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AT&T and Verizon have been pushing for state-wide franchises as well as the national legislation in the House and Senate.
from: Detroit News

AT&T chief: Untangle local TV franchise rules
Company making plans to deliver Internet-based television to state residents
Sharon Terlep / The Detroit News

DETROIT -- AT&T Inc. Chairman and CEO Edward E. Whitacre Jr. said Monday that Michigan should revamp cable television franchise rules that stand in the way of AT&T's plan to deliver Internet-based TV to state residents.

In a speech before the Detroit Economic Club, Whitacre pushed for new legislation that would give companies a statewide franchise and eliminate requirements that cable providers negotiate individual contracts with every city and township they serve.

If Michigan doesn't pass a new law, AT&T may begin delivering TV service anyway, Whitacre said after his speech, noting that Internet-based TV is not cable TV and therefore existing regulations don't apply.

"Could we just come in and do it? Sure," he said. "We're still contemplating that. But we'd rather work within the system. We hope to make friends."

AT&T, which is spending $4 billion to upgrade and expand its national fiber-optic network, intends to offer video service to half of the customers in its 13-state service territory within three years.

The company has said it will invest $500 million in Michigan to upgrade its infrastructure, most of which would go toward adding broadband capability for Internet TV. Without a statewide franchise, AT&T would invest far less in the state, Whitacre said Monday.

If bills pending in the Michigan legislature pass, AT&T and other cable providers would be able to get a statewide franchise that lets them decide which neighborhoods to serve. AT&T has told investors it plans to serve 90 percent of what it calls "high-value" customers and 5 percent of "low-value" customers.

Municipal officials fear that means low-income areas will be bypassed and that cable companies eventually will stop serving unprofitable neighborhoods. Existing local franchise agreements require Comcast Corp. and other providers to offer their services to everyone in a community.

Communities also worry about a provision of the proposed state law that appears to cut by one-third the franchise fees that cable providers pay to local governments.
"Our concerns are based on what they told their Wall Street investors," said Joe Fivas, assistant director of the Michigan Municipal League, which represents 500 cities and villages. Whitacre's comments Monday that AT&T is committed to providing service to all did little to assuage members' fears, Fivas said.

"It's easy for them to take the 'trust me' approach," he said of AT&T. "The reality is that we need a statutory guarantee."

The franchise debate is becoming increasingly heated, with cable companies and local governments locked in a battle with phone companies and groups advocating for expanded service.

At one point during his speech, Whitacre singled out the Michigan Municipal League, saying the group refused to meet with AT&T, a charge the league denies. Meanwhile, the league helped pay to have a truck circle the Masonic Temple in Detroit, where Whitacre was speaking; the truck carried a billboard that said, "AT&T: Why won't you call us back? -- Michigan's communities."

Whitacre acknowledged that AT&T likely would face lawsuits if the company were to begin offering Internet-based video service without any kind of franchise agreement. The company tried that approach in some Chicago-area suburbs but was forced by the communities to stop. AT&T is suing the communities. AT&T also mounted that argument unsuccessfully on a federal level.

Whitacre said a statewide franchise is the only way to keep cable rates down. While the average phone bill has dropped 20 percent since 2000, he said, cable bills have increased by 40 percent.

"Know how to put a dent in cable bills?" he said. "Increase competition."

AT&T's goal is to include 5.5 million low-income households in its initial rollout of Internet-based TV.
Whitacre also used his Detroit appearance to announce an effort to expand AT&T's high-speed Internet offerings in rural areas by selling satellite-based access to customers who can't be reached by broadband over phone lines.

AT&T will partner with WildBlue Communications Inc. to sell satellite broadband, eventually expanding to include all customers in its 13-state local service area without access to a digital subscriber line, or DSL.
The company will also bolster efforts to provide fixed wireless technology in Texas and Nevada.

You can reach Sharon Terlep at (313)223-4686 or sterlep@detnews.com.