Sumbitches Vote A Victory For Phone Companies

FCC Vote A Victory For Phone Companies
TV Service Rule Hurts Cable Firms

By Alan Sipress
Washington Post Staff Writer
Thursday, December 21, 2006; D01

A divided Federal Communications Commission yesterday approved a measure aimed at helping telephone companies move into cable television markets by significantly limiting what local officials can demand in return for franchises.

The new rule reflects the intensifying battle between the phone and cable industries over who will control distribution of video, voice and Internet access in an increasingly wired country. But the telephone industry's victory could prove temporary because opponents say the measure will almost certainly be challenged in court.

The FCC voted 3 to 2 along party lines to change how local officials award television franchises to eliminate what Republican supporters said were unreasonable demands and delays.

The measure requires local regulators to rule on franchise applications within 90 days for companies such as Verizon Communications and AT&T that have wires in place. It also bars local officials from requiring that companies provide TV service to everyone in a jurisdiction and prevents them from demanding fees or in-kind contributions exceeding 5 percent of the television revenues.

Verizon has been seeking local TV franchises nationwide and has won more than 200, including agreements with most of the counties and cities in the Washington area. The company has said it plans to win 3,300 franchises nationwide and has been lobbying state legislatures and Congress to speed up the approval process.

The FCC's Republican majority said that removing unreasonable hurdles erected by local governments would translate into lower cable rates. Democratic members disagreed and accused the Republicans of overstepping the FCC's authority.

FCC Chairman Kevin J. Martin, a leading proponent of the new federal rule, called it crucial for breaking the virtual monopoly held by cable companies in many areas and reversing the steady increase in cable bills over the past decade. Martin said the measure, which is to take effect next year, also would make broadband Internet access more widely available because telephone companies would gain revenue to continue building fiber-optic networks.

"The record collected by the commission in this proceeding cited instances where [local officials] sat on applications for more than a year or required extraordinary in-kind contributions such as the building of public swimming pools and recreation centers," Martin said.

But the commission's Democrats warned that the FCC, by exceeding its legal mandate, would face time-consuming challenges from opponents, including cable companies and local officials angered by what they say is a preemption of their authority.

"The end result will likely be litigation, confusion of the process and a certain amount of chaos," Commissioner Jonathan S. Adelstein said. He questioned the claim that local officials have unreasonably refused applications, saying the FCC had not cited a single instance in which a franchise was being unduly delayed or held up because of demands for exorbitant fees or concessions.

"The majority simply accepts in every case that the big phone companies are right and the local governments are wrong," Adelstein said.

In the District, where phone companies do not have franchises to provide television service, officials called the FCC decision troubling.

"People in the District would be concerned if control is taken away from local municipalities. Cities could be damaged in many different ways," said J. Carl Wilson, general counsel of the D.C. Office of Cable Television and Telecommunications. He said District residents could suffer if officials no longer asked providers for public channels.

Montgomery County Council President Marilyn Praisner (D-Eastern County) said consumers would suffer from the FCC ruling. "This is an early Christmas present of a stocking full of coal," she said, predicting that the county and other jurisdictions would challenge the decision in court.

Montgomery County and Verizon clashed this year over the company's ultimately successful bid to win a franchise there.

The United States Telecom Association, a telephone industry trade group, said the measure would give consumers more choice.

"The steps outlined today will help fix the franchising process and end the unnecessary delays caused by outdated regulations," said Walter B. McCormick Jr., president of the association.

Kyle McSlarrow, president of the National Cable and Telecommunications Association, said the FCC gave phone companies an unfair advantage over longtime cable providers. FCC officials promised to study how cable providers should be treated when their franchises come up for renewal.

Staff writer Frank Ahrens contributed to this report.