Thursday, April 24, 2008

AT&T, Cox: Our favorite flavor is Cherry/Red

This week's edition of the Baton Rouge Business Report contains an informative story about the spirited battle that EATEL is waging against Cox on the eastern edge of the privately-held cable giant's central Louisiana market footprint.

One comment that immediately jumped out was that the competition between EATEL (with its superior fiber network) and Cox (with its very deep corporate pockets) has prompted an in-your-face element of competition that neither the locally-owned phone company (EATEL) nor the Atlanta-based cable company (Cox) is accustomed to using:
Brad Supple, the director of sales and marketing with EATEL, says the ads represent the first time they’ve countered the competition in such an aggressive fashion. Cox says it’s a first for them, too; the companies have battled for customers for nearly three years.
EATEL's most aggressive move (detailed in the BRBR article) was the running of ads in Lafayette informing Cox customers here about the special bargain rates Cox was trying to limit to the market in east Ascension Parish, where it competes head-to-head with EATEL.

The ad has been discussed here before, but there is news in the article and it deals with the flavors of the video franchise bills up for consideration in the current session of the Louisiana Legislature.

For starters, it quotes Cheryl McCormick of the Louisiana Cable and Telecommunications Association (LCTA) for noting that one of the three bills up this session dealing with video is actually the LCTA's bill (HB 869); the other two (House Bill 1009 and Senate Bill 422) are AT&T's bills and would create the statewide video franchise.

The real news, however, comes from a woman who once held McCormick's job but now works as Cox's vice president of government and public affairs, Sharon Kleinpeter. Commenting on AT&T's push for passage of statewide video franchise legislation here, Kleinpeter confirmed a point made here recently — specifically, AT&T and the state's largest cable provider are engaged in a carefully choreographed effort to relieve both elements of this communications duopoly from current legal requirements to serve all segments of the communities where local franchise agreements now exist.

Here's the money passage:
While AT&T’s earlier efforts to get statewide authority have failed, Kleinpeter says Cox doesn’t oppose it as long as it can also get options that would free the company from 55 20-year and 30-year franchises it has in 13 parishes, which have more stringent provisions. So far, AT&T hasn’t agreed to the move, which she says would otherwise give Cox a competitive advantage. Talks are under way on this issue.
This is the Cherry/Red flavor of regulation they love.

That is, both AT&T and Cox (and other Louisiana cable providers) want the ability to provide services only in those neighborhoods where they believe they can make the highest rate of return and not have to provide services, say, all over Lafayette Parish as would be the case under the terms of the current franchise agreement here (and in, the article says, 55 other parts of the state).

They want to be able to legally cherry pick what they consider the best neighborhoods and legally redline those that they want to ignore. Thus, Cherry/Red.

Stunts, Scams & Sirens

The recent — but thus far not detailed — franchise agreement the AT&T signed with Baton Rouge is a public relations stunt, coming as it did on the heels of the recently-announced Cox rate increase. If the statewide video franchise legislation passes, the Baton Rouge/AT&T agreement will be meaningless. The statewide video franchise legislation would lift all local requirements included in that mysterious document before any of it took effect — and, I'll wager, before AT&T spends a penny on new services in the Baton Rouge market.

This clever dance that these two corporate giants are staging for us is an elaborate flim-flam. The fact is that this legislation will not bring new competition to Louisiana. How do we know this? Because similar legislation has not brought competition to Texas, North Carolina or Ohio.

But, the Louisiana version of this legislation will do long term damage to at least the 55 communities with franchise agreements by allowing companies like Cox and AT&T to discriminate against low- and middle-income neighborhoods in the delivery of modern network services. For that reason it is particularly disheartening to see the head of the Louisiana chapter of the NAACP fall for the competition scam at the heart of this legislation.

The Louisiana Legislature is being bamboozled by AT&T and the big cable companies which are acting in concert to get legal permission to leave significant portions of this state on the far side of the digital divide. "Competition" is a sirens' call that is only being used to convince our tech-illiterate legislators to sell out the hopes and aspirations of Louisiana citizens and communities to become full participants in the network-dependent global economy.

This legislation serves no other interests but those of the phone and cable companies. It is terrible policy for Louisiana citizens, consumers and communities. Rate relief will not come, but a widened gap between the tech haves and have-nots will.

Count on it.

3 comments:

Anonymous said...

There must be something wrong with me because I just don't get what is really wrong with this. I kinda do, if I look at this from a non business stand point.

But is it wrong for a business to want to do things that are profitable?

All of these things, phone and tv and internet are not things someone HAS to have. Its something someone wants.

People seem to try to make these things to be almost life supporting, and so you can't not provide or pull their life line.

Now I know people will try to argue and say phone is, for 911. I might give you that. But does that argument really hold up?

Wouldn't cell phones be a better choice if your arguing that someone should always be able to call 911. I would assume that a solution that is always available to someone no matter where they are would be more useful. So maybe every citizen of every community should be given a device that works anywhere, anytime and allows them to get ahold of emergency services.

If all of these are so vital to people then why is LUS only offering fiber in the city of lafayette and not the parish? Why isn't it something provided to all at no extra cost other then through tax dollars? Wouldn't electricity be deemed even more important, and so it should be provided to everyone at no cost other then taxes as well?

Why doesn't LUS offer electric and fiber to ALL of the parish and not just the city if all of these things are so important?

