Phone firms can get statewide franchise for TV;

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Cable competition opens as governor signs legislation


Sacramento, CA — Gov. Arnold Schwarzenegger has signed a bill that will make it easier for telephone companies such as AT&T to jump into the video market, helping to transform the state’s telecommunications landscape of how consumers access television, telephone and Internet services.

At the heart of AB2987 is the ability for companies to get a single statewide franchise license to provide video service rather than seeking separate agreements from local governments, which the cable companies have done for decades.

When the legislation becomes law on Jan. 1, companies such as AT&T and Verizon will be able to compete against cable TV providers such as Comcast and Time Warner. It is part of a trend in which telecommunications companies are stepping on each other’s toes as they expand service using faster Internet connections.

For example, AT&T will add video to its telephone, Internet and cellular phone services.

Cable companies are already offering TV, Internet and telephone services. They will probably add cell phone service in partnership with Sprint, said Jeff Kagan, a telecommunications analyst in Atlanta.

“The telecommunications industries are reinventing themselves,” he said. “Until now, your local cable companies and your local telephone companies never really competed. Now, you will have these two big competitors slugging it out.”

Signing the bill Friday, the governor said increased competition will result in “better service and lower prices for everyone.”

However, critics continued to voice objections. They said the new state franchise scheme is long on promises to provide better service and prices but short on regulations to ensure that they deliver on those promises.

“Consumers just lost all the leverage that they had, which was the power of city and county officials to make sure companies provide good and equitable service,” said Jamie Court, president of the Foundation for Taxpayer and Consumer Rights. “You can’t remove 500 carefully crafted franchise agreements without doing damage.”

However, the bill’s co-author Assembly Speaker Fabian Núñez, D-Los Angeles, said people will realize in due time that this was the right move.

“I think when people look back five or six years from now, they’re going to realize that what we did this year has translated into more variety, better products and I would argue, at a much more competitive price,” he said.

With billions of dollars of investments and business at stake, the bill has been one of the most heavily lobbied pieces of legislation this year.

AT&T and Verizon together spent nearly $20 million to influence the vote in the three months that AB2987 waded through both houses of the state Legislature.

AT&T started the year really needing to educate consumers and policymakers about a significant paradigm shift in communications and entertainment industries,” said Ken McNeely, AT&T California president. “Consumers now have a better understanding and I think policymakers now understand.”

The effort paid off quickly, as an early version of the bill passed the Assembly unanimously. Even the cable industry, which had been trying to kill the bill, quickly switched gears, jumping on board in support in exchange for adding a provision that would allow them to obtain a statewide license when a phone
company enters their market.

The bill didn’t see a single “no” vote until it reached the Senate on Aug. 30, where the upper house approved the legislation 33-4.

Consumer Watchdog
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