Telecommunications legislation passed by the U.S. House of Representatives earlier this month and now being debated in the Senate has important implications for schools and consumers. One of the many issues at stake is the amount of funding that will be available to local communities for public educational and governmental (PEG) television programming.
If the legislation works as planned, it could increase competition for delivering cable TV and other video and broadband services to local markets, thereby driving down prices for consumers. But critics of the legislation fear it does too little to ensure these services will be extended equally to customers in lower-income and rural areas–and they also warn it could lead to a drop in funding for PEG programming in many communities.
Backed by telephone companies looking to leap into the business of delivering subscription television services, the House and Senate bills aim to rewrite the rules that for decades have given local governments control over who provides cable TV in their areas.
The most significant telecommunications legislation in a decade, the bills would make it easier for telephone companies to enter the subscription TV market by replacing the current video franchising system–in which potential providers must negotiate contracts municipality by municipality, sometimes taking months or even years–with a national franchising model.
The House version of the legislation was approved June 8 by a vote of 321 to 101. The Senate version is still being debated in the Senate Commerce Committee; no votes had been taken as of press time. One issue dividing senators is an amendment aimed at better protecting internet users from pricing or access discrimination that internet providers might apply. The House rejected a similar “net neutrality” measure in its version of the bill (see related story).
Supporters are touting the legislation as pro-consumer, saying competition from Verizon Communications’ and AT&T Inc.’s video services will lower prices. “This legislation can increase competition not only for cable services, but also unleash a race for who can supply the fastest, most sophisticated broadband connections that will provide video, voice, and data services,” said House Energy and Commerce Committee Chairman Joe Barton, R-Texas.
Barton noted that because of the impediments created by the local video franchising system, the United States doesn’t even rank in the top 10 nations worldwide in broadband deployment. “This bill should change that statistic,” he said.
Rep. Fred Upton, R-Mich., who heads the House telecommunications subcommittee, estimated that people could save $30 to $40 each month if given more of a choice in video services.
But many Democrats said the measure does too little to ensure that broadband services will be extended equally to lower-income and rural areas. Several consumer rights’ groups and municipalities agree, arguing that the bill gives away too many consumer protections to telephone companies that are almost monopolies.
Their fear is that new entrants to the video market will offer their services in more affluent neighborhoods that tend to spend more, while ignoring working-class or poor areas. That means mainly wealthier areas would see the benefits of competition–lower prices, better services, faster upgrades.
“AT&T has been very clear its business plan is to target the high-value customer. Where Verizon has sought local franchise agreements, it has sought them only in the wealthiest communities,” said Jeannine Kenney, senior policy analyst for Consumers Union. “Consumers who most need relief from monopolistic cable prices are the least likely to get it.”
The House and Senate bills are national extensions of a movement that is under way in at least 14 states. Texas, Indiana, Kansas, and South Carolina already have signed into law a state-approval franchising process. Virginia passed a variation that speeds up the local approval process by setting deadlines. Similar bills are pending in Pennsylvania, California, Iowa, Michigan, Minnesota, New Jersey, Tennessee, North Carolina, and Louisiana. Connecticut recently ruled that AT&T doesn’t need franchises for its service on any level.
Consumer groups are upset that the legislation lets new video providers choose which communities they want to serve. Currently, cable companies generally are required to serve all neighborhoods in any city they enter–the so-called “buildout” requirement.
“We’re afraid that either state or federal bills will allow the phone companies to redline some neighborhoods, to price gouge others, to eliminate benefits to the local community and allow the existing cable company to backslide,” said Ed Mierzwinski, consumer program director for U.S. Public Interest Research Group.
Phone companies say they are spending billions of dollars to offer video and high-speed internet services over fiber-optic connections to the home or the neighborhood, so it makes sense to offer these services initially in areas where they’re likely to get the most business.
Ed Whitacre, AT&T’s chief executive, told the Detroit Economic Club in early May that the company’s initial rollout of TV services will reach 5.5 million low-income households in 41 markets.
Verizon said its entry into video is good for consumers, because it will force cable providers to cut prices.
“It’s perfectly evident, if you think about it for three minutes, that the system that’s in place now just protects the incumbent monopoly cable provider,” said Verizon spokesman Eric Rabe. “Cable has been the last telecom monopoly, and they have taken full advantage of that by raising prices on an annual basis for years.”
From 1993 to 2003, cable rates have risen by 53 percent, according to the Federal Communications Commission. Local phone rates in urban areas have risen by 23 percent from 1994 to 2004.
A March 2006 study by Thomas Hazlett, a professor at George Mason University in Virginia, said wire-line video competition would save consumers $9 billion a year.
Verizon says its upgrade of the phone network to optical fiber, which can carry TV service, is done town by town, with no regard to neighborhoods or demographics.
“Our strategy is to go in and do the entire town,” said Paul Lacouture, Verizon’s vice president of engineering and technology. “That’s how you get the operational savings.”
Pricing and access to new video services aside, local municipalities stand to lose under a national franchising system, said Libby Beaty, executive director of the National Association of Telecommunications Officers and Advisors, which represents the telecommunications interests of local governments.
The bills strip local communities of their rights to negotiate what often are lucrative video franchising deals, Beaty said, eliminating a much-needed source of revenue for municipalities. Though both the House and Senate versions of the legislation provide for 1 percent of the gross revenues of approved video providers to be spent on local PEG programming, that figure falls far short of what many communities already have negotiated in their current franchise deals, she added.
Rep. Tammy Baldwin, D-Wis., offered an amendment to the House version of the bill that would have permitted local authorities to keep their existing, previously negotiated funding structures for PEG programming. That amendment was voted down.
“Sadly, we are looking at the end of vibrant and diverse public access channels on cable television if this legislation” becomes law, said Baldwin. “In my own hometown, the Madison School District operates two channels that feature a variety of school board meetings and forums, as well as interviews with school board members and administrators and sporting events … The channels also feature student music events, math and science fairs, and news programming.”
She continued: “Preserving PEG funding is about preserving the local flavor and diversity of community voices. It is about transparency and accountability in our local government, and it is about strengthening the sense of shared neighborhoods and communities. I am disappointed that the Republican-controlled Congress wouldn’t allow my bipartisan amendment to reach the House floor for a vote.”
Besides access to local educational content and programming, school systems often benefit from local franchising deals in other ways, too. For instance, the Duval County Schools in Florida have saved an estimated $900,000 per year in internet access charges, officials say, thanks to a deal they negotiated with cable franchise MediaOne eight years ago. In exchange for providing hub sites for MediaOne on school property, the district received a high-speed network connecting more than 150 schools and administrative buildings at no cost (see story: http://www.eschoolnews.com/news/showStory.cfm?ArticleID=1069).
If the current legislation becomes law, Beaty said, schools could lose the ability to make deals like this in the future. It’s also unclear how existing deals might be affected.
“The programming capacity that local government has negotiated for years and years is deeply embedded in our educational system on all levels,” Beaty concluded. But the new legislation “seeks to remove the ability of local government to negotiate in a way that benefits the needs of the community.”
The House bill is the Communications Opportunity, Promotion, and Enhancement Act of 2006, or COPE Act (H.R. 5252). The Senate bill is the Communications, Consumers’ Choice, and Broadband Deployment Act of 2006 (S. 2686).
U.S. House of Representatives
U.S. Public Interest Research Group
National Association of Telecommunications Officers and Advisors