The Case for Local Control of TV Deals

I have a simple rule of thumb for determining whether my cable TV service is overpriced: Is it a monopoly? Then it’s overpriced.

And let’s face it: Virtually every cable TV operation in the country is a monopoly.

In principle, therefore, we should welcome the efforts of the phone companies Verizon Communications Inc. and AT&T; Inc. to offer cable-style video services to the home in competition with the Comcasts and Time Warner Cables of the world. The record shows that when a genuine rival enters a cable TV market, subscription rates plummet. (Satellite TV doesn’t have as marked an effect, because dish TV has its own inadequacies and can’t provide broadband Internet service as conveniently as cable or DSL.)

But the question raised by a bill in the state Assembly is whether it’s necessary to wipe out all local regulation of cable services in order to achieve the nirvana of video competition. AB 2987, sponsored by Democratic Assembly Speaker Fabian Nunez and Assemblyman Lloyd Levine (D-Van Nuys), chairman of the Utilities and Commerce Committee, would do just that.

The bill would replace our current regime of local regulation with a statewide system endowed with scarcely a dime’s worth of enforcement authority. Local officials have reacted predictably to this threat to their only leverage against the big companies -- leverage that has allowed them to demand benefits such as public access channels and free video and Internet connections for government buildings, schools and libraries, as well as enforceable guarantees of service to underserved neighborhoods and communities.

“This bill is not good public policy for California,” says Lori Panzino-Tillery, division chief of the franchise program for San Bernardino County and president of the National Assn. of Telecommunications Officers and Advisors. “It would harm technology to schools, it doesn’t provide for advanced services for those who don’t have it and it doesn’t enhance broadband deployment.”

Levine says it’s wrong to regard his bill as deregulation. “We’re not removing regulation,” he says, “we’re regulating differently.”

Still, from the companies’ standpoint, one undoubtedly gratifying feature of the bill is the ease of obtaining a statewide franchise. The procedure would require a video provider merely to file an application with the state Department of Corporations essentially bearing its name and address and identifying the boundary lines and socioeconomic characteristics of the region it wishes to serve. It must also pledge to observe local laws, to avoid redlining underprivileged neighborhoods and to provide a certain number of public-access hours. But the bill doesn’t require the provision of separate public-access channels, known as PEG, or “public, educational and government,” channels. Once the application is complete, the department would be required to award the franchise within 14 days.

No public hearings. No vote by elected officials. What if the company later violates its pledges? Tough. The Department of Corporations has no authority to revoke the franchise. The only path of enforcement is litigation by a municipality, a district attorney or the attorney general. (As if they don’t have enough to do besides wrangling in court with nationwide phone and cable giants for a few years.) The phone companies would be awarded the free ride immediately; cable providers as early as 2008 or whenever their existing local franchise agreements expire.

AT&T; and Verizon, which are vocal in the bill’s praise, complain that reaching franchise agreements with more than 500 cities and counties in California is an arduous process that only delays the rollout of advanced technologies and the marvels of competition to downtrodden consumers. Both companies say the local franchise system is a relic of the past, when cable meant a one-way coaxial pipeline carrying TV channels into the home, unlike today’s interactive digital fiber optics with high-speed Internet service and video on demand. But they haven’t made the case that the old system is unable to cope with the new world, only that they’d rather do without it.

Tim McCallion, region president of Verizon California, told me that two years of negotiations with 30 municipalities have yielded his company only five agreements thus far. “There are always a lot of bureaucratic reasons and rationales for slowing the process down,” he says. Ken McNeely, president of AT&T; California, illustrates the obstacles thrown up by local officials by observing that Oakland has been negotiating its franchise agreement with Comcast for three years and San Jose for six.

As blanket condemnations of municipal regulation, these arguments fall under the category of spin. Local officials say the phone companies try to manhandle them by swanking into City Hall with take-it-or-leave-it contracts and dragging their feet in negotiating when told that won’t do. “I have cities that have said they’ve sat at the table for only four hours over a six-month period,” says Panzino-Tillery.

As for Oakland and San Jose, Comcast is a full partner in those delays. In Oakland, it’s balking at a city law facilitating union organizing of its workforce; in San Jose, the sticking point is the city’s demand for additional public access channels. Both demands are arguably public benefices; Comcast just doesn’t want to pay the price. While the negotiations drag on, it has continued to serve its customers unimpeded, collecting its customary profit.

We shouldn’t forget that this state’s row over TV regulation is merely a skirmish in an epochal war. The cable providers and phone companies are invading each other’s turfs with bundled TV, Internet and phone deals, and at every turn each side gripes that the other is favored by incumbency and outdated regulatory procedures. Rather than confronting these claims head-on, the Federal Communications Commission and state regulators have made themselves scarce.

Will the entire country gain evenly from deregulated telecommunications? Doubtful. Affluent suburban neighborhoods will get the best service first; low-income, rural and inner-city communities, which need advanced telecommunications as much as anybody, will get the dregs eventually, if ever.

In rural San Bernardino County, Panzino-Tillery observes, there are communities that haven’t yet been touched by cable TV, much less broadband Internet. “There are people out there who don’t have this stuff,” she says, “and the way federal and state legislation is going, they never will be.”

The cable and phone companies keep talking about their desire to face each other on a level playing field, but who’s keeping it level for the consumer?

*

Golden State appears every Monday and Thursday. You

can reach Michael Hiltzik at

golden.state@latimes.com and view his weblog at latimes.com/goldenstateblog.