Policy

Verizon Near Pivotal Cable Franchise

1/28/2005 8:36 AM Eastern

Verizon Communications is poised to earn its fifth cable franchise, this time in Keller, Texas, which the telco identified as the first market where it will actually launch video service.

The town, population 33,000, is notable because it is the location where Verizon chose to announce plans to build fiber-to-the-home architecture to deliver bundled broadband services.

Verizon spokesman Bill Kula said the plant now passes 16,000 homes in the community in the Dallas suburbs.

The telco began marketing its initial broadband offerings -- including 5-megabit-per-second to 30-mbps high-speed-data service -- in August. To date, 20% of its local phone customers have signed up for the new data service, Kula said. That penetration rate rises to 26% when traditional digital-subscriber-line services are factored in, he added.

That growth may be at the expense of the cable incumbent in Keller, Charter Communications Inc. The Keller system is fully upgraded to 860-megahertz, fiber-to-the-node, and it offers advanced products including high-speed data, video-on-demand, HDTV and digital-video recorders. Charter officials did not state the operator’s current cable penetration.

Charter officials said they are thoroughly examining the proposed Keller franchise, which has already been approved on a first reading by the council.

Margaret Lejuste, vice president of government affairs for Charter’s Southeast division, said executives are already concerned as it appears that the franchise doesn’t have universal-service provisions. “That raises concerns of cherry-picking,” she added.

“We understand completely that we don’t have an exclusive agreement,” Lejuste said, adding that she expected the city to respond to any concerns raised by Charter. “We’re not trying to stop [Verizon] -- just to make sure the terms are level.”

Kula said Charter’s arguments are representative of the delaying tactics employed by incumbents that also include Comcast Corp. Similar arguments have been raised in each franchising proceeding.

Last year, the telco earned video-delivery authority in Beaumont, Calif. (Nov. 1), and Sachse, Texas (Dec. 6). This month, franchises were approved in Westlake, Texas, a town of fewer than 10,000 residents east of Dallas, and Wylie, Texas, a 30,000-population town near Keller.

“Charter and its allies have executed this strategy before. It’s a ploy aimed at confusing town councils. But councils are far more savvy than Charter believes. They understand the true merits [of competition],” Kula said.

In addition to pursuing local franchises, Verizon has sought some state legislative solutions to city-by-city permission, such as the recent introduction of a bill in Virginia that could eliminate traditional franchising, instead extending telephone certification to cover cable delivery, too.

In California, cable lobbyists have been told to expect reintroduction of a bill from last session that would prevent local authorities from demanding that Verizon build its FTTP plant beyond the boundaries of its telephony business.

In Texas, no cable-specific bills have yet surfaced from Verizon, but that state’s telecommunications laws have reached their sunset date. All policies are on the table for renegotiation, Texas Cable & Telecommunications Association vice president Kathy Grant said.

Meanwhile, Verizon continues to move forward with its countrywide FTTP deployment. In an earnings call this past week, executives said the company plans to pass 3 million customers by the end of this year, with construction underway in 11 states. In Texas, Verizon is selling its “FiOS” branded Internet-access service in 10 towns, five of which are nearly built out.

Keller currently has its second and final reading of the franchise ordinance on schedule for Feb. 1. Once approved, Verizon plans to test video service there early in the second quarter, Kula said, with commercial launch in the second half of this year.

September