But I guess people will say this is just infrastructure like roads so yes the city should provide it because no one else will and its not profitable or something, or like the sewer system. No one gets it for free you pay either through tax dollars or your utility bill.

So the people that don't pay taxes here or who don't have a utility bill shouldn't be allowed to use any of these infrastructures then.

I don't know it just all sounds very socialist.

I don't blame either AT&T or Cox for wanting this. However I think this is more AT&T then anything. The cable companies may not like the existing rules but have apparently lived with them. But then you get AT&T coming in and wanting to change the rules in their favor? Of course the cable co's aren't gonna like this, they have been playing by the rules for a long time its got to suck for them to have this happen. But if its going to happen for one provider it should be applicable for all of them including the cable companies right? Sounds only fair.

I started reading this blog the last few days and it seems awfully biased against the telecommunications companies. Lots of bashing it seems making these companies all seem equal and just horrible.

Do you guys just hate every big business or just the telecommunications companies?

You say your all about the digital divide, which I admire and respect but I read these posts and I don't see that. I just see posts saying XYZ company is bad because they want to make money, be profitable and dont care about anyone or thing else not like LUS.

Anonymous said...

Anonymous ("Anon") brings up some interesting points, but his story is incomplete. For illustrative purposes, I will walk you through the logic of a franchise with a local government.

Let's start with Anon's premise "Is it wrong for a business to want to do things that are profitable?". No, it is right for business to do things that are profitable. If a person wants to open up, say a hardware store. Once he is at the point to look for a site, he either rents an existing property, or he chooses to build one. Then, he opens his business and competes against other companies for business.

Suppose instead, he would decide to locate his store on Anon's property, well Anon would want to first, 1) Give his permission for that to happen, and 2) Expect some compensation for the use of his property.

Makes sense so far.

When the phone, cable and utility companies began expanding their facilities throughout the country, they wanted to build their facilities along Publicly-owned streets and highways. Why? Because it was cheaper and more convenient to do so. But wait, someone else owns those rights-of-way - so those companies negotiated franchise agreements with local governments so they could conduct their for-profit businesses on rights-of-way owned by all the citizens. Local governments learned that in order to insure that their constituency were able to enjoy the benefits of these new technologies, those franchise agreements needed to include provisions to encourage these companies to provide service to all citizens in those areas - afterall, those citizens were the rightful owners of those rights-of-way. In addition, those companies paid a franchise fee to the local government based on a percentage of their gross revenues. That approach worked well for many decades.

But, now the telephone company wants to provide video services (a service not covered by their existing franchise) - but does not want to be obligated to serve any areas it does not want to serve. So if we take a step back, the premise is that these companies want to enjoy the use of any public rights-of-way they want to use (which are owned by the entire community), but yet provide these new competitive video services in the areas that make them the most profit (with profit being a key fundamental and acknowledged component in any business).

So what happens to the other citizens who aren't ripe for the picking by this new technology? They don't have competitive choices. That is the premise behind John St. Julien's concerns about this bill.

Now, to LUS and its fiber initiative. LUS is owned by the citizens of the city of Lafayette. Its the citizens of Lafayette who voted to establish LUS utilities to begin with in the late 1800's and to move forward with the fiber plan in 2005.
That is why they are getting it. If the parish wants these services, they can have an election to do so, too.

...just thinking I guess someone could have used Anon's suggestion that "All of these things, phone and tv and internet are not things someone HAS to have. Its something someone wants." on the need for electricity - paraphrased "Electricity is not a thing someone HAS to have. Its something someone wants. What's wrong with using candles and lamps?"

Fortunately, public leaders of yesteryear were wise to push for electric and telephone services for all and are similarly wise to push for competitive internet and cable for all.

John said...

Thanks, that is well-put and to the point.

An interesting sidelight to all this is that the original AT&T monopoly was based, as much as anything, on the Federal government excluding both state and local governments from exerting any control over their rights of way in regard to telephony. So local government has had to "take it" from the phone company for a long time.

The phone companies are now wanting to get into a new business (cable) and have a long sense of entitlement based on the privilege long ago granted by the Feds. They've got haughty in their genes--the phone company feels strongly that dealing with the little local guys is beneath their dignity.

Heck, they don't really want to deal with the states--they tried hard and lost at the federal level to get their telephone era "rights" extended. Only when Congress refused to go along and started talking about Net Neutrality did they turn to the states.

My guess is that just as soon as the states cave on this AT&T will go back to the feds and complain about all the little states making life difficult and how confusing a patchwork of 50 different codes is and how, if they just had "relief" (Federal control) they would then ("really, we mean it this time") start rolling out all that fiber that they promised decades ago.

The states are digging their own grave. Once it is out of the hands of the communities that actually own it will be easy to pass the control up to the feds. The state legislatures should ask themselves just how badly they want the monies and control that cable companies now have to share with folks in their states to move to the feds. (And one thing they could ask themselves is how much influence over or money from phone services they currently get--and the answer is NADA. That is what will happen with cable.)

Unless, of course, local communities are freed up to offer their own local alternative. As Lafayette is preparing to do.

Which goes to Mike's point: If the state is going to shaft us this way the least they can do is to allow us free reign to do as we think wisest and repeal the (un)Fair Competition act so that we can at least use our own property ourselves.

Handing control of our property over to some huge corporation is the worst possible public policy.