Thursday, July 21, 2005

Federal: BellSouth's 80% and Federal Law

Here's a little present that the feds are considering giving the Baby Bells like BellSouth: the right to compete only in the most lucrative parts of town. While the National Journal's story mentions only Verizon and SBC as telephone corporations planning to offer video services, BellSouth is often noted as the third Bell whose public plans include the capacity to offer such services.

Local governments traditionally have required, through their franchise agreements with cable companies, "universal service"--the idea that cable would be available to all the citizens of the city or town granting the franchise. This was a local imitation of the federal rule that phone service had to be "universal." It's an idea that began at the federal level and one that has been a huge benefit to poor communities and rural ones. If the new suggestions are made law, the idea will also end as a consequence of federal action. The feds call the part of proposed new law that sets ground rues for who is to be served (and other things as well) "build-out rules," and here is how the NR discusses it:
Build-out requirements generally involve a mandate that service be available to all residents in a given service area. Both SBC Communications and Verizon Communications -- which are deploying subscription television services that will compete with cable -- argue that build-out restrictions would be unfair, on the grounds that their efforts will foster competition and therefore benefit consumers.
This is a truly twisted idea of what "fairness" is. In other areas, like, for instance, Lafayette's municipal broadband plans, the telephone companies (claim to) believe that fairness has to do with a level playing field where all are treated alike. Here they think that they should be treated differently -- that it would be "fair" to treat them differently than cable companies are treated. Convenient. And hypocritical. What they are actually saying is that they want both the economic advantage AND the right to claim some sort of moral high ground. Really, the truth is that what they want is advantage, and the basis for claiming the moral high ground can be whatever sounds good and allows them to claim that advantage.

The advantage, the real advantage sought here, is in the competition with the cable companies. The cable companies with plants already built out according to the old universal rules serve both the most profitable and the least profitable parts of town. The spiffy new phone company tech would compete only in the most lucrative parts of town, taking customers there and only there. It would have the effect of driving the cable companies out of the wealthy areas and leaving them with the least profitable parts of the area. Multiply that by every town in BellSouth's footprint and imagine the huge amounts of competitive advantage BellSouth gets over its cable competition in the video arena. This, and this almost exclusively, is what is in this proposal for the telephone companies. Advantage over its competitors who have committed to universal service.

In our town not only Cox, but soon LUS also, will be committed to universal provision of services.

All this relates directly to the "offer" BellSouth made to the Lafayette Consolidated Government that revealed their intent to offer "advanced services" to only 80% of Lafayette. (If BellSouth was to serve more, "almost all," they would ask Lafayette to pony up tax-derived cash or some sort of equivalent pay off.) The speed numbers that that BellSouth mentioned are the speeds at which a minimal form of video services could be offered. If BellSouth wanted to just suggest it would bring in its new cable service it would surely be asked to meet the universal service requirements that Cox has met. But a deal with BellSouth based on that letter to Joey Durel would have been a back-door way to get the city to pay for what the current franchise agreement with Cox effectively mandates in the city: universal service. Sneaky, eh? But the city didn't bite. Good for them.

Should this idea be approved at the federal level, BellSouth would not have to serve the parts of the city it considered less profitable. And in that situation LCG would have to buy them off if it wanted all its citizens to have access to the same services. Or it could just build its own network, serve all its citizens, and let those guys go their own way.

Thank goodness for LUS.

On the "upside:"
...Boucher has been floating the idea of coupling nationwide franchises for video providers with authority for states and/or local governments to offer low-cost, high-speed Internet services. That puts Boucher at odds with SBC, which has opposed government-sponsored broadband in several states. Verizon has expressed opposition in some areas.
But, as we can plainly see, local utilities will be faced with the same competitive disadvantage if these suggestions go forward as the cable companies. You'll also notice that Boucher is talking about allowing cities to provide is "internet" services, NOT cable services. And cable service is what will pay for any new build out--the profits to be had there are why the telephone companies are so desperate to get into a lucrative cable market as they struggle to build modern systems. The Bells, under a Boucher regime, will be licensed to poach the most lucrative customers selectively. Preserving municipal rights to serve its citizens as it sees fit should not be bought at the price of universal service or sacrificed to the profit motive of the Telephone Companies.

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