Article on Statewide Cable Franchising Effects

A legislative measure would end most regulation of new wired video service

by Charles N. Wheeler III

"When two elephants fight, it is the grass that gets trampled."

African proverb

In the legislative battle now under way between two heavyweight industries — the telephone companies and the cable television providers — what's at risk of getting trampled is the public interest.

The focus of the intense struggle is a telecom-backed measure that would strip franchising control from local governments and do away with most regulation for new entrants into the lucrative field of providing wired video service, long dominated by cable companies. As cable providers have started to offer telephone service, though, traditional phone companies have begun fighting back with plans for video over their landlines.

Led by AT&T, the phone companies argue that Illinois consumers are being gouged by the near-monopoly on video that cable companies like Comcast now enjoy, a competitive advantage owing in part to the need for would-be video providers to negotiate franchise agreements with every locality they wish to serve.

Under the pending legislation, providers no longer would have to deal with city officials. Instead, they could seek authorization from the Illinois Commerce Commission to provide video wherever they choose. Proponents say allowing the telecoms unfettered access to local markets will unleash competition that will drive down prices, attract more investment to Illinois and create thousands of new, high-tech jobs.

The cable industry responds, quite accurately, that nothing now prevents AT&T, Verizon or other telephone companies from competing for the video business under the existing rules by negotiating the same sort of franchise agreements that cable providers have with cities and villages across the state. The telecom proposal, the cable guys say, is merely a way for Ma Bell's offspring to avoid locally set service standards and to serve only those neighborhoods most likely to sign up for the most-expensive packages with lots of bells and whistles.

Fearful of being caught underfoot are the folks who run the community-based, public, educational and government channels, referred to as PEGs. They typically broadcast such fare as school board meetings, city council sessions, community arts events and educational programming.

Equally concerned are local government officials, who worry about losing control over the public rights of way in their communities and losing their ability to set service standards for the new video providers, including requiring that service be offered throughout the community.

Lawmakers face a tough challenge in sorting out fact from the public relations spin employed by the competing corporate interests. A key point to remember, though, is that neither the telecoms nor the cable companies should be expected to have the public interest at heart. After all, big corporations are supposed to make as much money as possible for shareholders. Looking out for the little guy — John Q. Public — is government's job, and it should be a top priority for elected officials.

To his credit, the telecom bill's chief sponsor, Rep. James Brosnahan, an Oak Lawn Democrat, already has removed some of the measure's more troublesome points and has been negotiating with the community groups and local officials in an effort to allay some of their other concerns.

To safeguard the public interest, however, lawmakers should focus on a couple of critical issues:

• Protecting the existing network of public access channels, including encouraging their future growth. Telecom allies profess their commitment to public access, citing a provision of the measure that earmarks 1 percent of receipts to underwrite PEGs. But public access stations in some communities enjoy higher levels of funding, which would be slashed by a statewide 1 percent cap.

Moreover, cable providers now foot the bill for hooking up the public access stations to their systems and carry the signal for free. In contrast, AT&T would like PEGs to buy the equipment needed to make their signal compatible with the phone company's technology, then pay AT&T for carrying it. And the phone company initially planned to provide a lower quality picture for PEGs — akin to a YouTube image in a computer window — rather than the full-screen TV picture viewers expect.

Advocates argue, correctly, that new entrants into video service should be required to play by the same public access rules as cable providers. That means no funding cuts, no freeze on future PEGs, no new carriage charges and no second-rate picture quality.

• Assuring that local governments maintain control over the use of public property by private business. Even if one accepts the premise that the state should issue video licenses to all comers, that's no reason to allow the telecoms to stick the refrigerator-size boxes needed for their technology where they see fit. Local regulation of equipment placement is important for public safety — think clear sight lines at intersections.

Local officials also generally have done a good job of requiring cable providers to offer service to everyone within the franchise area, thus avoiding so-called "cherry picking" in which only affluent, or demographically desirable, neighborhoods are covered. The telecoms say they want everyone for a customer, but mandating 100 percent build-out is bad business practice. At the least, though, lawmakers should set a goal of universal build-out, with reporting and enforcement provisions to stop technological redlining.

Similarly, the legislation sets out demanding standards for consumer protection, like resolving billing disputes, requiring prompt service calls and barring excessive fees, the familiar consumer headaches. All commendable, but equally necessary is oversight and enforcement, somewhere an aggrieved customer can complain, short of suing the provider, and get a fair shake. Perhaps the ICC's role could be expanded beyond mere pro forma license issuance; even better, the attorney general could be given the job.

The ultimate goal in the telecommunications war is to become a customer's sole provider of video, telephone and broadband Internet service. Lawmakers should watch out for the broader public interest along the way.

Charles N. Wheeler III is director of the Public Affairs Reporting program at the University of Illinois at Springfield.

Illinois Issues, May 2007


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What Makes AT&T's U-Verse Tick?

This is a recent article by Jennifer Harris, of the Center for Digital Democracy. It mentions an issue of concern in San Antonio.

