Municipalities, Telcos Battle over Franchising

Carl Weinschenk

A very important battle is ongoing between municipalities and the phone companies which, under the right regulatory conditions, are promising them the many convergence benefits of fiber optics.

The basic parameters of the fight are fairly straightforward. The telcos are resisting the requirement that they enter into cable system-like franchises with every community they wish to serve. Instead, they want a single national franchise. This, they say, will enable them to build their networks much more efficiently.

Not only will they be saved all that time at city hall, but they can move forward knowing that the technology they install and applications they offer in Podunk are the same as what they use in Hicksville (which is, actually, a nice town on Long Island).

The communities, of course, don't want to give up the rights they have grown accustomed to in their 40 years of dealing with cable companies. They clearly don't like the idea of losing control on the eve of the unprecedented growth in applications and services most people expect. They fear that the telcos will bypass economically undesirable areas, a practice called "red lining."

The telcos are using their considerable muscle in Washington to get what they want, but the issue is a victim, like everything else in the capital these days, to mid-term election politics.

Whether a phone company deploys its fiber in a town is a vital issue, especially to businesses. Fiber, it's been proven, goes a long way toward leveling the playing field and making remote areas more desirable for corporations to set up shop. It's not too dramatic to say that fiber can save a small town. However, the municipalities that are likely to complain aren't those in such dire straits. It's the affluent suburbs and exurbs.

There are, of course, other options. The cable industry is continually upgrading its infrastructure. Wireless platforms are growing increasingly robust. Regardless, the regulatory and legal regimes controlling how phone companies deploy their fiber will be tremendously important during the next decade.

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