Va. Law Aims to Widen Field of Cable Providers

RICHMOND, March 10 -- Gov. Timothy M. Kaine (D) signed legislation Friday that supporters say will increase competition in the television cable business and potentially reduce monthly cable bills for consumers.

House Bill 1404, which overwhelmingly passed the General Assembly, makes it easier for a phone company such as Verizon Communications Inc. to offer television service that would compete with cable companies. The law, which takes effect July 1, offers a way to accelerate the negotiation of franchise agreements between companies and local governments.

The current setup requires companies wishing to offer television service to get a cable franchise through direct negotiation with a city or county, which often can take as long as 18 months. Under the new law, if a deal cannot be worked out in 45 days, a company can commit to a standard statewide agreement and begin offering television service 30 days later.

"Until now, Virginians did not have the opportunity to choose from a broad range of telecommunications service providers," Kaine said in a statement. "This landmark legislation offers more companies the opportunity to operate in areas that were not competitive."

The measure is a compromise between two giants of the booming telecommunications industry: phone companies and cable companies. For years, Verizon had battled the state's cable companies to create a system that would make it easier for the phone company and other firms to sell television service. Cable companies argued that phone companies were trying to circumvent rules that require service providers to cover all neighborhoods.

"This is truly a compromise," said John Knapp, director of government affairs for Verizon Virginia. "And competition, as in all markets, is good because it will provide an incentive for innovation."

The legislation says new entrants must meet specific terms under the alternative franchise framework. It calls on new companies to cover 65 percent of a locality within seven years, and it allows local governments to require 80 percent coverage after 10 years.

The bill was important to such large phone companies as Verizon and such small ones as Cavalier Telephone because they are looking for efficient ways to consolidate telephone, Internet and television services into one package for consumers.

Local government representatives said they were concerned that jurisdictions were for the most part excluded from the complex negotiations between Verizon and cable companies. As a result, counties and towns will be less able to obtain concessions such as public access channels for local governments and cable TV for schools as part of their franchise agreements.

"Overall, local government has less negotiating room," said Phyllis Errico of the Virginia Association of Counties, adding that governments can set customer service standards for cable, an ability she said will likely be lost. "I think this will be a very confusing year for localities and the industry and consumers to figure out how this all works."

Lawmakers said consumers will win because more companies will be allowed to offer more services.

"It's sort of like grocery stores," said Del. Terry G. Kilgore (R-Scott), chief sponsor of the bill. "The more people you have selling groceries, you'll find good deals out there." Kilgore said the law will also make it easier for companies to offer cable in the rural areas he represents.

A 2004 study performed by the General Accounting Office found that cable rates were 15 percent lower in markets that had competition than in those that did not. Verizon officials said that the law will mimic such conditions studied in the report, and consumers should see similar benefits.

Penelope A. Gross (D-Mason), a Fairfax County supervisor who has worked on cable franchise agreements, said she fears customers will lose out as the regulatory role of local government is curbed.

"The standard is, competition reduces pricing. But I think it reduces prices only temporarily," she said. "That was the argument made when they broke up Ma Bell, but I'm paying a whole lot more for phone service now."