Wednesday, May 10, 2006

"BellSouth wins round one for TV services"

John Hill had a brief bit in the Advertiser this morning on the approval by the House Commerce Committee of BellSouth's state-wide franchise bill.

It pretty much continues what I feel is a mischaracterization of the immediate battle (as I said in response to an earlier story) in that it pitches the battle as one between BellSouth and Cox. But it is the local communities' ox who is getting gored as the state usurps local property rights in order to give BellSouth/AT&T what it most desires: freedom from the obligation to serve the whole community in return for using the rights-of-way that are owned by the people. Hill does not, in fact, repeat any of the arguments of the Louisiana Municipal Association or the Police Juries--both of whom emphasized local control and the injustice of forbidding local municipalities to continue their practice of requiring the whole community be served.

Similarly absent was mention of amendments offered by the local governments which would have given BellSouth/AT&T what they claimed they wanted: fast, hassle-free granting of a franchise and a "level playing field." The local's solution: they'd back a law gauranteeing a 60 day turn around with no negotiations and a mere exchange of two letters if BellSouth would adopt the same franchise so arduously negotiated with the cable companies. What could be more fair? BellSouth, however, was uninterested--but the committee was not. The suggestions were made an amendments by Rep. Frist and quickly gained healthy support even though most of the members had not see them prior to the hearing: it went down by a vote of only 11 to 7 and the chair, Pinac, and the bill's sponsor were both clearly upset by how quickly the alternative gained support. A little more thorough preparation by local government might well have killed the bill then and and there.

The story closes with a few inaccuracies. It says:

Mike Stagg of Lafayette, an independent information technology consultant, said BellSouth, which will merge with AT&T in six months, warned that there could be a loss of franchise fees to local governments.

In amendments adopted by the committee, Bell agreed to pay local governments the same rate of franchise fees that are now being paid by cable operators under their franchise agreements.

In fact Mike, in the fieriest testimony of the day did not say that "there could be a loss of franchise fees." He said there would be. More emphatically he said that local governments would never see a penny from AT&T since AT&T is emphatic that its service is not a cable service and is not franchiseable under Federal law and regulation. The key definition here is the definition of a cable service as being "one-way" in federal regulations. In John Hill's own recent story BellSouth representatives are emphatic that their IPTV service is "two-way." Softening this claim most likely means that Hill has been talking to BellSouth/AT&T or simply can't believe such an outrageous bait and switch can be underway. He'd be well served to google up AT&T's recent lawsuits --in the last couple of weeks!--in California and in Illinois where they are claiming exemptions from franchises on EXACTLY the basis that their service is not "one-way" and not a cable service but an information service. The characterization of their service as not like a cable service because it is "two-way" was made most recently in Hill's previous story on the issue.

And, just to set the record straight: BellSouth came in offering the same percentage of franchise fees that local governments had already. That did not change with the amendments. They did include a few more things (pretty minor) in the list of those things that made up the base for the rate. Again, this seems discomforting evidence that Hill is taking too seriously the way BellSouth reps are characterizing the bill and its consequences.

Lagniappe: Just keeping score: Representative Trahan of Lafayette voted with BellSouth on this bill. Trahan has been a bit of a weak reed on the Lafayette delegation in regards to telecom issues since they first started to blow up and this issue was no exception. This bill will damage his constituents should it pass. Some representatives will be able to claim ignorance when this law sucks revenue out of local communities but any Lafayette rep should have been attending closely enough to what has happened in the city to understand that BellSouth's motives are questionable.


Anonymous said...

I understand that the writer is not in favor of AT&T position that if IPTV is two-way then it wouldn't have to have a franchise. But what is the argument that it is not two-way? Just by the name IP it seems it would fall under data transmission like any internet traffic.

John said...


I'm not passing judgment here on whether or not IPTV is legitimately "one-way" or "two-way." What troubles me is the disconnect between AT&T/BellSouth insisting that their new service will be a "two-way" "information service" and hence exempt from local franchises elsewhere in this country and insisting here in Louisiana that they will pay franchise fees on that same service.

Both stories cannot be true.

I see every indication that they really believe that their services will be exempt--they are taking a huge fiscal risk otherwise in not negotiating honestly with localities before they've spent a fortune on system upgrades. I also see that both versions of the Louisiana Franchise bill--the original and the amended one-- make sure to exempt "information services" from being part of "gross revenue" for the purposes of calculating the franchise cost to rent public property. I see no reason not to believe the obvious; that they don't intend to pay in the end. The language about "information services" was specifically challenged by representatives of local government. The BellSouth reps effected not to know what that meant or what the implications would be. --That they wouldn't understand a definition that is foundational to how the feds regulate different parts of their current product line is simply not believable. They just didn't want to deal with it. And, sure enough, when the amendments came forward there was no attempt to fix what was at the crux of the local folks objections.

I see no reason to believe, given their actions to date, that they really intend to pay franchise fees to Louisiana cities.

In all honesty I think the phone companies believe that Federal law and regulations will get them out of any commitments they make to states. So the question becomes: why bother to fight for a state franchise law? And the answer, I think, reduces to wanting desperately to move control of the rights of ways away from local governments who will force them to compete head-on with cable companies more capable networks by requiring both cable and phone companies to serve the whole community. This would be a tough and perhaps impossible battle--one which they very well might lose. They are not fighting for a state-franchise law. They are fighting for an anti-local government franchise law and will be happy with any solution that results in their being able to cherry pick the most profitable customers and redline the "low value' ones.

(I think the one-way, two-way distinction is antiquated. I can't figure how digital cable channels are less two-way than the descriptions of IPTV I've seen.}