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The State Of Telecom Regulation
by Chloe Albanesius
After a protracted legislative battle over telecommunications deregulation this year, the Texas Public Utility Commission on Friday approved Verizon Communications' application for statewide video franchising. The move caps a year that has seen multiple local efforts to change the way states regulate telecom services.
Verizon, which already has video franchise agreements with the Texas cities of Keller, Sachse, Westlake and Wylie, will expand that coverage to offer its FiOS TV service to 21 communities in the Dallas and Forth Worth areas. FiOS is short for fiber-over-broadband system, and the company intends to reach 400,000 north Texas households with the service by the end of 2006.
Had the legislature this year not approved legislation allowing statewide rather than local franchises, expansion efforts would have taken from six to 18 months, according to Verizon. The company filed its application for statewide access Sept. 30.
The award is a victory for Verizon, which, along with SBC Communications, lobbied heavily for deregulation after spending millions to build out a fiber-optic cable system. The legislature this year failed to pass a telecom bill during its regular session, but later came to an agreement during a special session. SBC also has applied for statewide franchising authority.
The final law, signed by Gov. Rick Perry in September, also allows for gradual deregulation of telephone rates and high-speed Internet service over power lines. The act irked the cable industry, which sued the day after it was signed, alleging that the statute violates federal law, as well as the U.S. and Texas constitutions.
The Next Battleground: The Garden State
Legal challenges have not deterred Verizon, which plans to take the battle for statewide video franchising to New Jersey next month. Lawmakers in the Garden State last year introduced at least three bills to alter the cable-television franchise fee, but none saw significant movement.
Success in Texas, however, could help phone companies' efforts to quickly expand video offerings in New Jersey and elsewhere. The cable industry is lobbying against such action.
Verizon neglected to upgrade its infrastructure as early as cable providers and now argues that statewide franchising is necessary, Karen Alexander, president of the New Jersey Cable Telecommunications Association, argued in an article this month for New Jersey Municipalities. "The truth is, Verizon can bring its competitive services to New Jersey under the existing local franchising framework; it just doesn't want to."
Alexander said obtaining local franchises would not be time-consuming. "In a community that is highly motivated to make competitive video services available to its residents, the franchising process will likely take very little time," she wrote.
Detractors aside, expect to see a telecom battle of Texas proportions when New Jersey lawmakers convene for a post-election "lame duck" session.
Massachusetts also could debate the issue at some point. Verizon Chairman and CEO Ivan Seidenberg was in Boston last month, where he told the Chief Executives of Boston that "the benefits of video competition could come quicker if we could find a state or even a national solution to this franchise issue."
Verizon has landed several video franchises on a local basis, including Massapequa Park Village, N.Y., and the communities of Fairfax and Herndon in Virginia.
The Deregulated States of America?
The telecom deregulation fight has not been limited to Verizon strongholds. Lawmakers in Michigan recently have moved two telecom-related bills that would basically strip the state's Public Service Commission of its authority over local phones rates.
Under a recently passed House bill, H.B. 5237, the commission would maintain control of rates for those with basic phone service, which under the bill would be increased from 50 to 100 calls a month per household. A Senate bill, S.B. 754, would eliminate state-approved phone rates for residents and business customers who make more than 200 local calls per month.
Each bill now moves to the other chamber, and conference negotiations likely will be necessary.
Similar efforts in Indiana earlier this year were not resolved before the legislature adjourned. Under a Senate measure, S.B. 381, the Indiana Utility Regulatory Commission would have been stripped of its power to regulate phone prices by 2010 in areas where 50 percent of consumers have access to high-speed Internet.
Supporters said the bill, which was backed by the dominant local telecom provider SBC, would have encouraged broadband deployment. Some House Republicans, however, opposed the creation of a statewide broadband network because they said private companies should handle the deployment.
Alabama won its fight over Internet regulation when the governor signed S.B. 114 into law earlier this year. The measure strips the state's Public Service Commission of the power to regulate high-speed Internet, bundled communications and contract services. The commission retains jurisdiction over billing and service complaints by telecom subscribers. The retail price of basic telephone service also would continue to be regulated, and new telecom entrants would be charged an application fee.
Florida, meanwhile, enacted a law that, among other things, prohibits municipalities from regulating Internet telephony and created a committee on Public Service Commission oversight.
The Internet Tax Man Cometh -- Maybe
The issue of telecom and Internet taxation also is percolating. Delaware, for instance, enacted a law specifying that all Internet access be free from taxation, regardless of the technology used.
A majority of states this year also introduced resolutions urging the end of a federal telecom tax. The 3 percent excise tax on telephone service was imposed in 1898 to help fund the Spanish-American War. It was meant to be a temporary luxury tax because a majority of Americans did not have phone service in 1898, but it has persisted to this day.
The Joint Commission on Taxation suggested in March that the tax be extended to all telecom services, including the Internet and voice-over-Internet protocol, prompting Sen. George Allen in April to introduce a bill to keep the tax from being extended to the Internet. The bill has not seen any movement.
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