Phone companies looking to compete against cable operators in the TV market...

During its open monthly meeting, the Federal Communications Commission is scheduled to vote on new rules that would make it easier for phone companies to secure local video franchise agreements, which spell out requirements for everything from equipment to environmental protections.
High Impact
What's new:
An FCC vote scheduled for Wednesday could have significant implications for phone companies attempting to offer TV service in addition to telephony and broadband services.
Bottom line:
The FCC's chairman says adding phone companies as competitors in the TV market will ultimately benefit consumers. But cable operators, telecommunications watchdog groups and some members of Congress say the FCC is using flawed data that could lead to it overstepping its authority.
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The phone companies--namely Verizon Communications and AT&T--have spent billions of dollars over the past few years upgrading their networks with fiber-optic cabling and new equipment so they can offer TV service in addition to telephony and broadband services.
But to offer TV service, operators must negotiate local franchise agreements with cities and municipalities. Phone companies have complained that the process for obtaining these franchise agreements is taking too long. They also complain that some local communities have made unreasonable requests before granting the agreements.
The phone companies have looked for relief from state governments, which in many cases have streamlined the process by offering statewide franchises. So far, 14 states have introduced some form of franchise reform. Texas was the first state to pass franchise reform, and Michigan is the most recent to take up the issue. Phone companies have also taken their fight to Capitol Hill, where a proposed law for national franchise reform stalled earlier this year.
Now, the phone companies are looking to the FCC to help them in their fight. And they have found an amenable ally in FCC Chairman Kevin Martin, who is convinced that adding phone companies as competitors in the TV market will ultimately provide consumers with better programming at a lower cost.
While only Congress can do away with local franchises altogether, Martin believes the FCC can impose new rules to make the process work faster and strip local governments of the ability to add certain conditions to their franchise agreements.
In a speech December 6, Martin outlined his general ideas for reforming the local video franchise process. Specifically, he suggested that the FCC impose a time limit for local franchise authorities to consider new agreements, limiting that period to 90 days in some cases and up to six months in other cases. He also says he believes the FCC should have authority to determine what are reasonable or unreasonable requests made on companies to get those licenses.
"I am very concerned that the commission may be taking an action for which it does not have legal authority and that has not had proper congressional or public scrutiny."
--Rep. Mike Doyle in letter to FCC Chairman Kevin Martin
"The commission has noted that telephone company entry into the video marketplace has the potential to advance both the goals of broadband deployment and video competition," he said. "The commission developed an extensive record on the franchising process. That record indicates that the process can pose an unreasonable barrier to entry."
But cable operators, telecommunications watchdog groups and some members of Congress think the FCC is using flawed data that could lead to it overstepping its authority. The FCC plans to release a report on Wednesday that looks at the average rates for cable TV service over the past 10 years. In his recent speech, Martin said that from 1995 to 2005, cable rates have risen 93 percent, from $22.37 in 1995 to $43.04 in 2005. He used this data point as an argument for changing the local franchise rules to add more competition to the market.
While rates have gone up, the National Cable & Telecommunications Association argues that cable operators have invested more than $100 billion to provide advanced, interactive services like high-definition TV, video-on-demand, high-speed Internet and digital phone service. The group also says that bundled services lead to consumer discounts for those who subscribe to more than one service. And it argues that the number of viewers and the time that people spend watching television have actually increased every year.
What's more, Verizon is entering the market at roughly the same price as cable operators. Its Fios TV service costs $42.99 per month.
A consumer advocacy group called Teletruth says the FCC should be careful in imposing what it calls "Bell-friendly" franchise rules.