The Universe According to AT&T’s U-verse

By: Jennifer Harris

AT&T's leap into the converged world is illustrated in its two-pronged IPTV approach, Homezone and U-verse. IPTV is a system that enables digital television sets to be programmed using the more personalized data delivery method of the Internet – Internet Protocol.

U-verse, as explained by Joe Laszlo of JupiterKagan Research, is considered "the end-game" for AT&T. U-verse is similar to a cable-like video service offered by way of phone lines and to only those privileged enough to have fiber in their neighborhoods. Homezone, a hybrid satellite/IPTV service offered in conjunction with Dish Network, is a second-tier option offered to customers who don't want to wait (or may never see) fiber optic appear in their city. The cities able to yield the highest return on investment for the pricey deployment of fiber cables will get services first, while other communities remain on the back-burner. AT&T’s model of preferential treatment extends throughout the formation of their IPTV service, stepping up quality for those with deep pockets and standing aside for those without. By building a new media system that perpetuates the anti-competitive communications market and neglects the public interest, AT&T delivers a service to customers that falls short of its connective and innovative potential.

Traditional media is inevitably shifting from being a source primarily for entertainment to becoming a networked system that connects households inextricably to their educational, civic, health and buying needs. New media services will no longer be classified as stand-alone luxuries, because convergence is melding voice, video and data into singular systems essential for information sharing and communications. IPTV, and other new media services, will become staples in American households (much like electricity or telephone service) and become necessities in the information age. As AT&T sets the stage for an IPTV service that plays favorites between the haves and have-nots, it is setting in motion a system that restricts information, and allocates it only to the wealthy and the well-connected. The fiber lines being laid are dividing more than just parts of a city; AT&T is creating a lopsided playing field that will ultimately leave citizens and communities out of countless opportunities for advancement and connectivity.

When AT&T refused to disclose their build-out plans in the Geneva, IL tri-state area, it soon became clear to city officials that the reason was because AT&T had no intentions of offering U-verse and other advanced broadband services to the entire community. Geneva’s IT manager said “they're asking us to specifically segregate and point to one part of our community and say, ‘…in order to let AT&T come in here, we're going to serve the east side of town but not the west.’”

Unwilling to negotiate under local franchising authority and abide by the rules set for cable providers, AT&T eventually took the city of Geneva to court (many other cities have also been dragged into similar legal battles: Milwaukee, WI, Walnut Creek & Livermore, CA, Naperville, IL and multiple Chicago suburbs). Ralph Ballart, former vice president of broadband at SBC Laboratories commented that "If we are going to build the IP (Internet Protocol) pipe, we want all the revenue streams." However, AT&T cannot guarantee that all parts of a community that allow the company to build the IP pipe will ultimately receive AT&T’s IP services. When AT&T officials are questioned specifically about obligations to build out services, they claim that U-verse cannot be classified as either a cable or telecommunications service; therefore previous rules do not apply.

If U-verse is neither accountable for previous obligations nor responsible in adhering to principles guiding future innovation, then how can customers expect to benefit from services that don’t have to truly serve them? AT&T, as a stipulation to their $86 billion merger with BellSouth, agreed to abide by a set of net neutrality principles, or guidelines that the company will not favor one set of online content above others. However the guidelines distinctly exclude AT&T’s “end game”, U-verse. If U-verse is truly where the buck stops then as David Isenberg recognizes “we have provided AT&T/[BellSouth] the means to render the proposed Network Neutrality condition on the merger violable, and…so weak as to be meaningless”. By discriminating against certain types of content, U-verse will be able to set the hierarchy – dictating which content is most valuable for you and your family.

Pay for Digital Play

AT&T is not only seeking to control broadband on the user end, but to parcel it out to preferred content providers as well. AT&T is taking harmful steps to ensure that non-commercial television has no future on IPTV sets. Consumers should not expect to see community-focused, noncommercial programming in the world of U-verse…at least not clearly.

A suspicious request made in an agreement between AT&T and San Antonio asked that PEG access centers send all programming to the provider at rates that would clearly degrade the content; ultimately making the community channels unwatchable to all viewers. Alliance for Community Media Executive Director, Anthony Riddle believes that by juxtaposing the pixilated community media channels with the crisp HD images of the other cable channels that “AT&T is pushing to ghettoize PEG channels on U-verse”.

As AT&T has shifted into the new media environment, they have made it very clear that they want to leave the public’s interests out of the big IPTV picture. AT&T is rolling out a service that is perpetually cutting corners – exploiting converging technologies and dodging local oversight. AT&T is taking measured and calculated steps that trim the edges off of previous obligations to serve communities.

The infrastructure for a powerful, interactive communications system deserves to be built on a model that will give back to communities exponentially. A U-verse system that is responsive to the public interest would open windows in communities: enhancing distance learning programs in disadvantaged school systems, generating economic potential in rural and urban areas by offering career advancement in IT and media fields, and by connecting families to valuable health and medical care not offered locally. However, U-verse amounts to a universe of untapped possibility. AT&T could construct a U-verse environment that works toward a long-term vision instead of being based around fleeting profits, but in AT&T’s U-verse - advertisers mean the world.