Video Franchises Key to Telco TV -- And a Whole Lot More

Carl Weinschenk

It's clear that a big part of the telephone industry's master plan is to modernize the franchising process so that it can roll out its fiber infrastructure without trudging from town to town, like the cable vagabonds of the 1970s and 80s, begging permission from local communities. This was as big a problem as it sounds: Local franchising in theory enabled each community to demand different concessions, keeping operators from totally standardized deployments. It also was an administrative headache.


It worked in its era, as cable operators had no competition and the communities were as anxious to welcome operators in as the companies were to provide service. Indeed, prospective customers were so eager for service in those days that they were known as "truck chasers."


Obviously times have changed, and the telephone industry wants a statewide approach to franchising. This is an issue for IT departments to watch because it is an important variable in determining how quickly fiber networks will be deployed. These networks could transform the relationship between content suppliers and customers and, just as importantly, be used by businesses for their internal and business-to-business needs.


The issue seemed to be on the road to settlement. A number of states have established statewide franchises. However, Ars Technica reports that the Connecticut Department of Public Utility Control (DPUC) rejected AT&T's application for a statewide license. The story says a law that went into effect in the state at the beginning of this month established two classes of providers: cable companies and "new video service providers." A judge ruled in July that AT&T's U-Verse falls into the cable category. The DPUC was unable to give it a video service provider license.


AT&T didn't take the news very well: It is threatening to fire 300 workers and divert $300 million in investment funds to nearby states.


Though U-Verse and Verizon's FiOS are the most noteworthy of the telephone companies trying to squeeze into the fiber-based triple-play business, there are many smaller telephone companies aiming for the sector as well. Indeed, the business is so attractive that some carriers see potential profits in being the third player in a market. This Baltimore Sun story looks at one of these companies, Cavalier Telephone Corp., which is trying to win a franchise to join Comcast and Verizon in serving Baltimore County, Md. The Virginia-based company has about 5,200 triple-play customers in the Richmond and Hampton Road areas of its home state.


Another telco trying to become a television star is Qwest, which recently submitted a video franchise application to the community of Arvada, Colo. The Denver Post says that under new federal rules, the community has 90 days to accept or reject the application or negotiate with the company. Commentary in the story suggests the new approach gives the phone company some finality. Previously, a municipality could negotiate indefinitely. The story says the company has failed to convince the state legislature to award it a statewide franchise, though it has won the right in Iowa.


Despite AT&T's setback in Connecticut, things seem to be bright for telephone companies. For instance, Fiber Optics Online reportsthat Verizon has begun offering services to 77,000 customers in Sarasota County under a new statewide franchise law. The story points to Verizon plans to expand FiOS aggressively in the state.


Ohio also is on the move. Late last month, a statewide 10-year video franchise law went into effect in the state. Governor Ted Strickland, according to the Port Clinton News Herald, said the new regime will aid businesses in the state. Other commentary said that the liberalized laws will accelerate the expansion of the modern telecommunication infrastructure. Current video providers can operate under their existing franchises. These cannot be extended or renewed. Providers have until Christmas Eve to apply for the new franchise.


Statewide video franchises make sense. However, regulatory approaches change slowly. It is encouraging that many states -- the Ars Technica story pegs the number at about 18 -- have shaken off the antiquated approach and now offer the more expansive licensing arrangement. Hopefully, the others will follow suit.

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