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from: Rockford Register Star

AT&T Backs IIlinois Video Franchise Legislation

From Rockford Register Star, March 21, 2007
By Kiyoshi Martinez

Two communication industry behemoths are battling over how TV programming gets to Illinois homes.

On one side, AT&T wants to re-enter the broadband market and compete directly with cable companies to supply video services — a market worth $32 billion nationally in 2006.

AT&T and others are pushing legislation at the state capitol that would let communication companies offer TV programming to homes through their phone lines throughout the state.

Supporters say it will help lower costs for consumers. Opponents to the bill, including cable companies, say the proposal gives AT&T an unfair advantage and also could hurt public-access channels.

The bill, which is still in committee, would allow communication companies to sidestep required negotiations with municipal governments, which cable companies must do before offering service. Instead, the bill would let communications companies apply for a license from the state.

If it passes, AT&T says, it will spend $500 million to $700 million in Illinois to upgrade its network infrastructure to provide TV programming, said Paul La Schiazza, AT&T Illinois president.

“We have capital that we want to spend in Illinois today, and we can’t find the communities to spend it quick enough because of this authorization problem,” he said.

La Schiazza said AT&T expects to invest if the bill passes.

Can competition mean lower rates?

Communications companies, in testimony last month in support of the legislation, argued that more competition could stop rising cable TV rates in Illinois.

Comcast Corp. has the largest share of the cable market in Illinois. Insight Communications, which serves Rockford, has a partnership with Comcast, which owns 50 percent of Insight’s assets.

Cable rates increased 93 percent nationwide from 1995 to 2005, according a report released last year by the Federal Communications Commission. In Rockford, the price of the basic-expanded package from Insight has gone up 144 percent since 1996, while the number of channels rose from 32 to 69.

“This is a real opportunity to get consumers lower prices, better choices, more innovation and real rate relief they deserve,” La Schiazza said.

The plan’s opponents say communications companies wouldn’t be competing fairly under the bill’s provisions.

“If this bill is truly about competition, then AT&T and the competitive phone providers should have to offer service to all their customers,” said Brian Gregory, regional director of government and regulatory affairs for Insight.

The bill doesn’t require universal service to all customers in the company’s service area, meaning one portion of city residents could have more options than another.

“What we see as a drawback to the bill as it is drafted is that AT&T is allowed to pick certain areas that they deem to be in their best interest to serve,” said Ron Schultz, Rockford’s city attorney.

Under Rockford’s currently local franchise agreement, Schultz said, the city requires Insight to provide universal service.

And there’s still uncertainty if competition will really mean lower rates for consumers.

“I’ve never been too great at predicting the future,” La Schiazza said at the hearing when asked directly if the rates would go down. “Prices have gone down in other states and I don’t believe that Illinois is going to be any different or unique.”

The agreements that cable companies have with cities require them to provide public access channels.

Opponents to the bill also say it could eliminate local public, education and government programming, or PEG, because public access channels wouldn’t be able to produce enough original content to stay on.

“AT&T is telling people they’re going to take care of (PEG),” said Barbara Popovic, executive director of Chicago Access Network Television. “Having read the legislation, I can tell you they sure didn’t take care of it the first draft. It looks pretty bad.”

The bill states that PEG channels would have to produce at least eight hours of non-repeated programming each day, otherwise the provider can stop showing the channel.

However, the bill also requires communication companies to give 1 percent of their gross revenues in the municipality back to the area to be specifically spent on PEG programming.