The lack of competition in the cable markets is causing quite a stir in Congress and state legislatures as cable and telephone lobbyists and local government officials trade words over the best and most economical way to get video services to consumers. Bringing Competition to Cable Television

The lack of competition in the cable markets is causing quite a stir in Congress and state legislatures as cable and telephone lobbyists and local government officials trade words over the best and most economical way to get video services to consumers.  Under the current regulatory scheme, businesses wanting to offer video service to compete with cable companies must negotiate franchise fee agreements with each individual locality across the country (there are currently more than 30,000) before offering their service to consumers.  The process is costly and time consuming; consumers are hurt the most.

At the federal level, both the House and Senate are considering legislation to streamline antiquated local cable franchise rules into a uniform national law that will encourage new providers to build broadband networks and offer advanced services.  At the state level, Texas and Virginia have already passed legislation that eliminates the requirement that a business must strike an agreement with each city or town before offering video services.  Consumers in those states have benefited from lower prices and better service as multiple market players now compete for their business.  

Recently, a representative from the Video Access Alliance, a coalition advocating the need for more video distribution platforms, joined CFIF Corporate Counsel & Senior Vice President Renee Giachino to discuss consumer choices for their television and entertainment services.  What follows are  excepts from the interview that aired on "Your Turn -- Meeting Nonsense With Common Sense" on WEBY 1330 AM, Northwest Florida's Talk Radio.

GIACHINO:  Are you tired of not having choices for cable television?  Are you tired of paying for an expensive service that seems to be lacking in the service department?  Well you might want to pay attention to this next segment because it might generate enough interest for you to get involved.

You may have read that both the House and Senate are considering legislation to streamline antiquated local cable franchise rules into uniform national law that will encourage new providers in our area and throughout the country to build broadband networks and offer advanced services to compete with cable.

This afternoon we are joined by Julia Johnson who serves as Chairperson of the Video Access Alliance. She is a nationally recognized expert in regulatory and public policy matters.  She has a long list of wonderful things that she has accomplished; most notably for us Floridians she was appointed by several different governors here in the State of Florida to serve on different boards.  We welcome her to "Your Turn" to help us understand this issue of franchising fees.

Ms. Johnson, thank you so much for joining us.

JOHNSON:  Thank you for the opportunity.

GIACHINO:  I understand from your website that Video Access Alliance's initial effort was to launch a campaign to urge Congress to pass video franchise reform legislation addressing the lack of diversified programming currently available.  I know, for example, that here in Santa Rosa County where this show is broadcast we have one choice other than to go satellite.  What your organization has called for is an increase in minority access to broadband technology and to support emerging and independent networks and other content providers.  Can you help us understand why we need to be paying attention to this issue of video franchising?

JOHNSON:  Sure.  For us and our membership – our membership is generally made up of independent networks, and when I say that what I mean by that is emerging channels.  For example, the America channel that goes around to local and small communities and highlights local heroes.  We also have an employment channel.  Lots of people now find their jobs using the internet.  Well this particular entrepreneur decided that television as a tool would be even more powerful.

But our interest in video franchise reform is not because we are against cable but we are for consumers and we're saying that if a household had a choice in terms of the company that they use when they switch on their television, then that greater choice would mean lower prices and a better quality and a more diverse service offered.  So we are very much in support of the companies that are investing billions of dollars to build the infrastructure to give customers choice.  We know that if we have choice, we have more platforms.  If we have more platforms we have better opportunities to have shared voices and lower prices.

GIACHINO:  Let me get a better understanding of this.  An organization or an entity develops programming, say the tennis channel, they are then held hostage to our local cable company as to whether or not our local cable company is willing or able to include that channel in our programming.  Is that right?

JOHNSON:  That is absolutely right.  And generally the new independent networks, because they are not owned by cable, the customer never knows that they exist – they never have the opportunity to pick those good, wholesome programs and sometimes these are very entertaining stations that could be out there available to consumers.

