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from: Pittsburgh Post-Gazette

A bad deal for cable customers

Verizon's plan for statewide franchising would leave many behind

Wednesday, October 25, 2006
By Joel Kelsey and Beth McConnell

The telephone giant that provides many Pennsylvania homes with a dial tone is rapidly working its way into the cable market, as traditional home phone lines go the way of the horse and buggy. Generally, this new competition in cable and telephone markets should help stabilize the ever- increasing bills that consumers pay every month.

Yet, as Verizon scrambles to compete with Comcast's "triple-play" option of cable, telephone and Internet access, it is trying to sneak one past the ump. Verizon is asking the state Legislature to let it offer major league services to affluent suburban communities while leaving the rest of us to warm the bench in Comcast's monopoly. Eager to roll out its new video services in Pennsylvania, Verizon is pushing for sweetheart exceptions from consumer protection rules that have governed cable TV providers.

Right now, local municipal governments can require a cable company to comply with fundamental consumer protection provisions before it begins offering service. These agreements, called video franchises, establish customer service standards; provide funding for public, educational and government access channels; and ensure that when consumers have a problem with their cable company, they can call City Hall to get it resolved. Most important, nearly all franchise agreements require the cable provider to offer service to all residents in the service area, rather than cherry-pick the most profitable neighborhoods while denying service to everyone else. These "build-out" requirements ensure that all consumers in a cable company's footprint have access to service.

However, as Verizon attempts to jump into the world of cable service, it is trying to steal home by leap-frogging over Pennsylvania consumers. An army of Verizon lobbyists in Harrisburg are aggressively pushing legislation that would take consumer protection power away from local communities and replace it with one statewide franchise agreement without those protections, one that would provide no guarantee of choice or competition for cable consumers. The legislation could lead to higher cable bills for some consumers.

Verizon's argument that negotiating with communities is cumbersome and impedes competition that would lower cable bills is as transparent as it is inaccurate. Verizon already has struck deals with dozens of municipalities under the current pro-consumer rules.

In Montgomery County, 30 municipal governments have formed a consortium that just brokered a deal with Verizon, which 17 local governments have ratified. In Chester County, 13 municipal governments have ratified a consortium agreement with the telephone giant. Verizon is signing franchise agreements in southeastern Pennsylvania faster than it can lay the fiber to provide service.

But it's clear that Verizon doesn't plan to offer service everywhere in the state. The company has rejected franchise offers from Western Pennsylvania municipalities. Tim Rogers, township manager of Shaler, tried to initiate talks with Verizon for a five-year franchise agreement but was turned down.

Noticeably absent from Verizon's proposal for a statewide franchise agreement is any requirement that it eventually offer service to all Pennsylvanians, even though the company has agreed to such requirements in other states. In New Jersey, Virginia and California, for example, Verizon has agreed to reasonable build-out over time. In California, once Verizon reaches one million customers, it has agreed to build-out its fiber service to 40 percent of the households in the state within five years.

Without strong build-out requirements, Verizon could draw a big red line around the neighborhoods it doesn't want to serve -- such as parts of Western Pennsylvania, like Shaler. Even more troubling is that once a new entrant like Verizon begins competing in a cable market, regulations that cap the price of basic cable service are lifted. In Pennsylvania, this would encourage Comcast to lower basic cable rates where it must compete with Verizon, while hiking rates in neighborhoods where it enjoys monopoly control. This is likely to leave many consumers throughout rural Pennsylvania on the wrong side of Verizon's big red line and firmly within the cable monopoly's fist. Verizon's proposal would give these consumers the choice of either paying skyrocketing cable rates from the monopolist Comcast or receiving no cable at all.

In a world where access to cable also can determine access to the Internet and other means of communication, the Pennsylvania General Assembly must ensure that the public is provided with meaningful protections.

Joel Kelsey is grassroots coordinator for the Consumers Union, publisher of Consumer Reports (www.consumersunion.org).

Beth McConnell is director of the Pennsylvania Public Interest Research Group Education Fund (www.pennpirg.org).