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from: Wisconsin State Journal

Video bill on fast track

MARK PITSCH 608-252-6145
mpitsch@madison.com

Wisconsin residents would lose their rights to cable television repairs within 72 hours, credit for service interruptions and advance notice of rate increases, under a bill on the fast track in the state Legislature.

The proposal, designed to increase competition in an industry dominated by cable companies, is supported by the lobbying muscle of telecommunications giant AT&T.

It's part of AT&T's challenge to cable companies such as Charter Communications, which are licensed by local governments.

There is little agreement on whether the proposal would help consumers or hurt them.

Local governments worry the so-called "video franchise" bill would lower the payments they get from cable providers up to 30 percent, which they say would mean cutting city services or increasing property taxes to cover the losses, they say.

Opponents also say the bill would mean less money for low-budget public-access channels.

"If this legislation passes it will be very hard hitting for us," said Zack Henderson, 14, a producer, editor and performer on "Thursday Night Live," a television program run by kids on Sun Prairie's Kids-4 public access station. "We'd have to cut our budget if not close our office entirely."

But proponents say the bill would lower costs for telecast delivery - whether by cable or AT&T's fiber optic lines - by up to 23 percent by introducing competition and deregulating the industry.

In the long run, that would mean more money for local governments in which television service is offered because lower monthly charges would lead to more subscribers, they say.

"The assertion that they'll lose money under the bill is patently false. The data we have shows that more people will take video under this bill," said state Rep. Phil Montgomery, R-Ashwaubenon.

Montgomery and state Sen. Jeff Plale, D-South Milwaukee, the lead Senate sponsor, have scheduled a hearing Tuesday on the bill.

A spokesman for Assembly Speaker Mike Huebsch, R-West Salem, a co-sponsor, said the chamber would take up the bill in the next few weeks. Senate Majority Leader Judy Robson, D-Beloit, has not taken a position on the measure.

Gov. Jim Doyle wants more competition in the industry, said spokesman Matt Canter. But Doyle shares concerns about the lack of consumer protections in the proposal and won't support it unless they are addressed, Canter said.

AB 207 was introduced this week by Montgomery and Plale with a bipartisan group of 41 co-sponsors.

It has gained momentum in part because 15 lobbyists for AT&T are campaigning hard for quick passage.

That kind of muscle is usually a formula for success, said Rep. Mark Pocan, D- Madison. But the company could stumble if they push too hard, he said.

"They're trying to do it so fast that it looks a bit sleazier than I think it's intended," Pocan said.

But Jeff Bentoff, a spokesman for AT&T Wisconsin, said the lobbyists are simply teaching lawmakers about a complicated issue.

"It's an important issue, and it's complicated, and it takes some time to educate people on it," Bentoff said.

The state's cable industry endorses the bill. Although cable operators might be better off without a bill, they don't want lawmakers to pass other legislation giving AT&T and other competitors an advantage, said Tom Moore, executive director of the Wisconsin Cable Communications Association.

Rep. Gary Hebl, D-Sun Prairie, said lawmakers should give the bill plenty of scrutiny.

"This is one where we ought to take our time and evaluate it and make sure the people of Sun Prairie and Wisconsin are protected," Hebl said.

Under current law, video providers - mostly cable companies - negotiate franchise agreements with local governments to provide service. The agreements typically provide a fee to local governments in exchange for allowing companies to run cable through public rights of way.

Madison received $1.9 million last year, about 5 percent of Charter Communications' gross revenues, said Brad Clark, the city cable television coordinator. All but about $250,000 went into the city's general fund, which pays for police protection, garbage pickup and streets, he said.

An additional $390,000 came from a 62-cent-per-month fee each subscriber pays, Clark said. It's used for the city's public access channels, he said.

But under AB 207, the state Department of Financial Institutions would issue one statewide franchise, and local governments wouldn't have a role.

Opponents of the bill said they object to a provision that would wipe out consumer protections such as requiring cable operators to make repairs within 72 hours of being called, giving credits for service interruptions of more than four hours and giving 30 days' notice of a rate increases.

"That would irritate me more than I already am," said Nick Karabis, 63, a retired auto mechanic, said. "Why should the consumer suffer?"

But Karabis also said he would welcome competition. He said it took him three weeks last December to get Charter to repair his television reception. He said he didn't know about the 72-hour requirement until later.

And for about two months this year his high-speed Internet service was operating on about half the speed it should have, he said.

Another part of the bill that is drawing attention would prohibit the state Department of Financial Institutions from regulating the video service providers.

"They give it to an agency that doesn't know anything (about video service), then write in the law that they can't interpret this, can't regulate it and can't enforce it," said Barry Orton, a UW-Madison telecommunications professor who advises local governments on the issue. "That's bizarre."

Montgomery said the state Department of Agriculture, Trade and Consumer Protection would be able to issue regulations for video service providers.

Consumer costs for video service have dropped 23 percent in markets where phone companies offer competition, Montgomery said, citing a General Accounting Office study.

And in a report out this week, the Wisconsin Policy Research Institute said each Madison customer could save up to $138 annually through video competition.

Cities that negotiate licensing agreements with cable companies don't have a reason to negotiate lower rates because they get a portion of revenues, Montgomery said.

"What incentive has there been on the city's behalf to hold down rates? None. That's their cash cow," he said.

But others are skeptical.

Moore said he doubts AT&T's claims that customers' costs would go down.

He cited a 2006 statement by Edward Whitacre, AT&T chief executive officer, in which he said the company's entry into video service won't lead to lower prices.

"I don't think there's going to be a price war. I think it's going to be a war of values and services," Whitacre said, according to a transcript of his remarks at an investors conference.

City officials and Moore also said if AT&T and others want to compete with cable companies, they can under existing law.

Clark, of Madison, said the city has been talking to AT&T for 12 years in an effort to get them to compete with cable. The city's franchise agreement with Charter, which runs through 2012, is not exclusive, he said.

Montgomery's bill would provide local governments fees for video licenses but would limit them to 5 percent of revenue from subscriber fees.

Some agreements between cable companies and local governments provide for a fee equal to 5 percent of all revenues, including subscriber fees and advertising, local officials said.

Montgomery said local governments would get more money under his bill because more people will want to subscribe to video services, increasing companies' revenues from subscriber fees.

But local officials fear that won't be the case and that public access programs will suffer because of a lack of money.

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