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Newspaper Article

    Dispute Flares Over Measure in Missouri on Cable TV Competition

    BY Jonathan Rivoli
    03/18/2006
    by Jonathan Rivoli on 3/18/06.

    JEFFERSON CITY - With an army of lobbyists and a barrage of television ads, AT&T and the cable television industry are locked in a legislative slugfest that could have a lasting effect on cable rates and service in the state of Missouri.

    The dispute flared up earlier this month when state legislators began debating a bill to abolish the system of local government franchise agreements, which require cable operators to sign service contracts with city and county governments.

    Telecom giant AT&T, which wants to enter the cable industry by offering service over its fiber-optic network, claims the franchise system is an antiquated barrier to the kind of real competition that would lower rates for all cable subscribers. But the cable industry says AT&T is looking to enter their market on slanted terms by skirting requirements to provide public access programming and service to low-income areas.

    Both sides are running hundreds of television ads across the state in an attempt to woo public support, but neither side will say how much it's spending.

    The battle in Jefferson City is in many ways a mere ripple of a technological revolution allowing cable companies to offer phone service and phone companies to offer cable service. What happens here in the next few weeks could go a long way toward defining the future of cable television in Missouri.

    The best-case scenario, put forth in ads by AT&T and Freedom Works - a conservative nonprofit organization that has joined the ad war - is that cable rates in Missouri will drop substantially, just as they did in Texas after a similar law was passed there this summer.

    For example, in Keller, Texas, a suburb in the Dallas-Fort Worth area, Verizon is offering a package of 180 channels for $39.95 a month, 18 percent lower than the 70-channel package offered by Charter Communications for $48.99 a month.

    Since Verizon began its service in Keller last September, it has also begun to offer the same package to 13 other Texas communities.

    Indiana may soon get similar service after it passed a law last week to abolish the local cable franchise system, and legislators in Kansas are considering a similar measure. There's been no mention of any such legislation in Illinois.

    Sen. John Griesheimer, sponsor of the Missouri bill, said unreasonable requirements in the local franchise agreements were keeping such service out of Missouri.

    "There is not one citizen of this state who will see the benefit of this product unless we pass this bill," said Griesheimer, R-Washington.

    Under the current franchise system, telephone companies can enter the cable market, but they have to meet the requirements imposed by the local governments that award the contracts. Those requirements often include building a system large enough to serve every customer within a city's border and providing public access programming.

    John Sondag, vice president of external affairs at AT&T, said it was unfair to expect telephone companies to spend millions of dollars building a network that could service all customers as a condition of entering the market. He compared it to forcing Starbucks to build a store in every neighborhood before it could serve a drop of coffee.

    "It's a financial risk that they're asking our company to take that no other company has to take," he said.

    It's also unfair because cable companies built their expansive networks under pre-deregulation contracts that guaranteed them exclusive access to a set of customers, whereas AT&T would have to build its network with no guarantees, he said.

    But Greg Harrison, president of the Missouri Cable and Telecommunications Association, said the conditions AT&T was asking for were designed to hurt consumers and put cable companies at a competitive disadvantage.

    By not being bound to offer service to all customers, the telephone companies would offer it to only the wealthy communities where they think they can make the most money, Harrison said. The bill also would let telephone companies skirt the requirement to offer public access channels, he added.

    Although the bill does contain provisions designed to prevent telephone companies from doing this, Harrison said the wording was "flimsy," providing outs with clauses such as "when technically feasible."

    Harrison has found an ally in Sen. Gary Nodler, R-Joplin, who owned a small cable company in southwestern Missouri in the 1980s.

    Nodler said he was determined to stop the bill, by a filibuster if necessary.

    He said that AT&T, just like any cable company, already had the ability to compete for the city and county franchises, which are no longer exclusive.