GIACHINO:  So essentially the regulatory environment that we have now allows the cable companies to become virtual monopolies in cities and towns across the country.  Is that right?

JOHNSON:  That is right.  Most people don't have real choice.  Some have limited choice with respect to satellite offerings, but what we are looking at is new infrastructure development, oftentimes by the telephone providers.  And not only are they bringing in new TV competition, but they are also expanding their internet broadband so people can even get better service when they sign on-line.

GIACHINO:  So we are not just talking about the types of programs that we may be able to watch on our television.  We are also talking about the fact that some of these regulations are actually preventing newer technologies from coming to the market and giving us a choice in our video services?

JOHNSON:  Absolutely.  It would be interesting to note that there are companies out there willing to invest the bucks and take the risks and bring in new technology because they believe that consumers really want that but just have not had a choice.  But what is happening here is that the process that you have to go through – whether it is a local or state process, the process to date has been very cumbersome and the delay has been extraordinary.  So who suffers?  It is the consumers who suffer.

GIACHINO:  When we talk about a franchising fee, that fee is sometimes mandated locally and other times it is state-wide?

JOHNSON:  Generally, and specifically in the State of Florida, the franchise fees that currently a provider has to pay is a local fee.  Now, mind you, here is an interesting part too.  The companies that are building these platforms are not adverse to even paying the fees.  They are saying that they will pay their fair share – they want to give back to the community, they just need a process that can be implemented quickly so that they can build these networks and get to the customers.

GIACHINO:  So ultimately if franchise fees went away and the local community no longer had the ability to charge these fees, well then I understand why the local government may be against it.  But you indicated that that may not necessarily be the case.  That is, they could still impose some sort of franchise fee that the independents would be willing to pay.  So what is the resistance at the local level?

JOHNSON:  The argument that we have heard is first the natural fear that if they don't have regulatory authority they will not be able to get those fees.  Let's take that off the table.  We want to support the local communities and there are certain fees that we are willing to pay.  So let's take that issue off the table.

And then a lot of it just goes to fear with the locals that there might be redlining.  And that is that the companies will only go into working class and upper class communities with their service.  Often times locals want to be able to mandate where the companies might offer their service or mandate that they offer service everywhere.  That is an issue that has been raised in a very legitimate way.  Our response is two-fold.  One, they will readily agree to regulations that say you cannot redline or discriminate.  However, in terms of their deployment, they have to take one step at a time and to the extent that they are required to blanket in the first instance an entire county, then their cost would go up so much that it would be cost prohibitive.  So all they are asking is to allow us to take one step at a time and we will cover your full community and we will do so in an expeditious manner.  But we do not want a regulator telling us how and when because that impacts whether or not we can get the money from Wall Street to make the investment.

GIACHINO:  I feel that way about a lot of things in my life; I don't need a regulator telling me who or what or when.

Let me get to why I am personally interested in this issue.  Do you think that the competition would ultimately reduce the price for us consumers?

JOHNSON:  That's right.  And it is going to be so clear.  For example, in the State of Texas they passed legislation that revamps the regulatory process and it is no longer done on a local basis but on a statewide basis.  Where companies have now gone into new locations, they have not only seen the new company come in with lower rates but they have seen the cable company that is now seeing competition lower its rate 20-30% overnight.  So it is a triple benefit for consumers:  they are getting a lower rate and they are getting more choices and they are getting quality programming.  It is a win, win, win.

GIACHINO:   I don't know if this is a fair question, because I am not sure if this is something you need to know for what you do.  But, do you know on average how much consumer cable rates have gone up on an annual basis?

JOHNSON:  I cannot answer that question because I am not sure.  If I look at the anecdotal and I hear lots of complaints, and I look at my own cable bill, and I am always complaining about that, but I am just not sure of the numbers.  But what I am sure of is that if you allow a second provider into your community, competition forces prices to immediately go down and generally you will see service and quality to go up.  Right now, if you have one game in town they can take you for granted.  They don't have to offer extra service.  They don't have to even offer good service.  But as soon as there is a competitor we see that people pay attention and service becomes better and rates go down.

