Thursday, August 18, 2005

Skirmish Over. War Is On!

The LUS fiber initiative has already succeeded in bringing large segments of Lafayette together in support of a vision of bringing new economic progress to the city via the 21st Century network infrastructure and the services that will flow through it.

For the most part, I think this unity will last. There will, of course, be exceptions.

The first break-up, though, is now official.

That's right! Cox and BellSouth have broken off their strained alliance and the war for digital media dominance across south Louisiana is back on!

There was no official announcement, but (in a world where nothing's considered real unless it's on TV) Cox Business Services has a new ad that purports to show a businessman talking to a phone company rep. The ad opens with the camera on the businessman while he talks to the phone rep. When the camera cuts to the phone rep at the end of the ad, it's a brick wall! The voice over says something to the effect that talking to your phone rep can be like talking to a brick wall.

The ad is not yet on Cox's website, but this one is. Here are more of them.

Judging by what just happened in Texas, look for the next fight in Louisiana to be over relieving phone companies of the local franchise fees for video services.

As you know, cable companies currently pay franchise fees to municipalities in exchange for right of way access which enables them to build their networks to deliver service (now including phone and internet) across the community.

In Texas, SBC and Verizon convinced state government leaders that requiring phone companies to negotiate these local franchise were onerous and delayed their plans to build new networks in those communities. Critics, including the cable companies, say the phone companies bought this legislation. If true, it was a good business deal and a hell of a lot cheaper than paying franchise fees across the state.

If this is, indeed, going to be the next phone v. cable fight in Louisiana, it will require something of a change in mindset in BellSouth's Atlanta headquarters. I still believe that the company's Louisiana leaders have not been able to convince their corporate betters that making new network investments in this state makes business sense. The chief reason for this is Cox's aggressive moves into phone and business services in major markets across south Louisiana.

As we heard ad infinitum during the recent campaign, BellSouth is a business and it makes investment decisions based on its best judgment of where it will get the best return. In Louisiana, BellSouth is in a bind. It is moving from somewhere in the 95 percent market share range to somewhere significantly south of that. Apparently, the powers that be in Atlanta won't invest significantly new dollars here until they have a better idea of just how far south their market share will fall.

Will this paralysis push BellSouth's marketshare beyond a tipping point where it begins to suffer major customer losses? It's possible. I talked with a businessman from Hammond last week who was exasperated by the lack of responsiveness of BellSouth to basic service quality issues. He spontaneously volunteered this information during a conversation about healthcare and connectivity. Sure, not too much should be read into an anecdote, but that kind of customer hostility can't be a good thing.

Fortunately for BellSouth, the State of Louisiana (rumored to be BellSouth's second largest customer in its entire nine-state network) will remain a docile customer. So, there is an anchor for the company there.

Could getting the Louisiana Legislature to eliminate local franchise fees for the phone companies be the kind of incentive that could convince BellSouth Atlanta to make new network investments here? They've got a few months to figure this out. So, too, does the Louisiana Municipal Association, whose members would take a pretty fair financial lick from such a move.

But, keep an eye on bill filings when the 2006 session approaches. If this is the play, BellSouth will look to its stalwarts (1, 2, 3) to carry their water.

Unlike the marketplace (where it has shown itself to be both tin-eared and ham-handed), BellSouth knows how to work state government. This is a win-able fight for them. And they need a win.

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