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from: Lancaster Online

Cable choice picture unclear
Bills that could have brought competition die in state Legislature. Some customers could have been cut out.

By Gil Smart
Sunday News

Published: Oct 01, 2006 12:05 AM EST

LANCASTER COUNTY, PA - State Sen. Gibson Armstrong said he probably gets more complaints about ever-rising cable rates than anything else.

“I’ve always been a strong advocate of competition” as a way to bring cable prices down, said the Refton Republican.

And it looked as if the state Legislature was poised to pass a landmark act that would generate more competition in the market, finally giving cable customers a choice.

But not this year.

The “Cable Choice and Competition Act,” actually two separate pieces of legislation that were being fast-tracked by the state House and state Senate, appears to have died a quiet death late last week. Armstrong — a member of the Senate Communications and Technology Committee, which was to have held a hearing on Senate Bill 1247 last week — said that opposition to the act, primarily from municipalities that feared they would lose control and maybe even money if it was passed, scuttled the proposal.

Even Armstrong said he had some reservations about it, particularly the lack of a provision that would ensure that rural communities such as his own would see the benefits of competition.

“I met [Thursday] with the Verizon people and they said, ‘Next year,’ ” said Armstrong.

Verizon spokeswoman Sharon Shaffer did not return a phone message Friday seeking comment.

Verizon’s fiber-optic service, of FiOS, has already been extended to four counties in southeastern Pennsylvania — Bucks, Chester, Montgomery and Delaware — and the company could begin delivering cable programming, Internet access and other broadband products to some 50 municipalities as early as next year.

Nationwide, the conversion of the company’s old copper lines to the new network is expected to cost $22.9 billion. Already, Verizon offers FiOS TV in parts of California, Florida, Maryland, Massachusetts, New York, Texas and Virginina. Texas in particular is considered a success story, said Verizon’s Shaffer in an interview earlier last week: “Twenty-two cable providers have now entered the market, and as more and more choices are available to the consumer, studies show a natural decline in cable rates.”

But Verizon said state law makes it harder for the company to generate a sufficient return on its investment in Pennsylvania. Currently, Verizon — and cable companies like Comcast or Blue Ridge — must negotiate a “franchise agreement” with each municipality, in effect paying to use the public right-of-way. Municipalities can extract “franchise fees” and compel cable providers to make service available to all citizens.

Under the Cable Choice and Competition Act, local franchise agreements would have been replaced with a single statewide agreement. Verizon officials said this would streamline the process, facilitate Verizon’s entry into markets now served by one provider — and benefit consumers.

But cable companies wondered why the rules should be changed for Verizon, and consumer groups worried that the lack of a “build-out provision” meant those living in areas deemed unprofitable could be bypassed.

That doesn’t mean urban areas; indeed, said Sen. Armstrong, “people in lower-income communities are some of [a cable provider’s] best customers.” But rural areas, where there would be less of a return on the massive investment necessary to extend the network to farther-flung homes, could be a different story.

“We’re talking about a vital communications infrastructure” to which some Pennsylvania residents simply wouldn’t have access, said Beth McConnell, state director of Penn Public Interest Research Group, or PennPIRG.

Indeed, said McConnell, people in such communities might even see their cable bills rise, as cable companies are forced to lower prices in areas where there is competition — and make up the difference by jacking up prices where they remain the only game in town.

Both the Pennsylvania Association of Township Supervisors and state Association of Boroughs opposed the legislation because they believed it would strip local communities of control. Some feared it could strip local communities of money, too, because the act might narrow the definition of “gross revenues” used to calculate franchise fees. The Pennsylvania State Association of Boroughs opposes the measure; locally, Marietta Borough Council voted in July to oppose it, with council president Bob Heiserman saying the borough could lose $27,000 a year if the legislation passes.

Armstrong said he’d spoken with local municipal officials and “we got some really good input” on the bill, but in the end “the municipalities wouldn’t sign off on it.”

“We just couldn’t get an agreement.”