The National Cable & Telecommunications Association (NCTA) has launched a push to support towns and cities that want to maintain their rights to force franchise agreements with companies delivering cable TV and using public rights of way and poles in their communities. Since cable companies hate those very franchise agreements (and especially their universal service clauses) and seek to evade them at every turn, the initiative has provoked some industry commentary.
The cable industry is reaching out to local governments to test whether they can forge an alliance to block Verizon Communications from waltzing into the cable business under liberalized state laws designed to accommodate the phone giant’s broadband-deployment plans.
Cable’s relationship with cities and towns has never been easy, and it probably reached its nadir three years ago, when cable backed the Federal Communications Commission’s decision to deny local governments about $500 million in annual cable-modem fees.
It’s interesting for us here in Lafayette too. Here’s a little conundrum for you: Why is the cable industry seeking allies with municipalities across the country to force regional Bell companies to abide by municipal rules while Cox is throwing its all into evading municipal rules here in Lafayette?
The easy answer that Cox and the cablecos don’t like competition is both correct and too easy; it doesn’t explain why the cable companies are suddenly engaging in this push. Cox, like every other effective monopoly, is anti-competitive by nature and design. What has changed? What do the cablecos see coming that moves them to action? In a phrase: real competition.
Until recently each cable company enjoyed an effective monopoly on the all-important local cable TV service in its service area. The telephone companies have provided some limited competition in broadband but can seldom match the speed or market penetration of cable in a broadband market that is still secondary for both types of companies. Satellite? No. National and even FCC studies have repeatedly shown that satellite “competition” may cost cable some customers but has yet to have the effect of lowering cable pricing—the essential marker of real competition. But all that is now changing.
Verizon has started to roll fiber to the home out at various (high value) points in its footprint and promises more. Everywhere its trucks roll fiber, it will be coming into direct, wireline-based competition with the cable companies. And the cable companies, wisely, are fearful. Fiber is, as the industry well knows, the path to expanded future revenue. Everywhere cable companies encounter fiber they find themselves going from having the network best positioned for the future to the also-ran company. It's galling and hurts their pride.
What has changed for the national companies and what has changed for Cox in Lafayette are the same: fiber optic-based competitors are emerging -- real competitors that could force them to lower prices and improve service. And that is what is worth, for the cablecos nationally and for Cox locally, opposing with all your might, even through alliances which are unnatural and necessarily temporary.
Update 10:45 1/2/05: Lest you think I overstate the case for it being "all about fiber," you might wish to review "Cable Officials See Greater Broadband Competition Ahead" wherein the cable company engineers were told:
Referring to FTTH as "cable TV on steroids," Farmer said the all-fiber networks offer much greater bandwidth and data speeds than cable's existing HFC plant. He also noted that FTTH costs about the same amount as cable HFC plant to build but much less to run, largely because the fiber lines don't need signal amplifiers and other active RF components that require frequent adjustment. "The maintenance and operation costs [of FTTH] are much lower," he said.The competitive advantage is real. Even the cable guys know it.