Why Verizon picked Montgomery for its battle

Posted on July 21, 2006 - 7:20am.

from: Maryland Gazette Net

Why Verizon picked Montgomery for its battle

‘‘I’m shocked, shocked to find that gambling is going on in here!”— Capt. Renault in ‘‘Casablanca”

When Verizon recently dug into its vast bag of armaments and lobbed a lawsuit at Montgomery County, the only one apparently surprised by the move was County Council Vice President Marilyn Praisner. In a statement released after the July 4 holiday, Praisner admitted to being ‘‘stunned to have these false accusations by Verizon leveled against Montgomery County.”

Verizon’s lawsuit, of course, stems from the inability of the parties to reach an agreement on franchising for Verizon’s new video distribution service. In taking the measure of Verizon, however, Praisner seems to have overlooked a couple of basic truisms: Verizon is spending a fortune to build out new infrastructure, and it has an army of lobbyists larger than the population of Shreveport, armed with talking points and taking no prisoners. This is a mighty dangerous combination.

Allow me first to state Henoch’s First Law of Telecommunications Policy: If Verizon or Comcast stakes out a position on a particular issue, it is probably not good for you. Notwithstanding this premise, I can see some logic behind Verizon’s position. I don’t agree, but at least I understand.

Verizon is in the midst of a huge fiber optic rollout throughout its service area (tune in for details in my next column). It plans ultimately to spend about $3 billion across 14 states to bring fiber to your home and business. The short-term benefits of mammoth download speeds are certainly attractive; indeed, Verizon currently offers business-class packages of up to 30 Mbps. New routers recently introduced by Verizon may push speeds to as high as 100 Mbps in the coming months.

But Verizon is not going through this exercise merely to allow my 8-year-old daughter to download Kelly Clarkson songs at a quicker clip — admittedly a fine goal in its own right. This embarrassment of bandwidth riches will also permit Verizon to introduce television services to compete with the local cable operator, a process that is under way in a number of markets under the FiOS TV brand name.

Verizon’s nightmare scenario is having to negotiate a video franchise in every county and hamlet it wishes to serve. That army of lobbyists mentioned previously has been marshaling its forces to urge passage of a bill in Congress that would allow national franchising, thereby cutting the locals out of the picture.

Which brings us to our lawsuit. It surely is no accident that Verizon chose our county for its test case. Montgomery, with its fine air and pleasant flowery aromas, is home to many members of Congress and other policymakers. What better place to make a statement than at the curb of the very people you are trying to persuade?

This spitting match is doing nobody any good. If the county sticks to its guns, it may well force Verizon to go to the mattresses. Verizon could, in a punitive bout of caprice and against its own best interest, divert its rollout of fiber in the county and decamp for friendlier climes. What Verizon will certainly do is unload the full weight of its legal might on 101 Monroe St. in a fit of pinstriped mutually assured destruction.

So what are the parties to do? I suggest that everybody needs to take a hard look at the reality of things. Verizon needs to stop its fuzzy daydreaming about shoving local governments out of the picture. Even Verizon doesn’t have the muscle on Capitol Hill to make that clunker fly. And the county had better realize that the ’80s are over; the 21st century is here, and the old regulatory paradigms don’t generally work any more. New times demand new thinking.

These are smart people, and I am sure that the parties can go back to the negotiating table and work out a deal that is good for everybody in the county. Now that could be the beginning of a beautiful friendship.

Bruce Henoch is a partner with the Rockville law firm Shulman, Rogers, Gandal, Pordy & Ecker. He represents telecommunications and technology companies on a broad range of U.S. and international regulatory and commercial matters. He can be reached at bhenoch@srgpe.com.

( categories: MARYLAND | State Franchises | Verizon )