NY: Powers jostle over Verizon TV service

Posted on March 25, 2007 - 7:33pm.

from: The Buffalo News

BUFFALO’S BUSINESS
Powers jostle over Verizon TV service
David Robinson
Updated: 03/25/07 8:25 AM

Last spring, Verizon started laying the fiber-optic cables to homes in Hamburg, Orchard Park and West Seneca that not only can carry faster Internet traffic but also cable television.

We’re still waiting for Verizon to roll out its cable TV service in the Buffalo Niagara region. Verizon spokeswoman Heather Wilner isn’t saying when that will happen, only that it will take place eventually.

But state legislators are working on a plan that could speed the process. The proposed law would allow Verizon and other telecommunications companies to avoid the long and costly process of obtaining cable franchises from every community they serve.

Instead, a single, statewide cable franchise would allow those new competitors to move faster in building their networks and rolling out TV services.

It’s a step that eight other states already have taken, and one that currently is under consideration by lawmakers in several others. Two other states — Virginia and Arizona — adopted reforms to speed up the process without going the statewide

franchise route, while Connecticut and Oklahoma ruled that telephone companies don’t need separate video franchises.

There’s no doubt that new cable TV competitors in New York are on the slow road. Verizon has won franchises in just 29 communities, all in Westchester and Rockland counties and on Long Island.

The stakes are high for Verizon, which is making a $23 billion bet that building its FiOS service will bring in enough new Internet and cable customers to offset the decline in its traditional telephone service. Verizon had 7.6 percent fewer traditional phone lines in the fourth quarter than it did a year earlier, and the costs of bringing fiber optics to customers’ homes cut into the company’s profits by a whopping $320 million.

“While the FiOS initiative is expensive, we believe that bold action was required to combat the threat from wireless and cable,” said A.G. Edwards & Sons analyst Kent Custer in a report.

Not surprisingly, New York’s cable TV industry opposes the idea of a statewide franchise, favoring instead a weaker bill that would require municipalities to give new players in the cable market a final decision on their local franchise application within 30 days.

The cable providers say it’s only fair that new players go through the same franchise process that they did. They say the local franchise model prevents cable companies from cherry picking only the most lucrative markets while avoiding poorer ones. Plus, cable already faces competition from satellite TV providers.

“Competition should not be spurred by a regulatory regime that creates an unlevel playing field designed to ease the way for new entrants at the expense of incumbent providers,” said Richard F. Alteri, the president of the Cable Television Association of New York, in testimony at an Assembly hearing last week.

“The proposed bill would allow new entrants to pick and choose which parts of a community to serve, thus creating the real possibility that they will bypass significant areas,” he said. “The proposed legislation would be a step backward for New York.”

To prevent cherry picking, the more sweeping legislation sponsored by Assemblyman Richard Brodsky, D-Westchester, would require companies receiving a statewide franchise to provide service to 85 percent of the state within six years.

That’s a big reason why Verizon opposes the Brodsky bill, too. “It requires new entrants to build service in areas where it’s not economically feasible,” Wilner says. Rather than speed up competition, the coverage mandate would actually slow it down, she says.

With cable rates rising at roughly 2z times the inflation rate in monopoly markets since 1996, more competition can’t come fast enough.

( categories: NEW YORK | State Franchises | Verizon )