Save Access

from: Dayton Daily News

Bill 117 would have drastic effects on cable competition, public access

By Jim DeBrosse

Staff Writer

Sunday, March 25, 2007

COLUMBUS — Consumer groups call it "cherry-picking" or "redlining" — allowing cable and phone companies to target affluent, densely populated areas for the latest in computer and video services while ignoring minorities, the poor and rural areas.

It has been a concern in nearly every video franchising bill introduced in states around the country over the last two years. And Ohio Senate Bill 117, introduced last week by Sen. Jeff Jacobson, R-Vandalia, is no exception, said Ed Mierzwinski of the Ohio Public Research Interest Group.

"The system in Ohio's bill is rigged and stacked in favor of the player — in this case, AT&T," he said. "This is AT&T's dream legislation."

Phone companies around the country are eager to enter the video-provider market and compete with cable companies, but they want laws that will allow them to sign a single statewide contract rather than negotiate hundreds or even thousands of separate contracts with localities. That's the current law in Ohio.

Nine states have passed statewide video franchising laws in the last two years, including Indiana and Michigan. "The best thing we can do in Indiana is to build an inviting sandbox where all the telecommunications companies can play, and our (new law) is a great, big step in that direction," said Brad Rateike, a spokesman for Indiana Gov. Mitch Daniels.

At least one state, Texas, the first in the union to launch statewide franchising in 2005, says it is seeing a savings to consumers through increased competition. In a study paid for by phone companies, the Perryman Group, an economic analysis firm based in Waco, Texas, found that consumers saved 15 percent or more on video bills in areas where there is now competition among providers.

The key word, however, is "competition," Mierzwinski said. If state laws don't force phone and cable companies to build out their networks to all areas, including poor and rural communities, only affluent consumers will benefit, he said.

The Ohio bill does include so-called "build-out" requirements, but "the provision has no teeth," said Joel Kelsey, grass-roots coordinator for Consumers Union, the nonprofit group that publishes Consumer Reports magazine. "There's nothing that stops AT&T from cherry-picking in the neighborhoods they want to — short of consumers bringing a lawsuit."

Once companies reach 30 percent of the households in their service area, the bill would require them to build out to reach 50 percent of their target over the next two years. Kelsey said that leaves too much wiggle room for cherry picking. Some states, such as California, require companies to build out to their entire service area, he said. And in New York, companies are required to build out to all areas above a certain population density.

Caryn Candisky, a spokeswoman for AT&T Ohio, countered that the "language in the bill sets high standards for nondiscrimination" against the poor and underserved.

Both consumer groups and local government officials say the bill reduces the power of localities to regulate cable customer service and control local rights of way while consolidating weaker oversight in the Ohio Department of Commerce.

"We have had local franchises since the 1970s for these kinds of services, and they've worked pretty well," said John Mahoney, executive director of the Ohio Municipal League. "We have reservations (about) whether the state government is structured in a way to regulate in the consumers' favor."

The bill would allow local governments to retain most of their franchise fees from video providers, capping those fees at 5 percent of the company's gross revenues. But it would also redefine "gross revenue" to exclude a phone or cable company's advertising revenue, a cause for concern among local officials.

Last year, the city of Dayton brought in $1.2 million in cable franchise revenues, while Columbus reported $6.5 million in collected fees. Localities use their franchise fees mostly to pay for customer service regulation and for operating educational and community access channels.

Steve Husemann, executive director of the Miami Valley Communications Council, said his agency relies on 80 percent of the cable franchise fees from eight cities in southern Montgomery County to operate its four community access channels.

"There's no question (the bill) will have a major impact on our revenues," he said.

MVCC's current franchise with Time Warner requires the cable firm to supply and replace certain equipment as well as providing an institutional network for local governments and schools, Husemann said. The state bill does not include those provisions.

Candisky defended the bill, saying it "very clearly preserves those local revenues ... and maintains the availability of those public access channels."

Cable companies say they have no problem with the bill, since it allows them the option of either seeking the same state franchises or retaining their current local franchises. "We'll stay neutral as long this bill treats all wire line providers equally," said Jonathon McGee, executive director of the Ohio Cable Telecommunications Association.

As the bill heads to committee hearings this week and next, Jacobson aide Greg Saul said there will be plenty of opportunity for consumer groups and local jurisdictions to help shape the legislation. "We would certainly listen to what they have to say," he said.

Statewide video franchise bills

The situation: Companies interested in offering cable services to consumers before 2005 were required to negotiate separate agreements with each city before they could lay cable in the ground or place it along utility lines. At least nine states now have laws that permit state-issued agreements.

Bills passed: Texas, California, Indiana, Kansas, Michigan, New Jersey, North Carolina, South Carolina and Missouri.

Bills being considered: New York, Illinois, Wisconsin, Pennsylvania, Ohio, Iowa and Georgia.