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Video bill turns off officials

| Tuesday, July 5, 2005

Steps in Congress to help phone companies compete in the $76.1 billion pay-TV market are worrying local government officials in Western Pennsylvania, who say limiting their authority to work out franchise agreements could hurt customer service.

U.S. Sen. Gordon Smith, R-Ore., introduced a bill last week that would end city-by-city licensing of new video providers trying to compete with cable TV, and Rep. Marsha Blackburn, R-Tenn., proposed a similar law in the House.

Eliminating the need to obtain local franchises -- as cable companies did decades ago -- is a top lobbying priority for big phone companies like Verizon Communications Inc. that are spending billions of dollars to build fiber-optic networks that can deliver video services.

Locally, Verizon has finished stringing aerial cable on poles in parts of 32 communities that are getting the company's new fiber-optic, or FiOS system. Crews now are moving on to areas with underground utilities. Work already is under way in Hampton for this phase of the project, spokesman Lee Gierczynski said.

In the next few weeks, Verizon will start selling higher-speed Internet service in neighborhoods with the new lines. But, "It will probably be a year, or a year and a half, before we think about a video offering for customers," he said.

Pittsburgh Councilman Bill Peduto said while he hasn't seen the legislation, the city code has protections that would, for example, require Verizon to follow a plan to serve the entire city. So far, Beechview and Brookline are the only neighborhoods with the new lines.

The rights-of-way where Verizon and other companies operate "are owned by the public, and with that comes a responsibility to abide by the public code," he said.

Under the Senate and House bills -- the first legislation at the federal level to deal with the phone companies' planned video offerings -- the carriers would have to abide by requirements of cable companies' local agreements, such as paying a "franchise fee" or percentage of revenue, carrying public-access channels and complying with customer service rules.

Shaler Manager Tim Rogers said franchise fees can range from 1 to 5 percent and his township's -- at the highest level -- brings in $340,000 a year from Comcast.

"We would have to create a level playing field between Comcast and Verizon," he said, and in addition to having "mirror agreements" with both providers, local officials would want to maintain their right to set standards for adding new technology, or responding to customers' calls within a certain time.

The new bills, in fact, may set up a lobbying fight pitting phone companies against cable companies, as well as groups representing U.S. mayors and cities that want to retain franchising authority.

Congress plans to consider broader telecommunications legislation this year, and lawmakers may attach the video proposal to larger bills.

Verizon has said it needs about 10,000 franchises, and complained that getting the agreements is too burdensome and takes too long. So far, the carrier has obtained four local licenses in Texas and one each in California and Florida.

But Rogers said that while Western Pennsylvania is fragmented, many municipalities have been negotiating joint agreements with cable companies -- and could do the same for Verizon and other providers.

"We have a contract now that covers almost all of the North Hills," he said, referring to a 2001 deal with Comcast.

The nation's biggest cable-TV operator, Comcast has expressed concerns with the bills. The legislation lacks "a workable way to address critical local issues such as equitable build-out requirements to ensure all residents can access new services," Comcast Executive Vice President David L. Cohen said.

Some communities, such as Mt. Lebanon -- traditionally an Adelphia franchise -- already are facing another pay-TV issue -- Adelphia's pending merger with Comcast.

Mt. Lebanon's agreement with Adelphia expired in March, and municipal representatives are talking with Bethel Park, Upper St. Clair and Peters about what steps to take next now that they will be dealing with Comcast.

"We are all faced with some of the same issues. What do we do about Verizon, and how will our agreements transfer?" Mt. Lebanon Assistant Manager Marcia Taylor said.

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