local franchise deals will help.

"In the immediate sense, competition is attractive," he said. "But how do you judge the longer run? I'm afraid it will end up as another monopoly."

For the ordinary consumer of television, phone and Internet, it's confusing. Here's a primer to help sort it out:

QUESTION: Who are the combatants?

ANSWER: On one side is an alliance composed mainly of cable providers (Comcast being the largest and most influential in Michigan) and local governments who award franchises. On the other, AT&T (which recently took control of SBC) is the big dog. In other states, Verizon is a player.

Q: What do they want?

A: Money, of course.

There's lots of it to be made just in cable with monthly packages that cost up to $100 per household. Locals get a cut of the fees, usually about 5%.

Then there is the rapidly expanding potential for bundling television, phone and broadband.

Q: So why don't they just try to sell services to consumers?

A: Here is the crux of the problem. You can't get cable in Michigan from a company that has not negotiated a franchise deal with the community. That's how it was set up in the 1970s and '80s.

AT&T doesn't want to deal with hundreds of communities and has backed legislation to turn franchising over to the state.

Comcast, which went through all the negotiating, doesn't want competition.

And local governments want to hang on to their franchise fees, public access stations and other contractual goodies.

Q: Who has the most political clout?

A: Both sides have lots of clout in the halls of government at every level. The interests of AT&T (formerly SBC and before that Ameritech) are never overlooked in Lansing when telecommunications regulation is in play.

The AT&T PAC had raised about $125,000 for the 2006 elections as of the latest reports, filed in April.

That's more than the Comcast PAC's $106,000. Significantly, however, Comcast hasn't previously been an active donor to state candidates, and spent only $2,400 in its PAC in 2004, according to the Michigan Campaign Finance Network.

Q: So why should ordinary citizens care?

A: Because it's your money. Unless you choose not to exercise your inalienable right to ESPN, CNN and online gaming, you're paying for this war.

That doesn't mean you have to take sides.

Joe Munem, spokesman for the City of Warren, said he's not sure what would happen if the state took control of franchise supervision. It might increase competition; it might not, he said.

"But the existing system has clear benefits for us," Munem said.

Warren uses about $1.2 million a year in franchise fees to subsidize broadcasts of City Council meetings, football games and local concerts, "the kinds of things that bind a community together," he said.

Q: Isn't there competition in the market already with satellite and, in some places, cable companies competing head to head?

A: Yes and no. Thanks to satellite (not to mention old-fashioned antennas), most consumers have options for television service. In some areas, like much of metro Detroit, Wide Open West provides a cable competitor for Comcast.

But the competition hasn't driven down prices much. And satellite technology right now makes it an unlikely provider of broadband.

Q: What's happening in Lansing?

A: A lot of the special interests and their lobbyists are packing committee rooms and disagreeing with one another. Ditto in Washington, where a discussion is under way about taking cable regulation national. Inexplicably, local governments in Michigan appear to prefer that option to state franchising.

Q: How's it going to end?

A: Sorry. No predictions.

There are valid arguments on both sides. Or at least, there are valid-sounding arguments on both sides. Figuring out which one is correct is a little like trying to understand a bill from your cell phone company.

Contact DAWSON BELL at 313-222-6604 or dbell@freepress.com.