Bill seeks to spur competition in cable television markets

~ The bill would make it easier for local telephone companies to offer TV service.

JEFFERSON CITY, Mo. -- The reception to the "Fair Competition in Video Act" was at times a little fuzzy as the cable and telephone industries, consumer advocates and city government representatives each tried to channel lawmakers toward their way of thinking.

But the picture was perfectly clear to Sen. John Griesheimer as he surveyed the standing room only crowd for a committee hearing on his bill.

"Really, we need to change the title of this," said Griesheimer, R-Washington. "It's going to be the Lobbyist Employment Act of 2006."

Griesheimer's bill would make it easier for local telephone companies to offer television service in competition with cable companies.

Its main backer is Missouri's largest local phone provider, AT&T Corp., formerly known as SBC Communications Inc. and, before that, Southwestern Bell. The phone company promises to invest more than $100 million to bring its television service to Missouri if lawmakers pass the bill.

Doubled lobbying budget

Cable companies have been joined in opposition by many local governments, which receive about $35 million annually in franchise fees from cable operators.

The result is a bunch of lobbyists.

The Missouri Cable Telecommunications Association has doubled its normal lobbying budget, said executive director Greg Harrison, now listing 15 lobbyists employed through at least six agencies.

AT&T has 26 lobbyists registered with the Missouri Ethics Commission, although more than half of those are company employees who do more than just talk to lawmakers, said AT&T Missouri spokeswoman Ellen Bogard.

And that doesn't begin to count the lobbyists hired by other phone companies, individual cable companies, cities, counties and consumer groups.

The amount of money being spent on the legislation cannot be determined, because Missouri law does not require lobbyists to report how much they are paid by their clients, nor companies to report their payroll for government persuasion.

As it is, cable and phone companies already compete. Cable companies can offer local phone service. A phone companies can reach franchise agreements with cities or counties to also offer television service.

Griesheimer's bill would spare phone companies from having to strike deals in each of the state's 553 cable franchise areas and instead let them get a state-issued franchise allowing them to enter multiple markets.

Claim of unfair advantage

Those phone companies could choose to offer television service only in certain neighborhoods, instead of having to serve the cable franchisee's entire area. In Jefferson City, they could target only the Capitol building itself, said Harrison, using an unlikely example to drive home the point of the cable companies.

His point is that phone companies likely would target the areas perceived to be most profitable.

In practical terms, it may mean that suburban residents are more likely than rural residents to see TV service from phone companies.

"The denser the population, the easier to bring service there profitably," said Paul Lane, the general counsel for AT&T Missouri.

Cable companies claim the bill would give AT&T an unfair advantage to cherry-pick their best customer areas. And they point to a 1996 state law, which required those seeking to compete against local telephone companies to offer service to the entire standard toll-free local calling area -- typically the whole city and, in some cases, beyond.

To be fair, cable companies contend the legislation should mandate that phone companies provide TV service to the entire area served by a cable franchise.

But officials at AT&T say there is an important distinction. Whereas competing phone services can rent space on AT&T's existing network of lines, AT&T is not piggybacking on the existing TV cables -- it's building its own video-quality transmission lines.

Role reversal

Some lawmakers see irony in the fight. Local phone companies, once monopolies resistant to competition, are seeking to be TV competitors. Meanwhile, cable TV companies, once clamoring to compete against phone companies, are resisting an effort to entice competitors into their markets.

"There's just a touch of hypocrisy on both sides, because it's just role reversal on the arguments," said Sen. Matt Bartle, R-Lee's Summit.

Griesheimer hopes to strike a compromise -- perhaps allowing phone companies to initially target only certain neighborhoods in a cable service area but requiring them to expand to the rest of the service area over a certain number of years.

A Federal Communications Commission report shows that for the year ending Jan. 1, 2004, cable TV prices were 15.7 percent lower in markets that had wireline competitors than in those without such competition.

That's why Griesheimer believes the state must do something to spur competition.

"The consumer is going to win," he said, "because it will drive down cable rates."