July 30, 2007

States Play Fair With Franchises

Video franchising bills are on the march, but redlining lately has been given the boot.

By Simon Applebaum

We’re only midway through 2007, and video franchising legislation has already been approved in seven states. That compares with eight states enacting video franchise legislation during all of 2006, and brings the number of states with such laws in play to 16. But this doesn’t necessarily spell bad news for cable operators since the 2007 bills are more equitable.

Illinois became the latest to join those with statewide franchise laws when Governor Rod Blagojevich (D) signed a bill June 30. Texas launched the video franchise movement three years ago, coinciding with FiOS TV, Verizon’s multichannel overbuild, in Keller and other Dallas-Fort Worth area communities.

At least one more state will implement a video franchise law this year. Connecticut lawmakers approved a bill that is awaiting final review from Governor M. Jodi Rell (R), who is expected to sign this summer.

Massachusetts, New York and Wisconsin are state franchise possibilities this year. New York legislators adjourned last month without voting on a bill, but the matter may be addressed during a special summer session. At stake for Verizon: the opportunity to overbuild any or all of New York City, taking on Time Warner Cable and Cablevision in the largest U.S. city.

On the whole, the 2007 class of statewide franchise bills "is a lot better than last year’s batch," says Rick Cimerman, NCTA’s VP of state government affairs. Cimerman believes the ’07 bills give both cable operators and local authorities a fairer shake than previous legislation, especially with provisions that outlaw "redlining," meaning overbuilders must serve an entire community, not just the most attractive neighborhoods. As a result, cable operators did not put up a struggle against passage.

"We’ve never taken the position that statewide franchises should never happen," Cimerman says. "If we’re going to have reform, let’s have reform that gives us a fair playing field and respects the rights of local municipalities. On those points, there’s been improvement."

Legislatures in six other states failed to pass video franchise bills this year. AT&T (whose U-verse overbuild started in San Antonio a year ago) and Qwest Communications lobbied hard for passage, but to no avail. Although the advocacy was highly organized, lawmakers didn’t buy AT&T and Qwest’s competition rhetoric. "They wanted proof that U-verse works," Cimerman says. "They [also] raised concerns about Qwest’s ability to invest, given recent financial difficulties," he notes. "Why go out on a limb on their behalf?"

Verizon and AT&T officials were unavailable for comment.

With many state legislatures out of session until January, NCTA doesn’t foresee another big round of franchise legislation until spring 2008.