09 May 2006

Committee action, May 9: HB 699

HB 699 by Rep. Billy Montgomery’s would permit telephone companies to offer cable services. Amendments proposed to the House Commerce Committee stripped out many features that had brought the objections of local governments, as the bill originally would have granted a statewide franchise regulated by a statewide board. The franchise fee would be the same to new entrants to the business under the bill as under existing contracts.

The amendment that sparked the most discussion was one that exempted pre-1974 Constitution home rule charter entities, although they could elect to be governed by the proposed statute. This was necessary because of legal niceties.

Rep. Tank Powell brought up the issue about what companies would be obligated to do regarding right-aways, and was assured they could not do what they please. With that, the amendments were adopted unanimously.

Montgomery explained the changes to the bill would satisfy some questions of local governments, but that nothing could satisfy the cable companies who wished to keep monopolies. He said this bill, which would open up competition, was the bill he had introduced in his entire career that was the most consumer-oriented. He pointed out that cable companies were able to get into other lines of business, but they continued to try to keep others out of the cable business. He also said the bill would force greater transparency in what fees and how much were being paid to whom.

The bill would have other providers able to obtain a statewide franchise that would then allow them to channel franchise fees to local governments. In fact, they could offer channels on demand, but also would carry state and local government-mandated channels.

Rep. Chuck Kleckley asked how complaints could get resolved, without a local franchise to contact through local government. Montgomery pointed out that increased competition should make for more responsive providers that make for better service. Indeed, better oversight would occur because, at this time, satellite providers operated without any oversight through franchise agreements, or payments to government He said after Texas had done this, satellite share of the market had gone down. Kleckley wondered about rural provision; Montgomery said since broadband service is far-reaching, most areas could be served, some where cable does not.

Rep. Bodi White observed it would take awhile for the infrastructure to come about to provide the service. However, it was pointed out, that the infrastructure would come quicker under the incentives provided by the bill. Rep. Gary Smith said the lines would have to exist, but that nothing was going to force their building. Again, with the ability to deliver into areas of potential profit, the rollout of this service should increase as market strength demanded.

Rep. Diane Winston said the bill did not have a “buildout” procedure, meaning providers were forced to provide to areas designated by local governments that did not have it. She also mentioned the lack of basic standards for customer service. Testifiers pointed out that some federal standards would still apply, and that competition would spur good service and “buildup” when profitable. She also said local governments might see a loss of revenue, because often beyond the basic required federal franchise fee some franchisees will pay local governments more – although Montgomery pointed out that amount gets transferred to consumers.

Rep. Roy Burrell wondered whether the investment into the market might discourage new entrants, as in some places it could be considerable. Reps. Don Trahan and Mickey Frith also brought up rural provision; Montgomery said the bill would improve chances of rural provision.

Opponents said required buildout was a desirable feature not guaranteed under this bill. They also said they could compete under the law now, but would have to go through the individual franchise agreements which would have greater local control; this bill would get around that through the statewide franchise. Perhaps, they said, the phone companies interested could commit right now to do this and provided the materials to do so; otherwise, they claimed there would be two sets of rules that might make things unfair or confusing. They said this was asking for special privileges, while other small companies were trying to compete under the current system.

Frith did offer as a substitute the language suggested by opponents, but they committee rejected the idea. Committee members were a bit taken aback at the abruptness of the offer and did not want to commit to it on such short notice.

Powell asked whether exclusive franchises can be granted, and was told they could not be, and the reason why that other firms did not enter markets was because of the startup costs. Kleckley asked the same question a different way about why should this bill be supported, and opponents said it was part of a larger national strategy to consolidate regulation in then field, giving an advantage because the same local standards would not be required of them, in terms of buildout and customer service. They also said that by allowing state franchise, in essence it would put state control over right-aways.

Rep. Mike Walsworth asked whether if a new entrant agreed to everything in a contract, they could come right in. Opponents said it did not have to be similar, but it always negotiated on a provider-by-provider basis. Walsworth did get opponents to admit that a local government could refuse to negotiate with a provider. Strain asked why the process couldn’t be reversed; opponents said the law could not make existing contracts null and void and some are to last decades.

Opponents also found fault with specific provisions about channel provision, and claimed the definition of “gross revenue” could be legally defined as coming from internet service and therefore would not owe fees. They kept harping that this was a bill to aid AT&T only (which is in negotiation to buy the provider of most phone service in the state, BellSouth).

Closing, Montgomery pointed out existing contracts allowed free reign to franchisees to charge what they want, and that greater competition would help to hold those prices down. The bill passed 13-5.

WEDNESDAY: HB 582 is scheduled to be heard in the House Health and Welfare Committee; SB 537 is scheduled to be heard by the Senate Health and Welfare Committee.

They are Hitler when it comes to the cable business.
Montgomery, referring to Cox Cable.

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