GIACHINO:  One of the things that I read is that the opposition makes an argument that public access channels would be at risk if this legislation passes.  How do you respond to that?

JOHNSON:  I think we all enjoy the public access channels and that is something that we all would want to protect.  Luckily, when you talk about not having an expedited process and not going through local channels that does not mean that the state authority that would be granted would relinquish companies of their obligations to provide the public broadcast content.

Here's another issue, and it's a legitimate fear, but it is an answer to the response to say "okay, if we have a state regulatory process that is expedited, we are more than willing and interested in making sure that we address the public access problem."

GIACHINO:  Could you please offer more information about your organization?

JOHNSON:  Our website address is www.videoaccessalliance.org.

GIACHINO:  On the issue of steering folks in that direction if they are interested in this, what should we do if we want change?

JOHNSON:  I think on two levels there are things consumers can do.  One, we do have interest at our state legislative level.  Both the House and Senate are entertaining bills that would allow for state franchising.  So I would suggest that they call their representatives and Senators and let them know that they are interested in more choice, competition and lower bills.  And they need to call right away because they are in the midst of session now and they can make sure that their voices are heard.

Interestingly enough, at the federal level they are considering the same type of legislation.  But at this level it would be federal oversight.  So I would suggest that you call your Congressmen and women and let them know the same – that you too believe that having more choice and not just a monopoly providing you cable TV service would be beneficial.

GIACHINO:  Are these competing bills – some at federal level and some at state level?

JOHNSON:  Interestingly enough, most of the leadership at the state level that file legislation really would not mind the federal legislation.  They are almost saying that if the feds don't give some federal relief, let us at least take care of what we can take care of, let us at least have the state expedite the process.

GIACHINO:  On behalf of one of our valued listeners who is always interested in states' rights issues, if in fact Florida were to pass this legislation and then the federal government were to pass competing legislation, would the state legislation trump whatever federal legislation is put into place?

JOHNSON:  I would have to take a closer look.  The bill at the House level in Washington, D.C. just came out and I am not sure how preemptive it is.

GIACHINO:  Certainly the legislative term in Florida is much shorter than the federal legislative term, so it is very likely that the federal legislators may be watching what is happening around the country in the state legislatures.  Are there other states, other than Florida, that are considering statewide franchise legislation?

JOHNSON:  Yes.  Texas and Virginia just recently passed legislation.  Indiana has done the same.  It is pending in New Jersey.  This is a good trend because consumers are speaking out and letting their legislators know that they want choice and they want lower rates and they want to be able to select their cable television provider.  And the public policy leaders are listening.

The other aspect of this is – and certainly the main focus would be more quality programming at lower prices, but the states that are initiating action first are the ones that are getting the new technologies first.  They are getting the investments and economic development.  They will have a competitive advantage as a state.

GIACHINO:  So I think it is fair to couch this as a free-market issue.  Is that right?

JOHNSON:  Absolutely.  This is free-market, innovation and investment.  This allows the market to work.  When we looked at what was happening with high-speed internet access and there were some companies that said they would compete with cable and companies saying they would offer a high-speed service, there was some trepidation.  Same kind of trepidation we are seeing now – should we let you do this or should we regulate?  The local, state and federal governments are so pleased that they did not regulate because it allowed the companies to come in and make the advancements faster and now 90% of our communities have access to high-speed internet access and the other 10% that are hard to serve are now seeing that they are getting wireless broadband.  So the market works and it has worked.

GIACHINO:  I agree.  And in my experience it seems that the more regulation there is the more taxation there is.  That's all the time we have this afternoon Ms. Johnson.  Thank you so much for joining us.  We would like to invite you back as this progresses.

JOHNSON:  Thank you very much.  Just go to the website videoaccessalliance.org.  We appreciate your support.

April 19, 2006
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