War Within the States

As 2006 draws to a close, national franchising talk is dying down to a whisper. Telecom chatter on the Hill these days is focused more on the nebulous net neutrality issue and overhauling Universal Service Fund contributions. But franchising reform isn’t dead. It’s just changed locales. The telcos have had a successful run, racking up franchising wins in eight states covering about 60% of AT&T lines (pre-BellSouth merger) and 33% of Verizon’s. There are considerable questions over just how hard the Bells will push national franchising next year, especially now that the Democrats control Congress. As witnessed in ’06, national franchising runs the risk of picking up a host of attachments, especially with the Democrats in charge. There is little doubt that the Bells will continue to mount campaigns for state reform (see map) and petition the FCC for franchise relief.

Verizon is openly targeting New York, Pennsylvania and Massachusetts for state franchising reform next year. Georgia—which will be AT&T territory post-merger—is also thought to be a mark. It’s somewhat of an unusual state in that incumbent BellSouth operates traditional cable systems there under franchises, recently renewing an agreement for affluent Cobb County. The move may help cable with its argument that franchise reform isn’t necessary, though state lawmakers seem keen on doing something. Pennsylvania legislators tried to introduce franchise bills this year, but withdrew them for further consideration in light of a short time frame and mounting opposition. Broadband Cable Association of Pennsylvania joined a coalition of others in launching KeepItLocalPA.com, a site that posts content opposing statewide franchising.

With legislation failing in Florida, Louisiana and Missouri this year, the Bells are expected to pick up where they left off and try again in those states. The Michigan legislature was still considering legislation at press time. If it doesn’t pass, it’ll probably return next year.

Cable’s best strategy is to make sure it has a seat at the table so that it can ensure a level playing field. The good news for the industry is that the Texas franchising model—which ties cable operators to existing franchise agreements until they expire, while new entrants can apply for state franchises right away—appears to have been an anomaly. Many of the newly enacted bills allow cable to opt out of franchises early and apply for state-issued ones. Amy Maclean is editor-in-chief of CableFAX Daily.

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