Proposed telecom bill would deregulate cable TV

By Chris O'Malley, The IBJ
comalley@ibj.com

State legislators today unveiled a "sweeping" telecommunications reform bill that would strip municipalities of their authority to regulate cable TV and other video providers by creating a statewide franchising authority.

Senate Bill 245 also would end state regulation of pricing for basic phone service after providers make broadband service available to 50 percent of their customers. It also calls for local property-tax abatements for providers that make infrastructure investments for broadband.

"It's time to modify our laws so that the free market can drive down prices for consumers," said State Sen. Brandt Hershman, R-Wheatfield, the bill's sponsor.

The measure is likely to bring a firestorm of opposition from Indiana municipalities, many of which regulate cable television firms serving their residents.

The force largely behind SB 245, opponents say, is SBC Indiana. For months, SBC has been lobbying legislators—lugging around DVD players that demonstrate the phone giant's plan for Internet protocol television. IPTV relies on fiber-optic and other video infrastructure improvements the company has been quietly installing in recent years capable of simultaneously providing video, voice and broadband service.

Under current regulation, it appears that SBC would need to sign a franchise agreement with the city of Indianapolis, said Rick Maultra, director of the city's cable communications agency.

Cities say such franchise agreements allow them to enforce customer-service standards and fund community television programming. SBC five years ago drew the ire of the Indiana Utility Regulatory Commission for numerous customer-service problems, resulting in a regulatory monitoring program that continues today, Maultra noted.

 Those problems are likely to pale to next problems that could arise when SBC implements new and complex video technology, Maultra said. Telecommunications providers exaggerate the effort needed to reach cable franchise agreements with municipalities, he said.

But cities also have another reason to lament lack of control: fees they collect from franchise agreements. For example, Comcast said it paid the city of Indianapolis more than $4 million last year under terms of its franchise agreement.

Hershman's bill calls for giving a 5-percent gross revenue fee to local governments, allowing them to preserve their "revenue-raising tools."

A single state franchising authority would speed deployment of video services, Hershman said. He pointed to Texas, where last September Gov. Rick Perry signed a law that allowed SBC and Verizon to obtain statewide video franchises. Cable bills in that state dropped by 25 percent in the weeks after the measure, according to backers of Indiana's SB 245.

Proponents of deregulation also point to soaring cable rates over the years and the potential to benefit consumers by greasing the skids for deployment of video competition from phone giants.

A Federal Communications Commission study found that cable rates in 2003 rose an average of 5.4 percent nationwide. Yet in areas where there was effective competition, cable rates rose by only 3.6 percent.

The bill also would make it more difficult for municipalities to own and operate broadband networks. Many of these networks were built by cities as economic-development tools.

Using taxpayer dollars "to build out expensive communications infrastructure should only be considered if private-sector dollars are not available," Hershman said.

Leaders in a number of Indiana cities counter that phone companies refused to bring broadband service to their residents because it wasn't profitable enough.

The bill's proposed roadblocks to municipal-operated broadband "is something we're going to have a problem with, I'm sure," said Andrea Johnson, spokeswoman for the Indiana Association of Cities and Towns.

Supporters of SB 245 said the measure could generate $7 billion in new spending and 20,000 new jobs, plus additional tax revenue.