Cities May Lose Hold on Cable

California cities and counties would be stripped of most of their power to regulate local cable television operators as part of a compromise that emerged Tuesday in a high-stakes legislative battle over local television service.

The plan would allow cable TV operators to be regulated statewide by the California Public Utilities Commission.

Local officials were wary Tuesday of the proposal, saying they were worried about the effect on pay-TV consumers if local governments could no longer set basic rates, ensure equal access to services for all residents and handle customer complaints.

The PUC’s proposed role in setting pay-TV rates and service standards was not spelled out Tuesday.

“We still think that the kinds of problems that come up are going to be best solved at the local level,” said Megan Taylor of the League of California Cities. “If someone puts graffiti on switching boxes, are you going to call the PUC?”

Dan Wall, the top lobbyist for Los Angeles County, agreed. “We think local control is the best model, but that doesn’t seem to be an option,” he said.

The compromise was unveiled in the state Senate on Tuesday by Assembly Speaker Fabian Nunez (D-Los Angeles). He has been shepherding a bill through the Legislature that would allow the state’s telephone companies to begin offering local television service transmitted through phone lines. The legislation passed the Assembly on May 31.

As originally written, the Nunez bill, AB 2987, called for statewide regulation of the phone companies, including AT&T; Inc. and Verizon Communications Inc., in providing TV service. But it did not address cable TV.

Cable companies called it unfair that they would have to deal with the demands of numerous local governments while the phone companies would have to contend with only one statewide regulator.

As a result, Nunez said that a compromise was at hand while a Senate committee began considering his bill on Tuesday. He offered an amendment calling for statewide regulation of cable operators and phone companies.

“This is about providing customer choice, about lowering prices and about making everybody happy,” Nunez told the committee Tuesday.

Counties and cities, not wanting to buck the powerful speaker, spent much of Tuesday afternoon furiously negotiating with the speaker’s staff to salvage what they could from the proposed regulatory scheme before a key vote in the Senate Energy, Utilities and Telecommunications Committee on Thursday.

Advocates for consumers and small businesses split over the Nunez bill.

Proponents of the legislation argued that allowing phone carriers to offer pay-TV service under a statewide franchise would boost competition, encourage the introduction of new products and lower prices.

“You cannot go city by city in our state and remain competitive,” said Ronald Gastelum, president of the Greater Los Angeles Area Chamber of Commerce, which represents small-business owners.

Opponents argued that eliminating much of the local control over television franchises would leave customers unprotected.

“It’s a complete bailout for cable companies and AT&T; to ramrod a bill that has no controls on either industry,” said Jamie Court president of the Foundation for Taxpayer and Consumer Rights based in Santa Monica.

The tentative agreement removes the cable industry’s opposition to the bill and sets the stage for expected passage by the full Legislature before it adjourns Aug. 30.

“We had to do what was in the best interest of our clients,” said Dennis Mangers, a lobbyist for the California Cable & Telecommunications Assn. He predicted that most of his industry, dominated by Comcast Corp., Adelphia Communications Corp., Cox Communications Inc., Time Warner Cable and Charter Communications Inc., would opt for a state franchise if Verizon or AT&T; entered their service territories.

Cities and counties, the bill’s primary remaining opponents, concede they have little chance of slowing down the measure.

Local governments are particularly worried that they would get less money from cable TV operators through franchise fees. The bill would require phone and cable companies to pay local governments the same 5% fee now paid by cable operators under local franchise agreements but could change the way those fees are calculated.

Cities and counties and some consumer advocates also said they wanted to make sure that Nunez’s bill would prevent telephone companies from favoring high-income neighborhoods in the delivery of Internet, phone and video service.

“We want to ensure service to all communities,” said Los Angeles City Councilman Alex Padilla.

Until now, the battle over the bill had been shaping up as the year’s biggest clash between competing business interests: cable TV versus the phone companies.

For months, the phone and cable industries had been preparing for warfare by running campaign-style advertisements in newspapers and on television to influence lawmakers, the governor and the public.

The state’s major phone companies declined Tuesday to comment specifically on Nunez’s deal with the cable companies.

Kenneth P. McNeely, president of AT&T; California, said he expected the governor to sign the bill because it “encourages competition and choice and significant investment in a broadband infrastructure.”

But assuming statewide franchising goes into effect Jan. 1, it’s difficult to say how soon the phone companies can start offering video service.

AT&T; would not say where it plans to roll out pay-TV because it wants to help cable companies focus efforts to lock customers into long-term contracts.

Verizon spokesman Jonathan Davies said the company already has fiber-optic lines going to homes in 30 California cities. Once statewide franchising takes effect, he said, the company could offer pay-TV in those cities in one to three months, depending on how much additional equipment is needed.

“The hard part is putting in the fiber,” Davies said. “The back-office stuff is not as time-consuming.”