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Policy

California-Wide Franchises Sought

4/28/2006 8:00 PM Eastern

At the urging of Fabian Nunez the California Assembly’s utilities and commerce committee unanimously approved a statewide franchise-reform bill over the objections of regulators and the cable industry.

Nunez (D-Los Angeles) also authored the bill, AB 2987. He said the bill will save Californians about $1 billion on cable service each year.

The claim is based on a new research report by University of California at Berkeley professor Yale Braunstein that estimates cable bills — which average $56.40 in the state — would decline by 22% due to competitive pressure from the telephone companies.

Incumbent cable operators were quick to point out the study had been commissioned by AT&T Inc., which wants the franchise reform bill to pass, and the effects of competition cited in the study would only be in select, high-value pockets of the state.

As currently drafted, AB 2987 would overturn current state policy that allows competition but compels new providers to match the service area of the current cable provider. It would let telephone companies or other qualified providers seek a statewide franchise.

Telephone companies could satisfy “full-service” aspects of the new legislation by packaging the lowest-speed digital subscriber line service with direct-broadcast satellite TV service in many areas.

Opponents contend DSL shouldn’t qualify as advanced broadband service on par with higher-capacity cable-modem services.

New providers would have to pay franchise fees of 5% of revenue.

Heavy hitters are playing on both sides of the bill. Supporting the telcos’ push for statewide franchising approval: unions, which see this as a job creation bill; community groups that attacked cable rate hikes that occur annually “for no good reason;” the state’s Chamber of Commerce; and the California Manufacturers Association.

Also supporting the bill is Sacramento overbuilder SureWest Communications, but only if the bill contains a provision that will immediately let it drop its local agreements and get a state franchise. A similar exception was contained in the landmark state reform bill passed in Texas last year, which allowed overbuilder Grande Communications Networks Inc. to get statewide operating authority.

On the side of the incumbent cable operators are lobbyists for state and local governments, Common Cause, technology policy groups and minority advocates, who fear the high-tech telco-delivered products will never reach their communities.

Utility Reform Network lobbyist Lenny Goldberg noted that as the telcos are pursuing this bill, they are also lobbying utility regulators to completely deregulate their landline phone business. This will create the slimmest of paper trails, he said, adding that he fears small, rural ratepayers will pay inflated costs to cross-subsidize urban deployment of advanced services.

In response to questioning from committee members, Nunez vowed to consider amendments to shore up the antidiscrimination language in the bill; tighten definitions of gross revenue; and provide more protection for the continuation of public, educational and government channels.

He vowed to deal with legislators’ objections before the bill hits the Assembly floor for a vote.

On April 24, the committee voted 9-0 to send the bill to the appropriations committee. It might be May 15 before that committee hears the bill, which could sport some amendments.

September