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from: Sioux City Journal

Qwest views TV future in Iowa
By Dave Dreeszen Journal business editor

Legislation that cleared the Iowa Senate last week could pull the plug on Sioux City's cable television monopoly in Sioux City.

The bill would establish statewide cable franchises, making it easier for Qwest Communications and other local phone companies to also offer video services in markets like Sioux City, where Cable One is now the sole cable provider.

"Fundamentally, it's a great consumer measure,'' said Sen. Steve Warnstadt, D-Sioux City, floor manager of the bill, which passed the Senate, 44-6. "It will result in more investment in Sioux City and across the entire state.''

Under current law, cable franchises are granted by local governments. In most cases, a provider gains exclusive rights to the market in exchange for an annual fee.

"The current system has been in place for 40 years, and look what we have, a monopoly environment,'' said Michael Sadler, a lobbyist for Qwest, the largest local phone provider in Sioux City and Iowa. "Right now, the present law discriminates against Qwest from providing that same video service over there own lines.''

Sadler said the current system to set up cable service is cumbersome for a large phone provider like Qwest, which serves 350 Iowa communities. It would take countless years to win approval in each town, he said.

Under Senate File 554, which now heads to the House, companies like Qwest could apply to the Iowa Utilities Board for a statewide franchise to provide video services.

Phone companies like Qwest would like to bundle TV along with local phone, high-speed Internet and other services over their networks. "Technology's changing quickly and we're at the point now where all the cable companies are offering telephone service. and we'd like the opportunity to turn around and offer cable TV service to our customers,'' Sadler said.

Qwest has not said where it would lilke to roll out cable TV in Iowa, but company spokeswoman Kara Neuverth said Sioux City is "clearly a key market for us.'' Qwest currently offers cable TV in the Omaha area, she noted.

Warnstadt said the Senate bill also could encourage local telecom companies like Long Lines and Fibercomm to begin adding cable TV in Sioux City. The senator emphasized his support of the legislation was not a reflection on Cable One, which he said "provides a great service'' in Sioux City.

"I'm not looking at it solely from a Sioux City perspective,'' he said. "I'm looking at eliminating the roadblocks toward businesses making some capital investment in this state that will help spur competition and give consumers more choices and lower cost,'' he said.

Mediacom, the state's largest cable TV provider with service to 320 communities, and other cable providers had opposed previous versions of the bill, but dropped their opposition after legislators added provisions that they say would put them on a level playing field with phone companies that add video services.

"We don't really feel the bill is necessary,'' said Cheryl Goettsche, general manager of Cable One in Sioux City. "The only thing we're asking for is that it's fair.''

Under Senate File 554, if a new competitor like Qwest begins offer TV service in a community, the existing cable company also could apply for a statewide permit. Until then, cable providers would continue to operate under their existing local franchise agreements.

"When Qwest comes to compete with us we don't have to do more for the city than Qwest does,'' said Tom Graves, a lobbyist for the Iowa Cable Association, which represents 100 cable providers and small phone companies doing business in the state. Cable One is a member, but Sergeant Bluff-based Long Lines is not.

To make the bill more palatable to cities who feared the loss of revenues they receive from cable providers, senators added a provision that says new competitors would be required to pay the same franchise fee and meet other conditions of the local franchise agreement, such as reserving channels for local government and public use.

Sioux City's current 15-year franchise agreement, Cable One, which began doing business in town in 1978, runs through 2014. The company pays a 3 percent franchise fee on its local gross revenues. That amounted to $349,938 in the fiscal year that ended last June 30, said city attorney Jim Abshier.

Warnstadt noted that cities like Sioux City already lose money when consumers switch from cable to a subscription satellite TV service, which don't pay franchise fees. In Sioux City and other communities, Qwest bundles with its services video services from satellite provider Direct TV.

With more cable choices, Warnstadt said local governments could see their franchise fee collections grow. "They do not take into account if a new provider is able to come in and take customers away from satellite or if they are able to get customers that do not have cable, that is revenue that will be coming into the city that the city is not currently getting,'' he said.

In states that injected competition into the cable franchise business, studies showed that rates fell as much as 41 percent, Warnstadt said.

Nationwide, a dozen states have passed some form of a statewide cable franchise bill. Denver-based Qwest, which serves 14 states in the Midwest and West, is lobbying to bypass local franchising rules in several other states. In addition to Iowa, legislation is pending in Minnesota and Washington. Proposals failed or were tabled in Colorado, Idaho and Utah.