Policy

A 15-Year Plan

9/22/2006 8:00 PM Eastern

Verizon Communications Inc. will have 15 years to build video infrastructure to serve residents of Montgomery County, Md., according to the terms of a tentative agreement between the county and the provider.

The agreement, the product of mediation before a magistrate judge, is still subject to a public hearing Sept. 28, and a County Council vote before it becomes effective.

Verizon sued the county in federal court earlier this year, claiming the county’s process constituted a barrier to entry.

TALKING SINCE ’05

The telephone company first approached the county about a franchise agreement in 2005 and the two parties began talks over terms. But Verizon objected when county officials said they expected the new video provider to live up to the same customer-service standards as the incumbent companies, Comcast Corp. and RCN Corp.

The parties also argued about franchise elements, such as where Verizon would extend its video plant. County officials wanted the infrastructure built out to a density of 15 homes per mile; Verizon countered with 30 homes per mile.

In August, Judge Marvin Garbis, hearing the case in U.S. District Court for Maryland, ordered the parties into mediation.

The proposed franchise agreement will give Verizon a 15-year franchise, while the county gains concessions such as 13 channels set aside for public, educational and government use. Of those, two must be within analog packages.

Verizon will pay a 5% fee on gross revenue, and another 3% to support PEG production. It will also make payment of $1 million, disbursed over five years, for other cable-related investments by the county.

A buildout will be conducted by region. In the initial area, closest to the county seat, Verizon’s service must reach all residences within three years. But a buildout of the whole county will take 15 years, according to the tentative pact.

DENSITIES INCREASE

The agreement calls for density of 30 homes per mile in the first seven years, changing to 20 residences per mile by year 10 of the agreement to the ultimate density of 15 homes per mile by the end of the franchise.

Documents supporting the franchise application state that Verizon will charge $39.95 for 15 to 35 channels of basic service plus, 180 digital channels. A converter will also be necessary, at $3.95 for a standard box to $12.95 to an HD-ready digital video recorder. But the filing noted the prices were for information only and could be changed. That video pricing is comparable to that of Comcast.

If the county council approves the agreement, the lawsuit will be dismissed.

Montgomery County Facts
Montgomery County, Md., is adjacent to Washington, D.C., and has 497 square miles of land area. The county executive and the nine-member county council have offices in Rockville. Forty-five percent of Maryland’s foreign-born population resides within the county limits.
Source: Maryland — National Capital Park and Planning Commission
Household population (2004): 914,900
Median single-family housing sale price (2003): $320,645
Median household income (2002): $79,105
Average household size (2003): 2.70
Median age (2003): 37.3

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