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Policy

'Level Field’ Under Siege

3/13/2005 7:00 PM Eastern

California’s cable lobbyists are ready to rumble this week over a Verizon Communications Inc.-backed bill that would loosen franchising requirements.

But the issues could change significantly on March 15, the day AB 903 is due for its first hearing in a state Assembly committee. Industry representatives have been told that at that time, another legislator will submit a substitute bill.

The current bill, from freshman Assemblyman Hector De La Torre (D-South Gate), would revise Section 53066.3 of the state Government Code — the so-called level playing field language that requires all cable competitors to be held to the same operating rules governing franchise fees; public, educational and government access support; buildout requirements; and service provision throughout a franchise.

THREAT TO COMPETITION

The bill says that standard “poses a threat to the emergence of cable competition in this state by creating a barrier to entry for telephone corporations seeking to provide competitive cable-television service.”

The Verizon-written bill would let the telco launch cable services in its telephone footprint, safe from local mandates that it extend its video plant beyond its current telco operating borders.

That protects Verizon from head-to-head competition against the state’s other dominant carrier, SBC Communications Inc., and lets it upgrade its current facilities rather than build new plant.

Level playing field requirements would extend only to PEG channels. Decisions like the extent of a buildout would be left to the new entrant.

Cable lobbyists say the effect would be similar to a controversial bill floated earlier in Virginia. That proposal would have given Verizon authority to move into the cable business under its telephony operating authority.

The Virginia measure has been tabled for more study.

CABLE TALKING POINTS

The California Cable Telecommunications Association has several talking points to read on the issue, said director of government affairs Gilbert Martinez.

Cable will point out that federal policy allows legislators to equalize the tax burden among broadband providers, and that such a strategy could generate $300 to $500 million a year for the revenue-strapped state.

Also, as in other states, California operators will argue that Verizon is violating state law by building cable-capable plant without a prior franchise.

Cable will also question why a telco’s captive ratepayers must pay to develop an advanced-services network when the revenue generated would ultimately benefit shareholders, and not California consumers.

Eliminating level-playing-field language would end 40 years of consistency in the telecommunications business climate, he added. Also, the telco could have a competitive advantage in communities where it provides telephone services — and, soon, multichannel TV — solely to more-affluent neighborhoods.

CITIES WAIT AND SEE

City officials are still weighing the import of the initial bill, and waiting to see how the second bill on the topic will read before deciding their stance on competitive reform.

The National Association of Telecommunications Officers and Advisors actively opposed the Virginia bill. But the regulatory climate varies state to state, said San Bernadino special districts division chief of franchise programs Lori Panzino, a California National Association of Telecommunication Officers and Advisors member.

Local governments support competition, she said, and California’s standards don’t make much sense in the current competitive environment. But the proposed bill doesn’t make sense now, either.

“We really need to see what the [bill’s] final version looks like,” Panzino said.

Lobbyists have been told that state Sen. Martha Escutia (D-Montebello) will introduce a Senate bill that will also address competitive issues.

Meanwhile, De La Torre has told the industries he wants them to hammer out a compromise.

Verizon is bringing out its big guns to support this bill, capital veterans say. Last year, a similar bill limped in at the end of the session. The 2005 version came in at the very beginning of the legislative season.

Also Verizon, known for its deep and effective corps of lobbyists, has hired “very aggressive” outside lobbyists especially for this bill, said Senate consultant Joe Camicia.

September