FCC to Cities: Open Cable to Competition

In a 3-2 vote that was delayed until this afternoon for procedural reasons, the US Federal Communications Commission voted to compel states and municipalities to give telephone companies 90 days following the date of their initial petition, to make their case for offering competitive cable TV and broadband service, in regions currently restricted to one CATV provider.

The new rule comes as legislation engineered by Republican House and Senate commerce committee heads last year, in an attempt to open up municipalities to possible national franchising, ground to what may be a permanent halt in the wake of the changing balance of power in Congress.

Attempts by lawmakers during the lame-duck session to fast-track the modified Barton Bill, which would have created a national franchising system for CATV operators to run in parallel with the current "one zone/one provider" system that pervades much of the country, failed in the midst of other priorities, including appropriations for the wars in Iraq and Afghanistan.

But today's ruling may not be the final word on this issue, as the FCC's two Democrat dissenting voters pointed out, as both legislators and courts may debate after the new year whether FCC has the right to compel state and municipal lawmakers to so much as open a window.

In a letter written yesterday to FCC Chairman Kevin Martin, incoming House Energy and Commerce Committee Chairman Rep. John Dingell (D - Mich.) clearly warned him not to overstep what Congress perceives to be his bounds. "It would be extremely inappropriate," Dingell wrote, "for the Federal Communications Commission to take action that would exceed the agency's authority and usurp congressional prerogative to reform the cable television and local franchising process."

That last phrase implied that Dingell's committee may be planning to assemble its own legislation, perhaps a resurrection of the bipartisan compromise bill that Dingell's predecessor, Rep. Joe Barton (R - Texas), hastily scrapped. The Barton bill's language had favored CATV and phone companies as principal providers of broadband Internet service, replacing language from the former bipartisan bill that would have conceivably made it easier for customers to choose cable TV from one provider and broadband Internet from another.

The FCC's ruling attempts to accomplish at least part of what the Barton Bill (a.k.a. the COPE bill) could not: specifically, to wedge open local markets to competitive pricing. In today's hearings, Chairman Martin cited evidence of consumer cable bills rising a total of 94% over a 10-year period (even though broadband Internet service was largely available in the US in 1996), as evidence that in single-provider markets, a lack of competition leads to almost organically grown prices.

But dissenting FCC voters Jonathan Adelstein and Michael Copps cited evidence that opening up cable service to competition does not necessarily lower rates, as is the case in areas serviced by direct broadcast satellite (DBS) providers such as DirecTV and Dish Network. Meanwhile, they said, services that operate over a completely different network -- such as RCN, a so-called "overbuilder" that provides cable, Internet, and phone service over non-leased fiberoptic lines -- but that partner with municipalities to provide new access to local zones and districts, have been able to reduce cable rates in their regions by as much as 17%, to an average price of $35.94/month.

Verizon -- one of the phone companies certain to benefit from today's proceedings -- portrayed the ruling as accelerating both nationwide broadband development and consumer choice.

In a prepared statement (perhaps prepared back when it seemed the Barton Bill was certain to pass), Verizon SVP for regulatory affairs Susanne Guyer wrote, "Today's action will fast-forward the delivery of new choices, lower prices and better services to consumers. The FCC is standing up for consumers who are tired of skyrocketing cable bills and want greater choice in service providers and programming."

Guyer mentioned the continued development of Verizon's own fiberoptic service, FiOS TV, which has already been rolled out in some areas. FiOS high-speed Internet service is available a la carte for $34.95/month, while TV service sells for $39.95/month.

"This order will enable us to reach agreements with local franchise authorities more quickly so we can deliver the benefits of competition to consumers faster," she continued. "The FCC has taken strong steps to increase consumer choice and spur investment in broadband and video deployment."

While few would dispute the notion that greater competition leads to healthier markets, the question before lawmakers now is whether the FCC not only has the right to dictate terms to cities and states over how they open up markets to competitors, but also the right to determine what class of competitor markets should be more open toward.