A Good Idea Gone Very, Very Bad Posted by Bob at 03/06/07 11:43 AM

The Federal Communications Commission yesterday released a an order that effectively undermines the authority of local governments to negotiate franchise agreements with big telecom companies such as AT&T and Verizon who want to offer pay television services.

Among other things, the order would give local governments a 90 day deadline to act on applications by phone companies and other would be video service providers. If no deal is reached, the companies would be free to move ahead.

Backers of the plan -- led by FCC Chairman Kevin Martin -- argue it will speed deployment of new video delivery networks by the phone companies and benefit consumers by introducing new competition to what had traditionally been a monopoly market for cable companies.

As consumer advocates, we are big fans of healthy competition. It almost always drives down prices and forces competitors to offer better goods and services. The consumer really has no better friend than robust competition.

We don't think the FCC order does much to create a truly competitive market for video services, however. In some markets where cable companies enjoy a complete monopoly, itI's possible one of the phone companies might give some consumers another choice.

We emphasize the "possible" part.

In the few markets where phone companies have begun offering video service, the impact on prices has been minimal and short-lived, at best. By and large, cable companies have continued to raise their rates. Verizon recently raised its rates as well.

Any real price breaks have come from the bundling of televison, Internet and phone services by the cable companies and the phone companies. Those benefits are also fleeting, however, with prices generally jumping up after a year or so of low introductory rates.

The biggest problem with the FCC order is that it frees phone companies of an obligation to build out their systems to all parts of a community. This doesn't just allow the phone companies to "cherry pick" more affluent customers and ignore poorer neighborhoods -- it actually encourages it.

Our Consumers Union colleague Jeannine Kenney put it very well in her reaction to the order.

"In pursuit of the valuable goal of competition in cable TV markets, the FCC has managed to craft a policy that is unfriendly to consumers. It is not enough to bring competition only to certain areas in a community. Meaningful build-out requirements are an essential component of any public interest franchising process. This Order ties the hands of local authorities to protect their most vulnerable constituencies."

Local governments are expected to challenge the order in court. There are also some rumblings that Congress -- which considered and rejected similar nationwide video franchising rules last year -- will try to find a way to step in and reverse the order.

Such uncertainty cannot be expected to encourage phone companies to spend billions of dollars to deploy new video delivery networks, which Martin and other supporters of the order often cite as the primary goal.

You can view the order and individual statements made by the five members of the commission by clicking here.

comments (1)

1 Posted by HAMMERHEAD at 04/09/07 03:41 PM

Isn't it time for the FCC to REQUIRE SUCH SERVICES IN RURAL UNITED STATES AREAS?
This just discriminates against rural and or POOR areas even more.