Phone Firms Await FCC on Cable Ruling

FCC Chairman Kevin J. Martin supports a proposal to make it easier for telephone companies to win local franchises for television service and compete with cable companies. (By Reed Saxon -- Associated Press)

Telephone companies could get a major boost today in their efforts to penetrate the cable television market when the Federal Communications Commission considers a measure that would give state and local officials less latitude in awarding cable franchises.

FCC Chairman Kevin J. Martin, a leading advocate of the rule, has argued that government officials often stymie competition by delaying decisions on awarding cable franchises to telephone companies and by imposing exorbitant fees and conditions. As a result, cable operators often have been able to maintain a virtual monopoly on television services, resulting in steadily increasing prices for consumers, according to Martin. He cited an FCC survey

"Telephone companies are investing billions of dollars to upgrade their networks to provide video,'' Martin said in a speech two weeks ago. "As the telephone companies and others began actively seeking to enter video markets in late 2004 and 2005, however, we began to hear from some providers that local authorities were making the process of getting franchises unreasonably difficult."

Though the draft proposal will not be made public until today, it has already drawn sharp criticism from cable companies -- which argue that it would unfairly penalize them -- and local and state officials, who balk at efforts to curtail their authority in awarding franchises.

FCC officials said the measure's key provisions reflect proposals that Martin outlined in his remarks to the Phoenix Center, a research group, including specific deadlines for officials to decide on franchise requests. He said that state and local officials should be required to rule on applications within 90 days if the companies applying already have access to the required rights of way. Telephone companies such as Verizon Communications and AT&T, which stand to benefit most from the measure, often have such access for their fiber-optic lines.

Martin also urged that limits be placed on what local officials can demand from applicants in return for franchises. Local officials now can impose fees amounting to no more than 5 percent of cable revenues, but they often also demand that companies make other public improvements, such as wiring government buildings for broadband and even building a public swimming pool.

Finally, Martin has raised concerns about "build-out" requirements, which force telephone companies and other new providers to offer TV service to everyone within a given geographic area as a condition for winning a franchise. An FCC official said some of those demands are unreasonable because the companies are asked to carry them out too quickly.

"There have been abuses of the franchising process that make consumers wait longer than they should," said David M. Fish, a Verizon spokesman.

Fish said Verizon is spending $18 billion to build a fiber-optic network capable of providing video. But he said the company often must wait 18 to 22 months to receive local franchise approval after filing an application, slowing its bid to gain 3,000 franchises across the country in the coming years.

Verizon now has about 200 franchises for providing video. In the Washington area, the company has approval to offer television service in five Northern Virginia counties, four counties in the Maryland suburbs and more than 10 area cities, though not the District.

While cable operators say they share the aim of streamlining the review process, they accuse the FCC of offering new providers, especially telephone companies, an unfair advantage by freeing them from some conditions imposed on incumbents.

"The proposals we keep hearing about at the commission appear not to represent a level playing field," said Kyle E. McSlarrow, president of the National Cable and Telecommunications Association. Speaking to reporters yesterday, he urged the FCC to pare back the proposed measure.

Local and state officials, meanwhile, have accused the FCC of overstepping its legal rights.

"Franchising authority is a local one," said Carolyn Coleman, director of federal relations for the National League of Cities. "We want to see no more preemption of local government rights in this area." She said the FCC lacked the authority required to address franchising issues.

Congress entered the debate this year over video franchising. But while the House approved rules to streamline the process, the measure did not come up for a vote in the Senate.

Verizon and other phone companies have lobbied for new rules both at the federal and state levels. At least eight states have adopted measures designed to ensure that local officials follow consistent standards when evaluating applications.

Martin has referred to FCC statistics showing that cable rates increased 93 percent from 1995 to 2005. He said the commission's annual price survey, scheduled for release today, also found that cable rates were lower in areas where there was competition between at least two providers.

McSlarrow said those figures were deceptive because they rely on old data and only a portion of the cable market. Moreover, he said, many consumers now buy cable as part of a bundle that includes broadband Internet service and voice communications, and the price of such bundles has declined 25 percent since the mid-1990s.

"The bottom line is that value and price have only gotten better for our customers and that is a much sounder basis for policy proposals than outdated and manipulated statistics," he said.