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HB 3179: telecomm reform or a sweetheart deal for SBC?

House Bill 3179 must have nine lives: The infamous telecommunications reform bill that has been hotly debated on TV and in newspapers died on the Texas House floor twice, only to return as pieces of vaguely related Senate bills 408 and 1748. If it passes, supporters of HB 3179 say it will make the cable industry more competitive, providing consumers with more options and lowering service fees. Yet opponents say it unfairly favors telephone companies, discriminates against low-income consumers, and will cost Texas cities money.

According to the Texas Municipal League and the Texas Cable and Telecomm Association, HB 3179 was originally an effort by cities, cable providers, and telecomm companies to create equality in the way that cities assess fees for the use of their public right-of-way - freeways, streets, alleys, and walkways. Today, some telecommunication services, such as cell phone, wireless, and satellite TV providers, don't have to pay taxes that cable and landline telephone providers pay to use the ROW. In its current form, the bill does not change the ROW fee structure, instead giving the Public Utilities Commission two years to conduct a study and issue recommendations.

"This bill does not address the original policy goals," says Kathy Grant, vice lobbyist for the Texas Cable and Telecomm Association. "What it is is a special deal for telephone companies in the guise of deregulation."

Authored by Representative Phil King (R-Weatherford), HB 3179 proposes to increase telecommunications competition by allowing cable companies to franchise with the State rather than creating business contracts with each city in which it provides service, as current law requires. Although nothing prohibits a cable competitor, such as SBC, from entering the market today, HB 3179 would make it much easier and, potentially less expensive.

"The benefit is that this will allow cable competitors to enter the market faster and with fewer regulatory hurtles," asserts SBC spokesman Gene Acuna, "so we can give consumers a choice."

He points to a Federal Communications Commission report stating that, since 1999, cable service rates have risen 40 percent, while in that same period TNS Telecoms reports that Texas telephone bills have dropped an average of $10 a month.

Opponents of the bill, such as Time Warner and Texas Cable & Telecommunications Association, say it contains provisions that allow cable companies to discriminate against low-income customers. Where federal law requires cable providers to roll out new services citywide, HB 3179 allows Texas cable providers to "redline," or choose which neighborhoods it services.

Time Warner has accused SBC of targeting "high value" neighborhoods for its new Project Lightspeed digital TV service, due out this winter, which would mean lower-income neighborhoods would not have the benefit of competitive pricing.

"Are they going to bring digital cable to Stone Oak but not Nogalitos Street on the South Side? This is not good policy for the city or the community," says Jon Gary Herrera, a spokesman for Time Warner Cable. "It would only extend the digital divide. Equal service throughout the community; those are the rules we play by, and we believe in those rules."

Redlining would allow SBC to avoid the initial expenditure that existing cable companies, such as Grande and Time Warner, have had to invest to build the infrastructure to provide cable service citywide.

Acuna won't deny the "high value" accusation, but he says SBC has committed $4 billion to Project Lightspeed, and plans to reach 18 million households in its 13-state service area over the next three years. "Just as Time Warner is issuing digital phone service to initial target areas, we are making a rollout in an area and hoping to get as many households as we can. That's business."

Regardless, Assistant City Attorney Keith Martin says redlining is one of the reasons the City Attorneys and Public Utilities offices won't support HB 3179; the other is the financial impact the bill could have on the city.

HB 3179's fiscal impact statement, based on information provided by Texas Municipal League, does not include numbers for San Antonio, but estimates that if the cable companies franchise with the state, therefore no longer paying franchise fees to the cities, Austin will lose $1.2 million annually, Dallas more than $2 million, and Houston $1.8 million. The state franchise process would be managed by the Public Utilities Commission, at a cost of $27 million over the next two years, and then $1.4 million annually.

Texas cities would experience the greatest financial impact from a provision in the bill that says municipalities can no longer negotiate "in-kind payments," which are services and funds the city is able to receive in trade for use of its right-of-way, such as free cable service for city buildings and public schools, and public access, education, and government channel funding (PEG funding).

In SA, Channels 19, 20, and 21 are paid for under PEG funding. If HB 3179 passes, each San Antonio cable company would be required to provide access to three channels, but not the infrastructure or equipment for programming. Herrera estimates it costs $1.2 million to operate San Antonio's PEG channels. The cost of the equipment is unknown because the channels currently operate with equipment purchased in 1978. According to Keith Martin, the City is negotiating with the cable companies for new equipment and facilities.

"Channel 21 is the most accessible venue to keep up with local government," says Martin. "So, this is not just about the educational or public access channels, this is about free speech."

Supporters of the bill say that those costs would be offset by another provision in the bill that requires cable providers to pay an quarterly tax to the cities equivelant to 5 percent of its gross revenues. However, that fee does not apply to information service providers. According to the Texas Cable & Telecommunications Association, SBC has applied to the Federal Communications Commission to define Project Lightspeed an information service, which would exempt it from the tax.

With only five days left in session, it's anyone's guess what will happen to the bill's language. As of May 23, SB 408, which carries the bulk of the original HB 3179 and would renew the Public Utilities Commission for another six years, is on its way to the State Senate. SB 1748, which supports development of broadband over power lines, includes two sections of HB 3179. The first pertains to how cities manage the right-of-way, and the second requires cities to pay the cost of relocation for public projects, and providing a way for the city to recover those costs through a telecommunications tax. SB 1748 is on the House calendar for May 24.

"The best thing that could happen is that the whole thing dies, and an interim committee of legislators is created to work on it," says Grant. "`HB 3179's` provisions have never been the subject of a study or a hearing. We think it is too important to rush through in this kind of mayhem. It continues to change, without addressing the original policy goals."

Acuna says SBC's Project Lightspeed will roll out with or without HB 3179. Does that mean it will seek to franchise with Texas cities? "Obviously the approach would differ, but lets get through the next two weeks, O.K.?"

By Susan Pagani


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